CHICAGO - The Minnesota Metropolitan Airports Commission will vote next month on a $125.8 million capital budget, as a $800 million terminal expansion remains on hold and officials await a proposal from Delta Air Lines over repayment of commission-backed bonds issued for the former Northwest Airlines.
The commission several years ago negotiated a package that provided $240 million in financial relief for Northwest in exchange for its agreement to keep its hub and headquarters at Minneapolis-St. Paul International Airport, maintain two maintenance hangars, and continue paying off a $275 million 1992 debt issue that matures in 2022.
Under the agreement, the airline is required to retire the debt that carries the commission's general obligation pledge in the event it closes its hub or headquarters. The airline was also required to meet minimum employment numbers - it employs about 11,500 now - but that term can be relaxed during poor economic conditions.
Delta's acquisition of Northwest last month has raised questions over the repayment schedule because the merged airline operations will be headquartered in Atlanta. Once the airline shutters its Eagan headquarters - expected in the next year to 18 months - the commission or state could demand repayment. The airline could accelerate its repayment, but officials have said they prefer to stick to the current schedule.
Delta officials have said they might be willing to agree to new terms, including job and business commitments, to prevent a demand for quicker repayment. The airport commission's primary goal is to preserve jobs in Minnesota and limit service cuts.
"Right now, Northwest is still in keeping with its agreement because its senior management remains here, but at some point they will be in violation," said commission spokesman Patrick Hogan. "We have talked to them and we have asked them to submit a proposal" on contract modifications.
Northwest accounted for more than 75% of the 18.1 million passengers that traveled through the Twin Cities airport last year. Northwest's passenger levels dipped in 2005 and 2006 before increasing again in fiscal 2007 as it emerged from bankruptcy.
Delta formally acquired Northwest late last month, six months after the union was first announced. The combined companies elevate Delta to the top spot among air carriers internationally, with expected annual revenues of $35 billion and 75,000 employees. The airline has said it would maintain all of its current hubs, including Northwest's in Minnesota, Detroit, and Memphis, and Delta's in Atlanta, Cincinnati, New York City, and Salt Lake City.
With the commission's proposed terminal expansion - known as the 2020 plan - indefinitely on hold, Hogan said board approval will be sought next month for a $125 million program for next year. It would fund a runway extension project at the airport, a runway extension at one of the commission's seven smaller airports, and residential noise reduction efforts on a pay-as-you-go basis.
"We are trying to avoid borrowing," Hogan said. The 2020 plan was put on hold following Northwest's bankruptcy filing.
The airport has wrapped up most projects under its $3.1 billion capital program for 2010 launched in the late 1990s. including construction of a new runway. Fitch Ratings and Standard & Poor's rate the airport's nearly $800 million of senior-lien debt AA-minus and $830 million of subordinated debt A.
