Last reviewed December 2010
Minnesota Issues Resource Guides
Northwest Airlines (Delta) and the State of Minnesota
This guide is compiled by staff at the Minnesota Legislative Reference Library on a topic of interest to state legislators. It introduces the topic and points to sources for further research. It is not intended to be exhaustive.
Northwest Airlines, Inc. (NWA) (which merged with Delta in 2008) began seeking assistance from the State of Minnesota in the early 1990s. The agreement between this privately held company and the State of Minnesota was a result of complex and hard fought negotiations. This chronology outlines the changing relationship between NWA and the State.
May 1989: Gary Wilson and Al Checchi approach NWA about acquiring the company. Other investors make bids.
June 1989: NWA agrees to sell to a group of investors including Wilson, Checchi, KLM Royal Dutch Airlines, and others for $3.65 billion.
September 1989: NWA's CEO, Steve Rothmeier and several others resign and are replaced by Checchi and his team.
May 1991: Minnesota Governor Arne Carlson and Al Checchi announce a tentative agreement for the construction of two NWA maintenance bases in the state. Legislation passes authorizing public subsidies for NWA.
December 1991: The Legislative Commission on Planning and Fiscal Policy approves, by a vote of 11-7, an $838 million financial assistance package for Northwest. The package consists of a loan of $270 million from the Metropolitan Airports Commission and more than $500 million in construction financing for maintenance bases in Duluth and Hibbing. The construction bonds are delayed by a lawsuit.
March 1992: State officials sign a $761 million public financing package for NWA. The original $838 million figure is reduced for a number of reasons.
April 1992: NWA receives the loan from the Metropolitan Airports Commission and gives half of the $270 million to Bankers Trust, its primary lender.
November 1992: NWA's six unions agree in principle to accept $900 million in employee concessions over the next 3 years. NWA seeks a $300 million loan. KLM Royal Dutch Airline, a part owner of NWA, and Bankers Trust, pledge $100 million if other lenders will commit to the rest.
December 1992: NWA executives announce the final approval of a tentative $2.2 billion restructuring plan that includes a $250 million emergency loan, $340 million in debt deferral, and cancellation of $3.5 billion in orders for new aircraft. Industry experts say that cancellation of orders for new aircraft threatens the plans for construction of the maintenance bases.
January 1993: The final piece of the $2.2 billion financial restructuring plan is the concessions agreement with the unions. In return for concessions, NWA unions demand 80 percent equity in the company. More than 1000 NWA employees are laid off.
Spring 1993: Concessions discussions continue between Northwest and the various unions.
June 1993: NWA warns unions that it will file for Chapter 11 bankruptcy protection within two or three weeks if contract concessions are not promptly approved.
July 1993: The Air Line Pilots Association's Master Executive Council averts a NWA Chapter 11 bankruptcy filing by voting 24-1 on behalf of its members to accept concessions totaling $365 million the first year. The other unions, lenders, and vendors must agree to the restructuring by August 1. Concessions over three years total $886 million. In exchange for their concessions, employees get three seats on the board of directors and up to 37.5 percent ownership of the company.
August 1993: The other five unions agree to the Air Line Pilots Association's concessions by August 1 and $886 million worth of contract concessions go into effect.
October 1993: NWA announces a third-quarter profit, their first profitable quarter in two years.
March 1994: Northwest Airlines re-enters the public stock market four and a half years after becoming a private company. The stock offering raises $260 million.
April 1994: Northwest Airlines renegotiates the agreement with Governor Arne Carlson, U.S. Representative James Oberstar and other government officials. The airline announces scaled-back plans to build an aircraft maintenance base in Duluth and a reservations center in Hibbing; an engine repair facility would not be built. The two facilities would employ up to 954 by the year 2002.
Spring 1994: After a tug of war between six Iron Range towns, Northwest Airlines ticket reservations center is now slated for Chisholm.
August 1994: Northwest Airlines stock rises 50% in value.
January 1995: Northwest Airlines posts record earnings of $295 million in 1994 after five years of losses.
Summer 1995: Construction begins on the aircraft maintenance base in Duluth and the reservations center in Chisholm.
January 1996: NWA reports record earnings for 1995.
April 1996: The Chisholm reservations center opens.
October 1996: The Duluth aircraft maintenance base opens. Northwest promises the base will employ at least 350 by the year 2000.
January 1997: NWA reports record earnings for 1996.
December 1997: Northwest decides to send its jet engines to a French overhaul facility. This decision permanently cancels a 1991 agreement the airline had negotiated with Minnesota state officials to build an engine overhaul facility in Hibbing. The original agreement unraveled in 1992 during Northwest's financial difficulties.
December 18, 1997: Northwest retires a 1992 $45 million loan from MAC with a $39 million check.
February 1999: Northwest Airlines issues a report to demonstrate how it has fulfilled its 1994 commitments to the state.
September 2001: The World Trade Center tragedy and the subsequent financial implications for the airline industry causes the state to consider assistance to Northwest Airlines. The Minnesota Senate creates the Senate Select Committee on Air Transportation and Economic Security "to explore state options available to assist airlines headquartered in Minnesota and their employees to recover from the repercussions of the September 11 terrorist attacks."
