New study says Northwest hub is a key economic asset to Minnesota
Mike Meyers
Star Tribune
Friday, July 13, 2001
A new study released Thursday says that protecting the Northwest Airlines hub at Minneapolis-St. Paul International Airport is key to maintaining economic
development in Minnesota.
The $75,000, yearlong study, commissioned by the chambers of commerce in Minneapolis, St. Paul and Bloomington, was praised by former Gov. Arne Carlson at a
news conference on Thursday.
The Minnesota economy has an "enormous dependency" on the Northwest hub, Carlson said. "Airline hubs have a substantial positive impact on the economic health
of a region."
"Northwest Airlines provides more than 21,000 Minnesota jobs representing $1.2 billion in wages," Carlson said. "Northwest spends more than $2 billion annually on
flight-related goods and services."
When the study was commissioned, early last year, Carlson was one of several civic, labor and business leaders who feared that Northwest would be bought by another
carrier, which would not use Minneapolis-St. Paul as a hub. In the intervening months, with antitrust barriers looming, such a merger seems much less likely.
The report was criticized Thursday by economists and travel experts for spotlighting benefits but downplaying the costs of "a fortress hub," where the U.S. Department
of Transportation has estimated fares are an average of 55 percent higher than in more competitive cities. Some scoffed at the idea that Northwest -- or any acquiring
airline -- would walk away from such revenue.
"They're not going to go anywhere as long as they're making a lot of money here," said George Wozniak, president of Hobbit Travel.
Said Kevin Mitchell, chairman of the Philadelphia-based Business Travel Coalition, "Instead of spending a year trying to say the hub is important, which is like saying
rocks fall when you drop them, they'd have been better off looking at hubs that have been very successful at getting great nonstop service and low fares."
He said many cities have relatively low-cost, frequent nonstop hub service without one airline dominating.
"You can look at Seattle. You can look at Los Angeles. You can look at Kansas City," Mitchell said. "All have low fares and excellent nonstop service."
Daniel Kasper, the economic consultant in Cambridge, Mass., who prepared the report, said that travelers flying in and out of Minneapolis-St. Paul may pay more than
elsewhere for air travel but that government and private studies have overstated the premium.
"When average fare calculations are adjusted to take account of the higher proportion of business travelers originating and destined for [the Minneapolis-St. Paul], the
average fare is reduced by almost 25 percent," Kasper wrote.
However, the U.S. Transportation Department said in a report this year that catering to business travelers does not justify overall higher fares at any airport. Although
business travelers often must make plans at the last minute, relatively few seats are flown empty from hub airports, the department said.
Nevertheless, Carlson said business travelers get what they pay for from Northwest. The loss of the Northwest hub would be "like pulling the veins out of your body. Then
it would be a slow death," he said. The hub allows people from small towns throughout Minnesota and the Upper Midwest to travel the world over, Carlson said, and
business travelers in small towns could find themselves stranded without the Minneapolis-St. Paul hub.
Others from a panel of business, labor and civic leaders who backed the report echoed Carlson's theme.
"We found that competition and expansion of Northwest's services ensure that travelers have access to good services at reasonable prices," said David Jennings, CEO of
the Greater Minneapolis Chamber of Commerce.
Vance Opperman, president of Key Investments, said the public can rely on the state attorney general, legions of private lawyers and the U.S. Department of Justice to
keep Northwest honest and foster competition. He praised the Metropolitan Airports Commission (MAC) for building more gates at Minneapolis-St. Paul in hope of
attracting new entrants.
"The answer is not to restrict supply," Opperman said. "The answer is to have more gates, more supply."
But Arthur Rolnick, director of research at the Federal Reserve Bank of Minneapolis, said the business and civic leaders were giving local airport officials too much
credit for fostering competition.
In the past two years, the MAC added 12 new gates at the main terminal, and every one of them was leased to Northwest, he noted.
"If anything, they're more dominant than they've ever been," Rolnick said.
-- Mike Meyers is at meyers@startribune.com .
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