Deals and IPOs

Delta, Northwest Merger Faces Another Hurdle


Delta Air Lines and Northwest Airlines, still trying to win backing for a merger from their pilots, face another hurdle in their effort to create the world's largest airline.

Before exiting bankruptcy last year, Northwest agreed to maintain a hub and headquarters in Minnesota in exchange for $445 million in loans and lease concessions at its Minneapolis operations.

Delta Airlines

If it merges with larger Delta and moves its headquarters to Delta's home in Atlanta, Northwest may have to repay $245 million in outstanding debt on bonds that Minnesota's Metropolitan Airports Commission issued on Northwest's behalf.

It also may have to give up $200 million a year in savings, stemming from a renegotiated lease agreement in Minneapolis.

"There has not been a resolution," said Patrick Hogan, a spokesman for the Metropolitan Airports Commission. "They have a legal commitment to this state, and we expect them to uphold it."

The potential Northwest-Delta merger has drawn attention of politicians and lawmakers. Minnesota Governor Tim Pawlenty wrote to the chief executives of both airlines saying, "We trust and expect these commitments to be honored.

He also offered "additional commitments" to Delta and Northwest to maintain the headquarters and full operations in his state.

The airlines are not in a rush to resolve the issue before agreeing on a merger.

"The airlines have said they are interested in having that conversation (about Northwest's agreements with Minnesota) at the appropriate time, after a merger is announced," Brian McClung, Pawlenty's spokesman, said via e-mail Thursday.

Northwest spokesman Dean Breest said the airline "is well aware of the importance to Minnesota of the Minneapolis-St. Paul hub and the jobs in Minnesota produced by our airline operations."

Northwest intends to "ensure the long-term survival of the Minneapolis-St. Paul hub and the Minnesota jobs we support," he said.