Bankrupt Northwest Airlines wants the Metropolitan Airports Commission to cut it some slack on landing and gate fees, now slated to rise 17 percent next year.
But the MAC, which runs the Minneapolis-St. Paul International Airport, says it already has held off passing on rate increases for several years, while pumping $3 billion into new parking garages, gates and other airport improvements.
And before it considers helping Northwest, the commission wants to know whether the Eagan-based carrier may invoke bankruptcy-law provisions to reject airport leases that put over $60 million a year into MAC coffers.
There's also that loan Northwest has from the MAC. Northwest could default on it, as part of its bankruptcy reorganization. The airline still owes the MAC about $269 million on the loan, issued to help the airline in 1992, when it merely flirted with bankruptcy.
"How far can we go in helping the airline until we know how the bankruptcy will impact us?'' said MAC spokesman Patrick Hogan. "At this point, they have not decided what leases they want to accept or reject."
And, so far, Northwest isn't saying what it may do about the loan.
Collateral posted by the airline should be sufficient to cover the debt if Northwest fails to pay it, said Hogan. The collateral includes plane spare parts and equipment, airline cash and investments, and Northwest's London landing rights.
The full MAC board is expected to vote today on the gate and landing fee increases. A subcommittee has recommended them, much to the displeasure of Northwest.
"At a time when all Northwest employees are making significant sacrifices to ensure the future viability of the airline, it is disheartening to see our hometown airport raise our costs by 17 percent," Northwest CEO Doug Steenland said in a message to employees last week. "We urge the commission to reconsider this increase."
The increases would cost Northwest about $10 million a year, bringing its 2006 payments to the MAC to around $72 million.
Between them, Northwest and its regional carriers, Mesaba and Pinnacle airlines, lease 101 of the airport's 127 gates. Northwest also accounts for about 60 percent of passenger plane landings at the airport; its regional airline partners, 26 percent.
Northwest says the MAC will have more than a $30 million budget surplus that it could tap to forgo the rate increases this year.
"It's not like bills would not get paid," said Andrea Fischer Newman, Northwest's senior vice president of government affairs. "And that surplus is generated by our customers through concession and parking revenue."
But the MAC says it plans to use the money to pay retirement and construction costs and to reduce its debt, now nearly $2 billion.
Northwest, meanwhile, is squeezing just about everyone it does business with for better deals — employees, aircraft leasing firms, vendors, suppliers and even its regional airline partners.
"Airports are included,'' Newman said. "We are looking at all airport contracts and leases. Minneapolis is a piece of the puzzle."
But the MAC already has provided $51.1 million in deferrals and rate breaks for airlines since 2000, with most of the benefits going to Northwest, Hogan countered.
In addition, he argued, the airport's charges to airlines are relatively low. He estimated airlines will pay the airport $5.72 per passenger in landing, gate and other fees in 2006, compared with $13.97 per passenger at Denver International and $7.27 at the Detroit airport.
MAC Chairwoman Vicki Tigwell doesn't expect Northwest to give up gates at the airport but acknowledges that "what they pay for them may be something they want to change."
Negotiations between the MAC and Northwest will be "extended and complicated," she said.
"We have so many complex financial arrangements with Northwest, beyond just the gate leases,'' she said. "We need to look at all of them in context. But we don't know now what might change through the bankruptcy court. … We have to see how we can work this out."
Whatever the outcome of its wrangling with Northwest, Tigwell said the MAC will not end up with a budget that requires taxing homeowners in the seven-county metro area.
To be sure, the MAC can look to increase the portion of its revenue that comes from parking, retail, restaurant and other concessions, said Tigwell. They'll cover about 41 percent of the MAC's projected 2006 budget of $247 million. Airline rates and fees will cover 39 percent.
Martin J. Moylan can be reached at [email protected] or 651-228-5479
News stories provided by third parties are not edited by "Site Publication" staff. For suggestions and comments, please click the Contact link at the bottom of this page.
