NWA withholds $5.5 million fees payment to MAC

by Justin Ware

Northwest Airlines’ layoffs of 4,500 Minnesota workers without severance will send at least half those people in search of state assistance, Northwest officials said Wednesday.

They joined Sun Country Airlines and the Metropolitan Airport Commission before a Senate committee in testifying about industry hardships. Sun Country and the MAC solicited additional aid from the committee, and some officials warned the layoffs could tear a hole in the travel industry from top to bottom.

“Our main task is to re-establish our industry as the safest form of travel in the world,” said Northwest CEO Richard Anderson to the Senate Select Committee on Air Transportation and Economic Security about the status of the air travel industry.

Anderson said the industry accounts for 10 percent of the nation’s gross domestic product and is the Twin Cities business community’s lifeblood.

Northwest expects roughly 50 percent of its recently furloughed employees to seek state assistance through the state’s Dislocated Workers Program.

Sun Country Airlines CEO David Banmiller said the airline laid off about 200 employees. He expects about half to seek state financial aid.

Prior to the Sept. 11 attacks, the Dislocated Worker Program already had its share of layoffs to handle.

A storm of layoffs in large Minnesota corporations such as Honeywell, 3M and LTV Steel gave the program an increased workload in recent months.

Earlier, the program allocated $6.4 million in “massive layoff” aid through June 30, 2002. To prepare for the airline layoffs, it took an additional $12 million from federal carry-over funds.

“It doesn’t seem to stop,” said Paul Moe, the program’s director. “Every day, I pick up a paper and read about another little ripple effect from the airline troubles.”

Sun Country’s Banmiller asked the committee for state assistance to pay unemployment benefits, and an increase to the Dislocated Worker Program, which trains unemployed workers.

“If all our employees apply for unemployment, our unemployment tax rate would skyrocket,” Banmiller said. “This would raise our costs from $115,000 in payroll taxes in 2000 to $600,000 … for 2001.”

Sun Country also asked the state to provide funding and relief for Minneapolis-St. Paul airport rent, landing fees, facility charges and fuel-related charges.

Northwest is also facing difficulty with MAC fees. The airline owes $5.5 million in fees to the MAC for September rent and August landing fees, but Anderson declined to ask for state assistance.

“We have delayed payments to assess our overall financial situation,” said Mary Beth Schubert, a Northwest spokeswoman.

Jeff Hamiel, MAC executive director, said airport officials contacted Northwest three days after the terrorist attacks and are uncertain about the status of the late payments.

“They have not defined specifically what they are or are not going to pay for,” Hamiel said.

Schubert said Northwest intends to fulfill its obligations.

The MAC has its own financial difficulties to consider after airlines reduced their traffic roughly 20 percent industry-wide.

After the attacks, MAC officials saw revenues from shops and stores within the airport cut in half, and they expect to see yearly profits from those sources drop between 30 percent and 40 percent.

Even more pressing are the needs of MAC airports in the coming winter months.

Hamiel said airlines’ 20 percent schedule reduction does not mean an equal reduction in overhead costs, such as snow removal.

“The economic outlook for the MAC is dire,” Hamiel said. “Any expenditure not essential should be eliminated.”

In the last two weeks, the airport eliminated $413 million in funding from improvement and construction projects. It also pushed back the opening of a new runway from 2003 to November 2004.

Hamiel said he is happy to hear airlines such as Northwest express their commitment to staying in operation. Also, he hopes to see airlines such as Sun Country stay in business. He said smaller airlines charging lower fares bring the element of competition and force lower prices across the board.

“Every quarter that Sun Country continues to operate results in $30.2 million in savings for Minnesota consumers,” Banmiller said.

Banmiller said that instead of saving travelers’ money, if airlines like Sun Country go bankrupt it could cost consumers $500 million more per year to travel.

Those at the committee meeting agreed on a solution to help every player in the airline industry: Get passengers back on planes.

“It is safe,” CEO Anderson said, “We encourage Minnesotans to fly.”


Justin Ware welcomes comments at [email protected]