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Legislators Consider Impact of Northwest Merger
By Bill Catlin
July 26, 2000
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Witnesses told a panel of powerful state lawmakers the state should take an active stance in dealing with a possible takeover of Northwest Airlines. The Legislative Commission on Planning and Fiscal Policy held a hearing this morning to gauge the economic impact on the state if Northwest is acquired. American Airlines has reportedly made an offer for Northwest in response to United Airlines' plans to buy US Airways.

The Future of NWA
For more stories and background about Northwest Airlines and its potential merger with another airline, visit MPR's online Future of NWA special section.
MINNESOTA ATTORNEY GENERAL Mike Hatch has taken a high-profile stance opposing the United-US Airways deal. Like many observers, he predicts it will lead to a chain reaction of mergers that will result in three major airlines dominating more than three quarters of the travel market, and believes that will lead to higher fares. Hatch said he doubts the United-US Airways deal will clear U.S. justice department anti-trust regulators.

"If I were at Justice, I'd say, 'This is nuts!' But you never know," Hatch told the panel.

States have no direct authority over airline mergers, but state attorneys general can play a role in anti-trust actions, as they did in the Microsoft case. Hatch is working with other state attorneys general and said he is preparing to sue if the United-US Airways deal gets a green light. He also says other state officials can have an impact by, in effect, making noise.

Former Gov. Arne Carlson testifies before the legislative panel. (MPR Photo/Eric Ryan)

Hear part of Carlson's comments
"Public opinion is very strong in this area. It's very, very effective in this area in terms of policy makers in Washington. I do know last week, Metropolitan Airports Commission did implement or pass a resolution in opposition to these mergers. I think that resolution is wise, I think that is something that Washington listens to, and I also think that legislative bodies expressing their opinions on issues like this are also helpful," Hatch said.

Former Governor Arne Carlson urged legislative leaders to build relationships with leaders of Northwest and other airlines to gain trust and confidence that would help policymakers protect Minnesota's interests. And he says there is no more important economic question facing the state than the carrier's future.

"We measured and figured that roughly 17,000 other jobs are directly affected by Northwest Airlines, but when you add up all the possible impact, you're probably talking close to between 80,000 and 100,000 jobs," Carlson said.

University of Minnesota economist Herbert Mohring said he doesn't think Northwest's impact is as big as Carlson estimates. But Carlson said during his administration, businesses made it clear that maintaining convenient air transportation was key to their willingness to expand or stay in Minnesota.

"We measured and figured that roughly 17,000 other jobs are directly affected by Northwest Airlines, but when you add up all the possible impact, you're probably talking close to between 80,000 and 100,000 jobs. "

- Former Gov. Arne Carlson
A state finance official said a new owner of Northwest would have to come up with about $340 million to pay off loans, terms of which require the company to maintain a hub, and its headquarters here. He says that would not be a significant amount in a multi-billion dollar buyout.

Mike Garbisch, a transportation analyst for American Express told the panel that a new owner would be unlikely to dismantle Northwest's Twin Cities hub. He says a hub that an airline dominates is a key strategic asset.

"There is no reason for anyone to buy another airline to destroy a hub. There's absolutely no reason to do that. Who would ever do that? From a given airline's perspective, the more hubs we have the better," Garbisch said.

However, Garbisch also said the Twin cities might lose direct international service to the Detroit hub if American buys Northwest.

Senate Majority Leader Roger Moe, chair of the commission said after the hearing the commission is likely to pass a resolution opposing the United-US Airways deal in the coming weeks. And he said it's important that the state be involved.

"This is a high stakes game. And the airport, the airline, is very important to this state in terms of its economic growth and vitality, and that's the sort of thing we want to maintain and grow. Obviously some of these things are out of the state's control," Moe said.

Moe said he thinks Governor Ventura should be more pro-active on the issue. Ventura's press secretary John Wodele says the administration is monitoring the situation, and the governor has met with Northwest officials, but contends it will be a matter the private sector and federal regulators will decide.