Steenland: Fuel costs may shrink merged Delta/Northwest
Northwest Airlines Corp. will keep a "vibrant" hub and a substantial number of jobs in Minneapolis-St. Paul after the airline's merger with Delta, Northwest CEO Doug Steenland told business leaders Monday.
But he warned that soaring fuel costs may ultimately mean a smaller company.
Speaking at a meeting of the St. Paul Area Chamber of Commerce, Steenland said the combined carrier will keep its reservation offices, data center and flight-training facility open following the close of the deal.
Overall, he likened the deal's impact on the Twin Cities to the 1998 merger between Minneapolis-based Norwest Corp. and San Francisco-based Wells Fargo & Co. Then, Minneapolis lost Norwest's corporate headquarters but ultimately gained jobs as Wells Fargo kept a big division there.
But with the price of oil soaring, Steenland said it's hard to predict how many workers the carrier will employ in the future.
"This can only go on so long," he said of airlines absorbing high energy prices. "Fuel costs will have to be passed on to consumers. That will mean higher fares, so we'll see demand come down, and the airline will have to shrink."
Northwest (NYSE: NWA) and Delta Air Lines (NYSE: DAL) last week began crafting a plan for integrating the carriers, Steenland said. The companies expect the merger to close by the end of the year. Northwest may operate as a standalone airline for a full year after the deal wraps up, he said.
While the combined airline's headquarters will be based in Atlanta, the merged company will continue to have a big presence in the Twin Cities. "What won't be different is that Minneapolis-St. Paul will continue to be a vibrant, robust hub," Steenland said.
The airline also will continue to support Twin Cities cultural institutions and non-profits, he said.
Based in Eagan, Minn., Northwest operates one of its three U.S. hubs at Memphis International Airport.
Minneapolis / St. Paul Business Journal
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