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Mixed signals for regional air service
by Jeff Horwich, Minnesota Public Radio
April 10, 2003

Mesaba Airlines, under the name Northwest Airlink, flies these Saab 340 turboprop aircraft on most of its Minnesota routes. Demand for Mesaba seats was up more than 12 percent in the first quarter of 2003. (Photo courtesy of Mesaba Airlines)

For most of the nation's major airlines, the events of Sept. 11 and the war in Iraq have brought nothing but bad news. Eagan-based Northwest Airlines has lost $1.2 billion in the past two years and laid off about 17,000 people. This week Minnesota's main regional airline, Mesaba, also announced plans for job cuts and a wage freeze. But travel from Minnesota's smaller airports is up, and there are signs Mesaba may emerge from the war in Iraq in better shape than its big brother, Northwest.

Collegeville, Minn. — Mesaba handles Northwest's connecting flights to 111 smaller airports around the midwest and Canada. The Minneapolis-based company anticipates a rough year ahead. They will cut 17 management jobs in Minnesota and freeze managers' wages. Non-management job cuts may come in the next six months. The Minneapolis-based company expects to reduce capacity by five percent over the next year. Mesaba's Dave Jackson says short-distance airlines can be particularly vulnerable because passengers often have other options.

"If you look at our planes, our Saab turboprops, the average trip length is 220 miles," Jackson says. "So we're seeing the effects in a different way than the major carriers are because one of the major factors is, do people want to drive or do they want to fly?"

Mesaba's fate is closely tied to Northwest. When Northwest recently announced it would cut its flights by 12 percent, Mesaba quickly followed with a five percent cut of its own.

	St. Cloud airport security, shortly after 9-11

But hard times at Northwest could actually pay off for Mesaba. Northwest loses money when it flies around big planes with too few people on them. One solution is to eliminate flights, but the other solution is to use smaller planes. Jackson says just this month alone Mesaba will pick up 11 routes previously flown by Northwest.

"So on a DC-9 route, where a DC-9 seats anywhere from 75 to 125 people, they may decide that they want to fill that route with one of our jets that seats 69," Jackson says. "So in the position that we're in, with smaller planes, we can see some shielding from the effects of the war."

In fact, next to Northwest Mesaba looks relatively healthy. From the first quarter of last year to the first quarter of this year, demand for Northwest seats has barely budged -- up just 0.2 percent. Over the same period, Mesaba's demand rose 12.5 percent. Good first quarter results triggered a jump in Mesaba's share price earlier this week.

Mesaba can take heart from the experience of Minnesota's small regional airports. The number of passengers boarding in Grand Rapids and Hibbing, for example, is up six percent from this time last year.

In St. Cloud, City Engineer Steve Gates closely watches how many seats are filled on his Mesaba flights.

"The number of flights seems to go up and down, but the number of enplanements has held relatively steady," Gates says. "Immediately following the events of September 11th there was some decline in travel, but we're back at about that same level."

A new crosswind runway and other projects down the road may be placed on hold until the state budget recovers. A tightening St. Cloud city budget could mean cuts in services at the airport. But enough people are flying out of St. Cloud the city is courting a second regional airline, most likely with flights to Chicago. That effort is still full-speed ahead, thanks largely to a federal grant. Federal money will also build a control tower in the near future.

The Transportation Security Administration ... has expressed an interest in having a central location because it would be easier to monitor cargo. - Steve Anderson, Metropolitan Airports Commission

A major project to move more cargo into the Minnesota skies is also methodically moving ahead. The regional cargo distribution center would provide a single processing facility for international freight, and would most likely be built between the Twin Cities and Rochester. Cargo traffic has slumped along with the global economy, but the Metropolitan Airports Commission (MAC) and other backers are pushing the center as a benefit to Minnesota business, especially in high technology.

The Legislature might balk at the $2.7 million bonding request for planning and design. But the threat of terrorism may give the project a boost. The federal government could mandate the scanning of cargo in the near future, and the new cargo center would fit the bill.

"That (security) component has become the kind of driver in a way, as perhaps a reason" to build the cargo center, says Steve Anderson, the director of air cargo development for the MAC. "Prior to this time we were pursuing it primarily on the basis of economic benefits to the community."

The total cost of constructing the center cannot be estimated at this time. Anderson puts it in the "tens of millions."

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