|South Metro Airport Action Council
** S M A A C **
Statement to the Metropolitan Airports Commission
6 January 2009
We doubt the proposed agreement will be beneficial to Minnesota. In his Memo, Counsel Anderson says the need for new terms and conditions was "caused by Delta's acquisition of Northwest "and the potential breach of "covenants." Nonsense! Delta wants to keep the money and decrease its obligations. Like Northwest before, it has a willing partner in the Commission, so prior representations and the State's original plan for MSP expansion will be ignored.
Several times since the loan was made, MAC agreed to changes in the contract and also made keeping the loan covenants part of other arrangements with Northwest. It is an open question if these agreements were made in good faith by Northwest. Is the loan safe in case of another bankruptcy?
The proposal is another step back from keeping comparable jobs in Minnesota. The term sheet provides $8 million annually in revenue sharing for only $500,000 more in loan payback. Parking fees, in particular, tax local travelers already paying high fares because of the near-monopoly and seat-availability manipulation. Metro economic growth would be better served by subsidizing parking at MSP instead of sharing surplus revenue with Delta. They will take the money, sure, but keep local fares high anyway.
Delta says it plans to provide "good Minnesota jobs," but fewer than Northwest provides now. The jobs can be outsourced or non-union and still be considered "Minnesota jobs" per the proposed agreement. There is no upside for Minnesota in fewer flights and fewer airlines.
The proposal gives more discretionary revenue to Delta, which you think is guaranteed by a Delta hub here. You judge that the MAC could possibly lose airport revenue if Delta pays off the loan and reduces its MSP operations. The alternative, making room for more (lower-fare) airlines, was not even considered much less compared in various economic scenarios.
The service levels Delta promises "unless business condition change" is less than Delta/Northwest do today, but still would be proportionally more per MSP-based employee. Off-peak operations could be dropped at Delta's option, making the hub-peaks less safe without making useful gates and slots available to competing airlines. Delta's staffing of gate and air operations is not included in the agreements, and can be reduced without rate reductions. Is a crash or an accident on the ground a change in business conditions?
Simple repayment in breach or escape by force majeure remains. There is no protection if Delta is unprofitable or defaults again, only the precedent that MAC will re-negotiate again and again and again. Neither is there a clause requiring higher fees if Delta is more profitable. Collateral hasn't been checked as to the present value of the airliners. Who is watching out for our side?
Delta/Northwest uses seat-blocking and dynamic pricing, computer market-models and control of seat supply to maximize revenue. The Bush Justice Department approved the Delta-Northwest merger with these words: the merger "will allow (Delta) to better compete with low-cost airlines." (Emphasis added.) It is hard to imagine how this squares with the public‚s interest in anti-trust and anti-price-fixing enforcement.
The Commission should be talking about how much commerce and how many jobs would be gained if MSP were safer and fares were more competitive compared to non-hub cities. We don't think it is a good idea to continue with a single airline controlling so many gates or operating MSP as an over-large hub with 155 flights at peak hours criss-crossing over our homes. There must be a better way.
South Metro Airport Action Council
James R. Spensley, President