Dirty Little Air War

Bully! Crybaby! Northwest and Sun Country brawl for control of the sandbox--and billions in local air-travel revenues

Brian Nystedt, CEO of the New Departures travel agency in Minneapolis, says overrides don't make much difference to small agencies: "The pressure to book the preferred provider" is much higher in larger companies, he notes. But, Nystedt adds, airlines can tell who their best customers are--and those customers get the most help. "Getting clients cleared on a wait list, getting people on a sold-out flight--all of that pulling-rabbits-out-of a hat stuff has to do with your relationship with people at the airlines." (Federal studies of the override system have also suggested that agents who don't play lose out on free or discounted tickets for themselves.)

Nystedt's fledgling agency stands to break even this year for the first time, he says, thanks in part to an increase in travel sparked by local fare wars. "Sun Country has made it possible for more people to travel," he explains, "and Northwest matching their fares makes it possible for more people to travel." Still, he often explains to his clients that "every once in a while, honey, you've got to fly Sun Country."

Which is precisely what Northwest is afraid of, Wozniak insists: "Those guys make a few bucks and then they go out and buy a few more planes and then, bang! You're dead. Don't kid yourself. American, United, Delta--they're all watching this, too. They learned their lesson with ValuJet when they sat back on their arrogant asses." (Discounter ValuJet made headlines when it was grounded after one of its planes crashed into the Everglades in 1996. But until then, the Atlanta-based carrier was known as the only airline this decade to launch a successful assault on a major carrier--Delta, in this case--in its hometown hub.

Brian Stauffer

 

Look north from Interstate 494 at the edge of the airport and the first thing you'll see is a veritable phalanx of white Northwest hangars. Dozens of noses and tails poke out of the blocks-long row of buildings that look sort of like marshmallows on steroids. Drive past the facility and you'll see three much smaller hangars--a new, white Sun Country structure and two older beige concrete cubes, one of them also used by the upstart.

The buildings themselves are owned by individual airlines, but the land underneath belongs to the Metropolitan Airports Commission (MAC), a government body whose 15 members are appointed by the governor and the mayors of Minneapolis and St. Paul. It is from the commission that airlines get gates, ticket counters, office space, and the like. Typically, the commission also issues the bonds that finance airlines' construction projects.

Last year, when the Northwest strike drew heightened public attention to the drawbacks of being a hub, the MAC came under fire from critics who said it should have done more to encourage airline competition. While MAC officials responded that the flurry of flak miscast their role in the fray, Sun Country and Attorney General Hatch complain that for years the agency has been indifferent to the little airline's attempts to grow.

It all began with the southernmost beige cube, a structure Sun Country has been using since its inaugural flight in 1983. Back then the edifice belonged to MLT, which sold it to Northwest in the 1985 deal. Northwest leased the hangar back to Sun Country for about $36,000 a month, according to co-founder Olsen. But in 1992, following a spat involving maintenance fees on a plane Sun Country had rented from Northwest, the monthly rent doubled and Olsen says Northwest added a proviso saying it would take the hangar back if Sun Country ever started scheduled service in the Twin Cities. At the same time, Northwest also increased the fee for performing federally mandated inspections of Sun Country's planes from $3,000 to $30,000.

Sun Country had been looking into constructing its own hangar but had encountered resistance from the MAC. Federal regulators said that without a hangar, Sun Country couldn't keep flying. So finally the MAC, in Olsen's words, "strongly suggested to Northwest that they try to come to a deal with an extended lease." After some further wangling, he says, a deal was inked that dropped the rent to its previous level and eliminated the non-compete clause.

A little more than two years ago, Sun Country did win MAC approval for a new hangar. Right around the same time, however, MAC planners happened to alter the direction of a new runway by a few degrees--sending it right through both Sun Country's rented hangar and its proposed new facility. (Sun Country ultimately built a collapsible hangar that will be moved once the runway is completed in 2001.)

The hangar spat marked just one of many times when the MAC, in response to a request from Sun Country, suggested that the airline find an accommodation with its rivals. Last month La Macchia, the Sun Country CEO, told a congressional panel in Washington that since its first flirtation with scheduled service in 1993, Sun Country has asked the MAC for gate space at the airport's main terminal 11 times. Each time the answer was no, and the MAC always offered the same reason: Other airlines--Northwest chief among them--had long-term leases on the terminal's 70 gates.

MAC officials respond that when an airline asks for space, they routinely suggest that it explore subleasing from established tenants. If that doesn't work, they say, the MAC will find the space--by wrestling it away from a competitor, if need be.

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