In 2006, the airline industry in America finally became profitable after a five year lull. Now, airlines like Eagan-based Northwest Airlines are facing new challenges, including rising fuel costs, which have forced them to look at corporate mergers to stay alive.
The impact of a possible Delta/Northwest merger on Minnesotans could be astronomical, in terms of jobs and the overall state economy. Minnesotans have recognized the need for a strong carrier like Northwest to be based here, not only for the direct benefits at the Minneapolis St. Paul airport, but for the businesses that have agreements with the airline, all of which employ thousands of people.
The merger talks are still up in the air, but if the pilots agree to a legitimate deal, Delta and Northwest would be one step closer to becoming the world’s largest airline. Such talks are common in today’s media, including Continental’s idea to merge with United. But while these mergers get national attention, it will be easy for executives to overlook the sacrifices that Minnesotans have made to allow Northwest the growth it has enjoyed. According to figures released by Gov. Tim Pawlenty in a press conference this week, the state of Minnesota has provided over $400 million in incentives to keep Northwest alive and kicking.
Regional air service by Northwest is one of the biggest issues at stake in these talks. It will be essential for Northwest to find a way to ensure this service to places like Fargo, Duluth and Rochester continues unabated, with or without a merger.
It will be very easy for Northwest to accept heavy cash incentives from Delta’s leaders to move operations to Atlanta, removing the need for many of the thousands of employees based in the Minneapolis area. But without an extremely cooperative partnership with the state, Northwest wouldn’t have recovered from bankruptcy the way it did, nor would it have built such a dependable base of support from policy makers on all levels of government.
Growing up in the metro-area suburbs, I knew many families of Northwest employees who are not new to job security fears. After bumpy negotiations for mechanics, pilots, and even flight attendants, employees that have survived the company chaos since 2000 have become stronger, more loyal employees. These jobs are crucial to viable communities across Minnesota, whether it’s a mechanic in Rochester, a reservation specialist in Crookston or an accountant in Eagan.
In general, the recent trend of growing mergers and acquisitions as solutions to financial difficulties could have long term negative consequences. Mergers of oil companies, cell phone providers and media giants are just some of the many conglomerations of our generation. Such unions are likely to create some increase in price for the consumer, if they haven’t already. Upcoming mergers that involve companies like Reuters and Thompson and the Yahoo/Microsoft potential deal all leave government with little to offer in the shadow of multi-billion dollar tradeoffs. Even if Pawlenty and state officials offer Northwest more incentives to stay or limit their involvement with Delta, those figures may not mean much when Delta is willing to give up so much for the merger. While companies are still growing, Minnesota needs to establish a positive, working relationship so that these corporations are more loyal later on.
The reality is that some people in Minnesota will probably lose their jobs if a merger deal is reached, and Northwest will take some steps to alleviate short term inconveniences caused by those layoffs. But in the long run, Minnesota elected officials need to put themselves in the shoes of business owners. Just this week, over $5 billion in new taxes were proposed by DFL legislators at the capitol, in their quest to make Minnesota the highest taxed state in the country. News that 3M (and other companies) will move some employees out of Minnesota should not be taken lightly. A 2007 ranking by the Tax Foundation found Minnesota in the top 10 worst states for businesses to develop.
In these mergers, more rules and regulations will be an urge our government should resist. Although it is imperative that the state and federal government hold Northwest to their promises and financial deals with Minnesota, the best plan is to work with the airline in a positive manner to make sure as many jobs as possible are not eliminated.
The customers will ultimately decide Northwest’s fate, as they always have. Will high prices scare people away from this new mega-airline? Will disgruntled ex-employees create sour publicity for Northwest? These are questions being raised in the rich, mahogany board rooms of Northwest and Delta this week.
Andy Post welcomes comments at [email protected].