2002: The Metropolitan Airports Commission agrees to refinance the underlying debt on the general obligation revenue bonds. There are no changes to the agreements which have been in place since 1994.
January 2002: The Amended and Restated Facilities and Equipment Agreement By and Between Metropolitan Airports Commission, Lessor and Northwest Airlines, Inc., Lessee is signed. (The Public Policy Representations and Covenants; Remedies are in Article XXI on p. 34.)
September 14, 2005: Northwest Airlines voluntarily files for bankruptcy protection under Chapter 11 of the U.S. Bankruptcy Code.
2005 through 2007: Northwest faces a variety of difficulties: filing for bankruptcy, debt restructuring, layoffs, a series of strikes, and labor negotiations. A Star Tribune article from January 16, 2007 states that Northwest still owes $262 million on the $270 million it borrowed from the Metropolitan Airports Commission in 1991.
January 2007: Northwest Airlines comes to an agreement with Mesaba Airlines' parent company to acquire the regional airline.
May 2007: The Metropolitan Airports Commission Board gives final approval to a $239 million aid deal to Northwest Airlines.
May 31, 2007: Northwest Airlines emerges from 20 months in bankruptcy protection.
December 28, 2007: The Amended and Restated Third Amendment to Airline Operating Agreement and Terminal Building Lease Minneapolis-St. Paul International Airport is signed by the Metropolitan Airports Commission and Northwest Airlines. The agreement includes Article XI Hub and Headquarters Covenants.
January 2008: Northwest and Delta are reported to be considering a merger.
April 14, 2008: Northwest Airlines and Delta Air Lines announce their plan to merge which would create the world's largest airline.
October 29, 2008: Northwest Airlines and Delta Air Lines formally merge within hours of getting approval to merge from the U.S. Justice Department.
November 2008: Delta reiterates pledge to repay the Metropolitan Airports Commission the $245 million that Northwest, as a Delta subsidiary, owes on bond debt, but states they want to renegotiate the covenants agreed to in 1992 related to headquarter location, hub location, and employment.
In May 1991, the Legislature passed House File 1655 (Laws of Minnesota 1991, chapter 350), which authorized the requirements for financing the construction of aircraft maintenance and repair facilities in Minnesota.
Later the same year, the Legislative Commission on Planning and Fiscal Policy held several meetings to give final approval to the funding and construction of the maintenance facilities.
Presentation by the Metropolitan Airports Commission Regarding the Effects of Possible Airline Mergers on MAC. Presented to the Minnesota House of Representatives Local Government and Metropolitan Affairs Committee on February 25, 2008 (listen). (Document includes copies of the 2002 and 2007 hub and headquarter covenants.)
Audio and minutes from meetings of the Legislative Commission on Planning and Fiscal Policy from 1991 and 1994 dealing with Northwest Airlines.
Significant Books and Reports
$270,000,000 Minneapolis-Saint Paul Metropolitan Airports Commission Taxable General Obligation Revenue Bonds Series 9. Minneapolis: Minneapolis-Saint Paul Metropolitan Airports Commission, 1992. (HG4948.M6 M472 1992) Included in this report is the original Facilities and Equipment Lease Agreement including the original version of Article XXI: Public Policy Representations and Covenants; Remedies and the Bond Purchase Agreement dated March 29, 1992 between MAC and Dain Bosworth. (There are several other bond reports related to Northwest Airlines in the Library's collection.)
Amended and Restated Facilities and Equipment Lease Agreement by and Between Metropolitan Airports Commission, Lessor and Northwest Airlines, Inc., Lessee. Minnesota: Northwest Airlines, Inc. and Metropolitan Airports Commission, 2002. (HE9813.M6 A44 2002)
Amended and Restated Third Amendment to Airline Operating Agreement and Terminal Building Lease, Minneapolis-St. Paul International Airport. Minnesota: Northwest Airlines, Inc. and Metropolitan Airports Commission, 2007. (HE9813.M6 A443 2007)
Berger, Annette. Northwest Airlines and the State of Minnesota: Using Public-Private Partnerships to Manage Turbulent Environments. Minneapolis: University of Minnesota, Strategic Management Research Center, 1994. (HC107.M63 P835 1994)
Closing Transcript, Metropolitan Airports Commission 1994 Modification: Amendments to Series 9 Financing Documents. Minneapolis: Metropolitan Airports Commission, 1994. (HG4948.M6 M472 1994) Contains the "amended and restated master financing agreement and development agreement." Also included in this collection of documents is Article XXI:Public Policy Representations and Covenants; Remedies from the Second Amendment to Facilities and Equipment Lease Agreement.
