MPR: Some airlines may fail, Steenland tells legislators

Some airlines may fail, Steenland tells legislators
By Andrew Haeg
Minnesota Public Radio
October 2, 2001

RealAudio

State lawmakers heard testimony Tuesday from airline executives and government officials about the state's troubled aviation industry. Meeting in Eagan's City Council chambers, legislators from two House committees began considering ways the state could help locally-based airlines through a time of crisis.

NWA President Doug Steenland testified before a legislative committee in Eagan considering ways to help the Minnesota-based airline industry.
(MPR Photo/Andrew Haeg)

Northwest Airlines president Doug Steenland told lawmakers the carrier may need help from state, despite the $15 billion federal assistance package for the industry. That deal will give Northwest an estimated $500 million in direct aid, and much more in loan guarantees. Members of the Minnesota House Tax Committee began looking at the possibility of easing the tax burden on Northwest. The airline said it pays some $73 million per year to the state in taxes.

"The cushion between being able to go the distance and not could be relatively small," said Steenland. He said even if the dollar total of state aid was not large, it could still make a big difference.

"Today what might seem to be - for an $11 billion business - a relatively small amount, six months from now, nine months from now, could be critical to whether the company makes it or doesn't make it," Steenland said.

Sun Country Airlines may be in an even tighter position than Northwest. The airline says it may lose $21 million in the fourth quarter, and is in the process of restructuring as it attempts to weather the crisis. President and CEO David Banmiller asked lawmakers for direct aid, loans and loan guarantees. Banmiller cited statistics that say for every airline job lost, six others in the state and throughout the country go with it.

Asked by one legislator who the state should tax to help Sun Country, Banmiller turned the question around by encouraging legislators to consider that helping Sun Country would in the end help the economy grow, thus boosting tax revenues.

International Association of Machinists Vice President Ann Meyer, President Danny Campbell, and President Kip Hedges say that the government is letting workers "twist in the wind." Nevertheless, they will lobby for more unemployment benefits to help the hundreds of their members who have lost their jobs get back on their feet.
(MPR Photo/Andrew Haeg)

"Travel and tourism is the largest industry in the world. We drive local economies. If the economy goes in the tank because the airline industry, particularly here locally, can't satisfy the needs of travel and tourism, that's going to adversely impact your tax revenues," Banmiller said.

Some legislators seemed to feel the Metropolitan Airports Commission could do more to help Northwest and Sun Country, by lowering fees the carriers must pay. Despite executive director Jeff Hamiel's protests that the MAC had already deeply cut its budget and postponed some $300 million in construction projects, legislators seemed to think it could still do more.

Shoreview Republican Phil Krinkie pressed Hamiel to justify big expenditures on a light rail tunnel under the airport and noise abatement programs, at a time when Northwest and Sun Country are struggling to survive.

"You've done the easy stuff, when are you going to get to the tough stuff?" said Krinkie.

We are taking this very seriously," said Hamiel. "We have a few more actions we can take, but quite frankly we're getting very close to bone on this issue. Every suggestion that comes out of this committee will be re-evaluated and reassessed and communicated to the appropriate folks. We have very very strong feelings, we are in a critical environment, and we are not going to back away from being aggressive on these issues."

At a separate hearing of the House Commerce Committee, lawmakers considered the ripple effects of the September 11 attacks on the state's economy. By one estimate, 15,000 airline workers and employees of related industries may lose their jobs as a direct result of the attacks.

The surge in layoffs is already putting a severe strain on state funds dedicated to unemployment insurance and dislocated workers programs. Legislators said the state should consider boosting funds for retraining laid-off workers and request additional federal funding. Rep. Greg Davids, R-Preston, who chairs the Commerce Committee, commented on how rapidly the economic climate had darkened.

"It's very interesting that six months ago, when we were in session, there was a move by the governor to repeal the dislocated workers' fund. I don't see where that would be the case now. Times change," said Davids.

Lawmakers said they'll spend the next several weeks examining the best ways to support the airlines, and to strengthen the safety net for laid off workers.

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