Dirty Little Air War

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

According to La Macchia's remarks in Washington, that's not the way it worked when Sun Country went looking. "Northwest did not even respond to our request," he alleged. "The other airlines, who each have only a handful of gates, could not accommodate a 16-plane operation. The MAC, whose mission is to foster competition, refused to intervene."

Northwest spokesman Jon Austin says he's not sure what specific requests La Macchia might have been referring to. In any case, he asserts, Northwest itself is "actively seeking more gates in Minneapolis-St. Paul because we're trying to grow our operation, and we're not in a position to sublease to anybody."

MAC public information officer Wendy Burt says it's not the commission's job to get involved in airline rivalries. "When Sun Country announced it was becoming a scheduled carrier, we thought, 'That's great,'" she says. "From the beginning we've wanted to work with Sun Country." Last year the commission did offer the airline two gates; company officials say they rejected the offer because the gates were not next to one another, and because there was no ticketing or baggage space to go with them. "In the end, when [Sun Country] decided to stay in the Humphrey terminal, we really got a bad rap for how they resolved deciding where they wanted to be," Burt concludes.

But Sun Country isn't the only one complaining that the MAC has failed to foster competition. Earlier this year a DoT study found that the commission had failed to track whether some of the airport's gates were used frequently enough to justify their exclusive leases. A separate DoT report concluded that long-term leases were limiting competition in the Twin Cities and several other markets. Yet another study by the agency, released just last month, determined that Minneapolis-St. Paul and a number of other airports had failed to aggressively market their facilities to low-fare carriers.

In an opinion piece published a year ago in the St. Paul Pioneer Press, MAC executive director Jeff Hamiel insisted that the agency "has never denied an airline a gate or access to the airport. If any airline wishes to launch service, we will make gates available." Wendy Burt adds that two years ago the agency sent letters to more than sixty airlines noting that leases on two-thirds of the airport's gates were about to expire, and that it was a good time to ask for more space. She says Northwest was the only carrier to respond. The MAC also has made a special, and public, effort to woo Southwest Airlines, the popular discounter that serves more than 60 cities around the nation.

Aviation consultant Ernest Arvai, head of New Hampshire's Arvai Group, says it's no wonder the MAC has had trouble attracting new airlines: "Northwest is known for predatory behavior," Arvai says bluntly. "There are 165 other airports that would love to have Southwest. So why would Southwest come in and try to compete with a predatory competitor?"

 

Ask Bill La Macchia about the Metropolitan Airports Commission and he declines to repeat the complaints he aired in Washington. Relations are much better these days, he says, pointing to the evidence of updates throughout the Humphrey Terminal: The new paint. The restrooms, handicapped-accessible at last. The lights, finally bright enough to read a newspaper by. The newsstand and gift shop next to the little snack bar. And, of course, the big pile of dirt behind the building.

Come March 2001, that spot will be the site of a new, sleek, 350,000-square-foot Hubert H. Humphrey Terminal. Four times the size of the current one and designed in such a way that it could be expanded from 8 gates to 18 or 19, the project will cost the MAC some $73 million. And Sun Country will be the anchor tenant. If, that is, it hasn't gone the way of most of the low-fare airlines that have tried to break the big carriers' hold on the market in the past two decades.

Fare war became a household phrase in the early Eighties, when the Reagan administration eliminated regulations governing routes and ticket prices. A host of budget carriers sprang up--most notably People Express--and many failed just as quickly. The survivors merged with their competitors, resulting in an industry that is now dominated by just seven major domestic airlines.

Since deregulation, the big airlines have all established hub-and-spoke systems that bundle much of their traffic in a few large airports. For people in hub cities, the system has made it easier and faster to fly. But critics of the system charge that hub passengers also pay a price: Travel costs more when one airline enjoys a near-monopoly on the market. Several federal probes have concluded that Twin Cities fares, for example, are higher than those of comparable, non-hub cities. Some suggested that the "hub premium"--up to 49 percent, according to a March study by the GAO--was a result of Northwest's control of some 80 percent of airport operations here.

Over the years a number of airlines have tried to capitalize on the demand this system has created by offering no-frills, budget service. The vast majority have been unsuccessful; the closest any low-fare entrant has come to commercial success was ValuJet's assault on Delta. (The former ValuJet is now back in business as AirTran, and it's among the low-fare carriers rumored to be on the verge of entering the Twin Cities market.)

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