Closing Transcript, Metropolitan Airports Commission 1994 Modification: Duluth Facility Documents. Minneapolis: Metropolitan Airports Commission, 1994. (HG4948.M6 M472 1994a)
Cost Analyses of the Northwest Airlines Heavy Maintenance and Jet Engine Repair Facilities. St. Paul: Minnesota Department of Trade and Economic Development, 1991. (HC107.M63 P832 1991)
The Economics of the Airline Industry and the Financial Condition of Northwest Airlines. Arvai Group, 1991. (HF5686.A38 E36 1991)
Final Record of Decision, Minneapolis-St. Paul International Airport Dual Track Airport Planning Process, New Runway 17/35 and Airport Plan Approval. Minneapolis: U.S. Department of Transportation, Federal Aviation Administration, Great Lakes Region, 1998. (TL726.4.T9 D87 1998)
Financial Analysis Metropolitan Airport System Incorporating Financing for Northwest Airlines. San Francisco: KPMG Peat Marwick, 1991. (HF5686.A38 F57 1991)
Financial Analysis of Northwest. Washington, D.C.: Price Waterhouse, 1991. (HF5686.A38 F56 1991)
The Financial Condition of Northwest Airlines and the Economics of the Airline Industry. Arvai Group, 1994. (HF5686.A38 F56 1994)
Memorandum of Understanding. Minnesota: Metropolitan Airports Commission; Northwest Airlines, Inc., 2007. (HE9813.M6 M465 2007)
NWA Maintenance & Repair Facilities: Report to the Legislature. St. Paul: Minnesota Department of Finance, 1991. (HF5686.A38 N67 1991)
NWA Maintenance & Repair Facilities: Report to the Governor and Legislative Update. St. Paul: Minnesota Department of Finance, 1992. (HF5686.A38 N67 1992) Contains a summary of the master financing agreement.
Northwest Airlines and the State of Minnesota: A Chronology. St. Paul, Minn.: Senate Majority Research, 2005. (HE9803.N65 N65 2005)
Northwest Airlines Estimated Cost Report. St. Paul: Minnesota Department of Trade and Economic Development, 1992. (HC107.M63 P833 1992)
Northwest Airlines Report to the State of Minnesota and the Metropolitan Airports Commission Concerning 2004 Compliance with Public Policy Covenants Northwest Airlines, 2004. (HG4948.M6 N67 2004 Chisholm and HG4948.M6 N67 2004 MSP)
Northwest Airlines: Presentation to State of Minnesota. Northwest Airlines, 1991. (HF5686.A38 N66 1991)
Owen, Beverly, and Jill Schultz. Report to the Legislative Commission on Planning and Fiscal Policy on Metropolitan Airports Commission-Northwest Airlines Negotiations. St. Paul: Minnesota Senate, Office of Senate Counsel & Research, 1992. (HC107.M63 P834 1992)
Peterson, Jerrold M., Richard Lichty and Miguel Garcia. Executive Summary of the Economic Impact Northwest Airlines Airbus Maintenance Facility and Jet Engine Repair Facility on Minnesota, St. Louis County and Duluth. Duluth, MN: University of Minnesota, Duluth, School of Business and Economics, Bureau of Business and Economic Research, 1990. (HB74.8.W67 no. 90-5)
Proposal for Northwest Airlines Heavy Maintenance Base. Minneapolis: Metropolitan Airports Commission, 1990. (HE9803.N65 P7 1990)
Report to the Minnesota Legislature on the Minnesota-Northwest Airlines Financing Agreement. St. Paul: Northwest Airlines, February 1999. (HE9803.N65 R37 1999)
Ruble, Kenneth D. Flight to the Top: How a Home Town Airline Made History--And Keeps on Making It: The Absorbing 60-Year Story of Northwest Airlines. New York: Viking Press, 1986. (HE9803.N65 R83 1986)
Venegas, Ernesto C. and Abigail McKenzie. The Cost-Effectiveness of the Public Investment in the NWA Heavy Maintenance Facility and Related Projects. St. Paul: Minnesota Department of Trade and Economic Development, Information Analysis and Evaluation Unit, Business Development and Analysis Division, 1991. (HC107.M63 P83 1991)
(articles in reverse chronological order)
Fedor, Liz. "Northwest, MAIR Agree on Terms of Mesaba Sale." Star Tribune, January 23, 2007.
Hawkins, Beth. "How Northwest Hijacked Minnesota." City Pages, April 20, 2005, p. 14-21.
Guskind, Robert. "Dead Before Arrival." National Journal, May 15, 1993, p. 1171-1175.
Picker, Ida. "The Doomed Flight of the Northwest LBO." Institutional Investor, April 1993, p. 33-42.
Schafer, Lee. "Base Instincts: Inside the NWA Deal." Corporate Report Minnesota, March 1992, p. 35-46.
Grover, Ron, Russell Mitchell, and Michael Oneal. "Dealmakers in the Cockpit." Business Week, March 5, 1990, p. 54-62.
Crudele, John. "Winging It." Corporate Report Minnesota, July 1989, p. 24-28.
Additional Library Resources
For historical information, check the following codes in the Newspaper Clipping File and the Vertical File: C118-NWA (Corporations-Northwest Airlines), M68-MAC (Metropolitan Airports Commission)
For additional reports at the Legislative Reference Library, use this Library catalog search: