NWA loads up on regional jets
Tony Kennedy
Star Tribune
Tuesday, July 10, 2001
Northwest Airlines said Monday that it will buy at least 75 more Bombardier jets to strengthen the feed of regional passengers into its principal hubs.
Terms were not revealed and discounts are common on large orders, but the combined list price for the group of 44-seat Canadair Regional Jets (CRJs) is $1.6 billion.
Brazilian jetmaker Embraer competed for the order, but lost. Bombardier spokesman Joe Singerman said the Canadian government helped the
deal by stepping in with loan subsidies to help Bombardier match Embraer's government-backed financing package.
"This is a very significant order for us," Singerman said.
"It was a rigorous evaluation right up to the final weekend," he said.
Singerman said that once Canada helped neutralize the Brazilian financing package, Bombardier had an inside track because Northwest Airlink
already operates a 50-seat version of the CRJ. For cost containment and ease of maintenance, fleet commonality is important to large carriers.
Northwest didn't discuss the financing package, but Pierre Pettigrew, Canada's international trade minister, described it as a 15-year, low-interest loan for up to $1.2
billion. He said it was intended to match what Canada considers illegal subsidies offered by Brazil to help Embraer.
The 75 newly ordered CRJs will be in addition to 54 50-seaters that Northwest ordered from Bombardier more than a year ago. Twenty of the 50-seaters have been
delivered and the rest will arrive by mid-2004. Delivery of the new set of jets will begin in mid-2002 and continue through 2005.
The 50-seat CRJs have been used at Minneapolis-St. Paul International Airport for more than a month, operated by Express Airlines I of Memphis. Express, a
Northwest Airlink affiliate, also flies the planes to and from NWA's hubs in Detroit and Memphis.
"This purchase further extends our ability to serve new markets, enhance service in existing areas and provide our regional passengers with fast, comfortable service,"
said Tim Griffin, Northwest executive vice president of marketing and distribution.
For several years, Northwest and other big carriers have upgraded their regional fleets to attract more customers. Most passengers prefer small jets to turboprops
because they are quieter and smoother riding.
Northwest spokeswoman Mary Beth Schubert said the jets replace some turboprop flying, but they also are used to add flights on turboprop routes. One recent example
was the addition of two CRJ flights from Minneapolis-St. Paul to Moline, Ill. The jets augment existing turboprop flights on the route.
In addition, CRJs have been used by Northwest Airlink to begin new routes, including Minneapolis-St. Paul to Providence, R.I.
Regional carriers
Northwest's latest CRJ deal automatically triggers competition between regional airlines for the right to sublease and fly the new planes. Dan Matthews, senior vice
president and treasurer for Northwest, said the Eagan-based carrier will talk to "one or more regional airline carriers."
Though Matthews didn't name any contenders, Twin Cities-based Mesaba Airlines and Memphis-based Express are certain to vie for the planes and the additional
routes they represent. Both regional carriers fly exclusively for Northwest.
In the last competition, Express won the right to fly 42 of the 54 CRJ 50-seaters. The remaining dozen aircraft from that order haven't been allocated yet to any
regional airline.
"We think it's important to our growth strategy," Mesaba CEO Paul Foley said of his planned bid for the 44-seat CRJs.
Phil Trenary, CEO of Express, was unavailable for comment. Express is wholly owned by Northwest. Mesaba is publicly traded, but Northwest is its largest shareholder.
It has been more than a year since Mesaba took delivery of a new airplane, and Foley has acknowldged that shareholders have become impatient with the airline's
inability to expand at previous rates.
He said Mesaba has shored up its operations after more than a year of disappointing results and is ready to impress Northwest with operational excellence, cost
efficiency and capacity to handle growth.
"We frankly expect to be successful with Northwest or with some other carrier," Foley said.
Pilot contract
An important part of Mesaba's bid for the CRJs will be the pay rate that it negotiates with its pilots. Those talks recently began as part of new, overall contract
negotiations with the group.
The expanded use of small jets by regional airlines has been a concern of union pilots at most major U.S. carriers. At Northwest, the pilots' contract prohibits Mesaba,
Express or any other Airlink partner from operating a plane for Northwest with more than 69 seats.
The job-security provision is designed to keep Northwest from shifting primary routes to lower-paid regional pilots. The contract puts limits on the number of 69-seat
jets and 50-seat jets that Northwest can deploy through its regional partners. But Northwest said the limitation doesn't apply to 44-seat jets.
As part of the Bombardier deal, Northwest will be able to substitute 50-seat jets for the 44-seaters on order. In addition, NWA secured options to buy 25 more regional
jets from Bombardier beginning in 2006. Northwest also obtained "certain other option rights" for the purchase of an additional 150 CRJ aircraft.
Northwest said Bombardier will provide favorable lease financing for each of the planes on firm order.
-- The Associated Press contributed to this report.
-- Tony Kennedy is at tonyk@startribune.com .
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