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Tuesday, October 15, 2019

Minnesota AG opposed to airline merger

By Nick Rees | Oct 30, 2008

Lori Swanson (D)

MINNEAPOLIS, Minn. (Legal Newsline) -- The Minnesota state attorney general has released a statement on an impending merger of two airlines and their potential impact on covenants one of the airlines made with the state.

The Justice Department announced that it will not block the merger of Northwest Airlines and Delta Airlines. Northwest Airlines is one of the largest employers in the state of Minnesota and carried nearly 80 percent of passengers in 2008 from Minneapolis-St. Paul Airport.

Northwest has been the beneficiary of significant subsidies from Minnesota, including a financial commitment of over $800 million in the 1990's and loan of $270 million from the Metropolitan Airports Commission in 1992. As part of the covenants from that loan, Northwest must prepay approximately $230,000,000 in debt owed to MAC if the corporate headquarters or hub moves or if the number of Minnesota employees drops below 1992 levels.

Similar covenants were again made in 2007 after Northwest executed gate lease agreements and received favorable concession and revenue rebates.

Northwest recently met with the Minnesota Department of Finance and MAC to propose a modification of the covenants to allow Northwest a longer period to repay its obligations but would not reveal to the office of the attorney general what concessions it would offer to receive the modifications.

According to her statement, Attorney General Lori Swanson, part of the Democratic-Farmer-Labor party, strongly opposes modifying or renegotiating the covenants, citing the sacrifices of taxpayers to the airline in its time of financial crisis in the 1990's.

In addition, the attorney general asks that the Minnesota Department of Finance and MAC retain a credit analyst to ascertain Northwest/Delta's ability to prepay the $230,000,000 owed as well as their ability to obtain credit.

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