MPR: MSP May Survive NWA Merger

MSP May Survive NWA Merger
By Bill Catlin
July 10, 2000

The Future of NWA

See a collection of stories and resources about the possibility of a merger between Northwest Airlines and another major airline.

The possibility that American Airlines might buy Northwest Airlines has raised questions about the future level of air service for the Twin Cities. A merger would leave American with three hubs in the Great Lakes region. When news of merger talks between Northwest and American came out last month, many observers assumed the Minneapolis-St. Paul hub might have to go. But experts point to a number of factors suggesting the Twin Cities' would remain a hub and keep high levels of non-stop and frequent service.

AT MINNEAPOLIS-ST. PAUL INTERNATIONAL AIRPORT, Northwest employees announce more than 500 flights a day. Nearly two-thirds of the passengers travelling to or leaving the Twin Cities fly Northwest. On top of that, connecting passengers give the airline three-quarters or more of the airport's total traffic.

While that dominance has fueled complaints about high fares, it also results in considerable non-stop service, and a lot more choice in flight times. Minnesota Congressman James Oberstar, a leading congressional authority on aviation, says it's critical to maintain the Twin Cities hub for the state's national and international businesses and its and tourism industry.

Northwest and American Airlines entered into in merger talks in response to United Airlines' proposal to buy US Airways. If American bought Northwest, the new carrier would combine American's Chicago hub with Northwest's in Minneapolis and Detroit. All are located in a span of slightly more than 500 miles, raising questions about whether the new company would keep all three. Both firms declined to comment on the issue, but many are pondering the effects of a merger.

As agents book tickets in the offices of Northwestern Travel in Edina, president Art Dahl says there are many things to dread about a Northwest-American merger, including the prospect of higher fares, and job losses.

"Every single dimension of it is a negative for Minnesota, or a neutral at the very best," says Dahl. But he also echoes a surprisingly common view about Twin Cities air service after a merger. "I don't think we're gonna see the hub disappear," says Dahl.

Dahl says the hub has three things going for it: strong demand for travel to and from the Twin Cities; a convenient central location; and less competition than other hubs. Northwest dominates Minneapolis and Detroit, while American plays second fiddle to United at Chicago's O'Hare Airport. O'Hare is also a capacity-controlled airport and American can't expand flights at will.

Many other observers agree the Minneapolis hub is likely to survive. A former Northwest executive who doesn't want to be identified, says it wouldn't make sense for a new owner to dismantle a profitable hub. He also says the Twin Cities has a huge maintenance operation that would be too costly to replace or move. But Dahl also says travelers using the Twin Cities hub may wind up with fewer options for travelling to some cities than exist now.

"Either Minneapolis or Detroit will experience some very modest downsizing, as American consolidates its presence at two of the three hubs."

- Joe Schwieterman
Former airlines executive

"American might say, for example, 'We want people going from New York to Omaha to go through Chicago. We don't need to encourage them, and make it super convenient for them to both go through Chicago to Omaha and through Minneapolis to Omaha, so, in one or both of those cities, we'll reduce the frequency, so we get them either way, but we won't have to have as much frequency in one of the cities as we had before.'"

Former United Airlines executive Joe Schwieterman, now at DePaul University, says Minneapolis, Detroit and Chicago are such strong markets for business travel, each can support non-stop flights to every major U.S. destination. But he doubts American would want to maintain a major connecting complex at all three.

He stresses changes would not be immediate, but would play out over years. "Either Minneapolis or Detroit will experience some very modest downsizing, as American consolidates its presence at two of the three hubs," says Schwieterman.

Detroit may have an advantage. Though the Twin Cities airport is expanding, Northwest and Wayne County, Michigan are building a new $1.2 billion terminal at the Detroit airport, with nearly 100 gates and 18 luggage carousels.

Detroit is already Northwest's biggest hub and primary international gateway.

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