New Northwest deal stinks

OPINION

By Charles Leocha

Travel columnist

updated 11:23 a.m. ET Aug. 24, 2007

Charles Leocha Travel columnist • Profile • E-mail

Last week brought the news that TPG Capital, a private equity firm based in Texas, has offered $450 million for the purchase of Midwest Air Group, the regional carrier based in Milwaukee. And who do we find on the passive investors list? None other than Northwest Airlines.

Could this be the same Northwest Airlines that is known far and wide for thousands of flight cancellations and the poorest employee relations in the airline industry? The same Northwest Airlines that can't possibly pay its flight attendants and pilots an extra dime or change any of its work rules because of its tenuous financial position?

Yep. That Northwest Airlines.

But wait, the press releases wish to make it clear that Northwest is only a "passive, minority investor" in the deal.

Right.

I don't know what the airlines think we have been smoking recently, but I'll bet a year's salary that Northwest is going to fork over real money — a lot of money — before this deal is done. Money that Northwest could otherwise use to fix its abysmal personnel problems, clean airplanes, provide in-flight meals, arrive on time, limit overbooking, lower change fees and pay off all those creditors who were fleeced in Northwest's bankruptcy move only months ago. The same money that the just-bankrupt airline swore it didn't have when it was negotiating with its labor unions and bondholders.

No, this deal doesn't pass the smell test.

Allowing Northwest to put its camel nose under the Midwest tent just invites meddling in Midwest's affairs. Of course, the deal makers are assuring antitrust authorities that Northwest will not interfere with Midwest's management decisions.

I don't believe them.

It sounds like the clever lawyers and bankers at Northwest and TPG Capital have figured out a way for the private equity firm to act as a front for the larger airline to begin de facto control of its regional rival. No news releases that I have seen indicate how big a position Northwest will hold in Midwest, and I've learned to be suspicious of sneaky secret deals. In my experience, these deals generally result in the lawyers and bankers getting rich and the little people — customers, workers and creditors — taking it in the shorts.

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The upper Midwest is already burdened with a callous airline that virtually controls flights and pricing into Detroit and Minneapolis. Now Northwest will be able to take its anti-consumer efforts to Milwaukee. That does not bode well for the hardworking folks in Wisconsin, Michigan and Minnesota.

According to The Associated Press, "Northwest accounts for about 18 percent of the traffic at Milwaukee's Mitchell International Airport and is the second-largest carrier behind Midwest. More than half of the flights leaving from Milwaukee are Midwest."

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Should this deal be approved by shareholders and regulatory authorities, the two airlines, with common ownership elements, will control about 70 percent of the flights in and out of Milwaukee. This is not good for travelers, who will see the current high price of airfares go even higher. The quality of Midwest's customer service will inevitably drop, and with Northwest's human-resources geniuses advising Midwest, employee relations will also suffer.

From a consumer point of view, this deal simply stinks, and the Department of Justice should put the kibosh on it as soon as possible.

On the bright side: good news for Southwest
According to U.S. government statistics for domestic and international departures, Southwest Airlines is on track to surpass giant American Airlines as the largest airline in the United States. This news brings a smug smile to my face. If I had a dollar for every time a public relations flack from one of the "big six" legacy airlines condescendingly told me over the past decade, "Southwest is not a real airline — you can't compare us with them," I would be rich.

This "unreal" airline is cleaning their clocks with the best service and employee relations in the air. When your passengers and your workers are happy, good things happen. It is a lesson that American, United, Delta, Northwest, Continental and US Airways need to learn.

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