Northwest Wants to Buy Mesaba

MINNEAPOLIS (AP) -- Northwest Airlines Corp. is discussing a purchase of its feeder carrier Mesaba Aviation Inc., a move that could have the effect of cutting out the middleman of Mesaba's parent company.

Shares of the parent company, MAIR Holdings Inc., jumped $1.44, or 25 percent, to $7.07 on the Nasdaq Stock Market in midday trading on Thursday.

Mesaba President John Spanjers disclosed the talks in a letter to employees on Wednesday, and Northwest spokesman Bill Mellon confirmed them, saying Northwest hopes to wrap up a deal in the "near future." He said Northwest contemplates running Mesaba as a wholly owned subsidiary, and that the transaction would be mostly noncash.

Northwest provides Mesaba's planes, passengers and revenue. When Northwest filed for bankruptcy protection in September 2005, Mesaba followed a month later. But while Northwest has set up financing for an expected 2007 emergence from bankruptcy, Mesaba has not.

Neither company has filed a reorganization plan yet. Spanjers' letter said the talks have included the idea that Northwest would co-sponsor Mesaba's reorganization plan.

"Northwest ownership would secure our core business and, in the long run, position us for growth," Spanjers wrote.

It wasn't clear what would become of Mesaba's parent, MAIR Holdings Inc. Spokespersons for Northwest, Mesaba, and MAIR all declined to say whether MAIR was involved in the talks. Northwest owns about 30 percent of MAIR. MAIR's only other business is Big Sky Aviation, a small regional airline that serves Western states.

MAIR collected Mesaba's profits during good years, and maintained separate executives and a separate headquarters even though some 90 percent of its revenue came from Mesaba. That galled Mesaba employees who were then asked for wage concessions in bankruptcy court this fall. They agreed to the concessions under the threat that a judge would allow Mesaba to impose harsher cuts.

Mesaba flies 49 prop-driven Saab aircraft with roughly 30 seats. Northwest is also starting a new subsidiary called Compass Airlines to handle some regional flying.