Minnesota House of Representatives Local Government and Metropolitan Affairs Committee

If MAC proposes to re-negotiate the $250 million loan repayment terms rather than enforce the condition -- If Delta moves the Headquarters, the loan must be repaid in full right now – the State needs to interpose.

Several legislators were surprised to learn that the agreement with Northwest included a clause making repayment the sole remedy in case of a breach by Northwest. Usually loan contracts have more collateral and more compelling breach clauses favoring the lender, such as actual and consequential damages, specific performance, or other penalties.

Delta/Northwest has much to gain by re-negotiation. Their loan payments are, not coincidentally, refunded monthly through lowered fees and revenue sharing at MSP. MAC will be shuffling revenue and absorbing more debt service costs to essentially forgive the $230 million loan over 4 or 5 years. 

In 2000, MAC postponed collecting lease payment increments for amortization of the capital cost of added gates and other terminal improvements until the new runway became operational. In 2005, there was a further postponement. In 2007, lease rates were lowered and the amortization of the costs of capital projects directly benefitting the incumbent airlines were dropped or funded from concessions, parking, and other airport revenues. 

The public has little to gain from re-negotiating the deal:

  1. Jobs not transferred or cut now still cannot be guaranteed against a future bankruptcy (and the CEO's "pledges" about keeping other jobs in Minnesota were hedges anyway, not to be counted on).

  2. New terms and conditions to keep pilot training facilities or vague hub operations here, negotiated pretty much by the same people? Unless the State steps in, jobs and business activities left here by a modified agreement would seem to be subject to further re-negotiation. The MAC regards these contract renegotiations and concessions as necessary to keep Delta/Northwest here – either because of political pressure or because there is no other plan to maintain air service. Northwest has been playing Minnesota, through MAC, as a sucker since 1996 at least.

  3. Concessions to Delta will either reduce MAC revenue, or reduce airline competition and increase local fares, or both. This is a negative whether the U.S. aviation industry recovers quickly or slowly.

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