The pending merger of Northwest Airlines and Delta has Minnesota politicians scurrying to make sure Minnesotans don’t get left behind in the tailwind of a corporate merger.
At stake in Minnesota are 11,000 Northwest jobs, plus millions of dollars in related economic development associated with having the Northwest hub at the Minneapolis St. Paul airport.
Gov. Tim Pawlenty and legislative leaders from both parties have said they are willing to consider changes to the deal the Metropolitan Airports Commission has with Northwest. In essence, Northwest would have to pay back some $245 million in bond debt and forego concessions at Minneapolis-St. Paul airport totaling another $200 million should it leave the state.
The state provided those incentives to keep the Northwest hub in the Twin Cities. A Delta-Northwest merger is widely expected to result in a corporate headquarters in Atlanta, where Delta is based. Losing the Northwest headquarters will likely cost about 1,000 jobs in the Twin Cities.
Northwest is clearly an employer Minnesota would like to keep and the Northwest hub at Minneapolis-St. Paul is significant for commerce. Still, state leaders should move with caution before giving up the farm.
Corporations are incorporated for the specific purpose of limiting their liability. Stockholders, including big pension funds, usually have more influence than some cold, small state’s politicians.
The city of Duluth struggled some years ago with losing the Northwest maintenance facility, which was subsidized by significant taxpayer dollars. Duluth lost some of its promised investments, if not real money. Ultimately the state had to take a chance at getting a bankruptcy claim to pay off the facility.
Clearly, there are inherent risks for government to do such financing with any large corporation, and especially a corporation that operates in a risky and volatile business such as airline travel.
Any renegotiated deal should be scrutinized for the risk taxpayers take for economic development that may not be around very long.
