For Eagan, the wait is over. Delta and Northwest airlines have announced that they will merge to create the world’s largest airline.
If the deal passes federal regulatory muster and goes forward, one of the losers figures to be Eagan, which has hosted Northwest’s headquarters for decades. Northwest’s Twin Cities airport hub operations will be unchanged after the merger, company officials have stated.
Not so, the headquarters. Delta, the lead partner in the deal, will retain its Atlanta base of operations, rendering Eagan redundant. Delta CEO Richard Anderson, the former head of Northwest, will run the merged company while Northwest CEO Doug Steenland will give up his job after the merger to take a seat on the new company’s board of directors.
During a press conference Tuesday afternoon, Steenland effectively quashed any lingering hopes that the newly merged airline would change its mind and keep Eagan as its headquarters. “I think in all honesty, no,” he said when asked that question. “At the end of the day, there can only be one.”
Northwest is Eagan’s third-largest employer. The airline’s multifacility headquarters includes its executive suites, its analytics and pricing operations, and its training facilities, which all together employ some 2,500 workers. Many of them live in Eagan and in nearby communities like Burnsville and Apple Valley. And while official word has yet to come down, it appears clear many will either lose their jobs or be asked to move south.
Steenland did strike a hopeful note during his press conference with Minnesota reporters. He suggested that the demands of the new 1,400-jet carrier would likely require the merged airline to retain locally a “meaningful” and “significant” number of the Northwest jobs currently based in Eagan.
He specifically mentioned jobs in the airline’s Eagan-based IT center and its pilot-training center, as well as the reservations center at the Bloomington airport. But he would elaborate no further when asked what he meant by the word “significant.”
“I think that’s premature,” Steenland said. “I think it’s better to use an adjective that implies ‘material.’ I think ‘significant’ is a very good one.”
His note of optimism was, however, at least slightly undercut by statements made earlier in the day during a joint Delta-Northwest news conference in New York.
There, Steenland told a group of Wall Street reporters that the merger would allow the consolidated airlines to streamline corporate offices and headquarters operations, as well as airline support and technology functions. “There will be considerable efficiencies as we try to focus our investment on the customer, rather than try to focus our resources on two separate businesses,” he said Tuesday morning.
Mike Campbell, Delta’s executive vice president of human resources, labor and communications, hammered that point home during the Tuesday morning press conference.
“On the administrative employees and the management employees where there may be some overlap, we are going to have voluntary [furlough] programs, and attempt every way we can to avoid involuntary [layoffs],” Campbell said. “But at the end of the day, there may be some involuntary furloughs on the management and the administrative side.”
A worried city
Eagan city officials, naturally, are worried. While the impact would be felt statewide, if the Delta-Northwest abandons town, it would prove particularly unsettling to Eagan and its surrounding suburbs, said Eagan City Administrator Tom Hedges.
Northwest employs 2,500, most of them skilled professionals with decent salaries, at its headquarters and training facilities. In addition, Hedges noted, the headquarters directly feeds many other businesses, including law firms, contractors, couriers and many others that depend at least partially on the airline for their own revenues.
The impact spreads well beyond the city limits. Bill Blazar, senior vice president at the Minnesota Chamber of Commerce, tells of the day he went to a car dealership in Burnsville a few years ago when Northwest was laying off employees during bankruptcy proceedings. When he asked someone at the car dealer how business was going, Blazar was stunned to find out that sales had been severely dented by Northwest’s troubles.
“He said, ‘Believe it or not, the airline has a huge impact on Dakota County, and when they lay off a bunch of people, or when they have a retrenchment, we see it in our new car sales,”‘ Blazar recalled. It only stands to reason, he said, that if the headquarters disappears, that same ripple effect will be repeated, and probably multiplied.
Beyond economics, there would be pronounced cultural effects if the headquarters were withdrawn. Those employees make charitable contributions, place kids in area schools, and are active in church and civic affairs, said City Administrator Hedges. To lose them would pack a powerful civic punch. “There are a lot of people who are going to feel it,” he said.
Despite having huge stakes in the outcome of the merger talks, Eagan’s options are almost nonexistent, he said. The city has no regulatory levers to pull. It has no financial stake in the airline. It provides the same levels of service to Northwest Airlines that it provides other corporations in the city and, even before the merger announcement, had little to offer by way of incentives to convince the airline to stay.
“It’s frustrating,” Hedges said. “You feel like you would like to cause a certain level of resistance, because Northwest is a good presence and it means a lot to our community. But there is so little we can do.”
Silver lining
Perhaps surprisingly, a headquarters pullout would only marginally affect Eagan’s property tax revenues. Though it is the city’s third-largest employer, it is — depending on how you account for it — only the city’s 11th or 12th largest tax contributor. Northwest currently accounts for just 0.8 percent of Eagan’s property tax proceeds, according to city records.
And while city officials are a little reticent to discuss it, the city seems fairly well positioned to recover any tax-revenue losses should the airline pull out of town. The airline’s main headquarters building, located at The Waters business park, has a Class A property designation — meaning it is considered desirable, high-rent office space. If abandoned, it would almost certainly be filled quickly, according to various city officials.
All together, Northwest owns six land parcels, four of which have structures on them that could be filled with new business tenants. Two others sit fallow; they were purchased with future expansions in mind, according to city spokesman Tom Garrison. They, too, would likely attract tenants that would build new businesses on them.
“We’re no longer a one-company town,” said Eagan Mayor Mark Maguire. “I certainly wouldn’t want to suggest that we are optimistic about those possibilities, but that would indeed be the silver lining.”
Kevin Featherly is a Twin Cities freelance writer.
How many of us really expect that we’ll get cheaper prices and/or better services from this? Anyone? I didn’t think so.
I am not convinced it will be easy to find a tenant for the office facilities. I live in Woodbury and there are a lot of empty office and retail spaces. Many, many. This will hurt.