Monday, Feb 04, 2019

(Editor’s note: Following is the seventh in a series of articles regarding how the Metropolitan Airports Commission came into being 75 years ago, and how the commission’s airport system has evolved over the decades.)

As the Metropolitan Airports Commission entered the 1980s, the airline industry was in the midst of upheaval following deregulation in 1978.
With increased competition, several airlines found themselves teetering on the edge of bankruptcy, and consolidations continued following a recession in 1981-82.

The decade also brought a larger and more dominant Northwest Airlines and the promotion of Jeff Hamiel to the MAC’s executive director position, a post he would hold for more than 30 years.

In 1981 Northwest Airlines and Republic Airlines announced plans for separate projects totaling $50 million at MSP, including an addition to Northwest’s maintenance base and a new Republic hangar. At the time, Northwest was also planning a new headquarters on the banks above the Minnesota River in Bloomington, near 34th Avenue, although that project would end up in Eagan.

Pictured: An ad from Western Airlines, which served MSP in the 1970s and 1980s. Western merged with Delta Air Lines in 1986.

U.S. airlines lost more than $600 million in 1981, a year of recession and government efforts to curb inflation – the interest rate on mortgage loans averaged 17 percent that year.
To make their far-flung route offerings more efficient, airlines increasingly embraced a hub-and-spoke system, with fleets of aircraft concentrated at major airports that served as connecting points. The model became the norm in the industry for large, networked airlines.

As the market forces of deregulation played out, Braniff Airlines filed for bankruptcy in 1982 -- a move that indirectly led to the formation of Sun Country Airlines in 1983.

Former Braniff pilots came together to launch Sun Country with MSP as its home base.  MLT Vacations Inc., a Twin Cities-based provider of flight-and-hotel packages, was a key financial backer. 

The charter airline performed well with flights to sunny destinations during Minnesota’s cold-weather months. As Sun Country became more popular, other airlines noticed the trend and competition increased. Sun Country’s original owners put together a deal to sell the airline to Northwest in the mid-1980s, but dissenting shareholders blocked the idea. 

Sun Country was eventually sold to B. John Barry, a banker, in 1988. By the early 1990s, Sun Country was the third largest charter airline in the U.S., aided in large part by revenue from military charters during the first Gulf War. 

Passenger numbers continued to expand at MSP as the economy recovered from the early 1980s recession, and the MAC worked to meet demand for services. In 1984 a new seven-level, $20 million parking ramp opened at Terminal 1 with 2,000 spaces. The concession program at MSP continued to grow as well, with the first McDonald’s opening in 1985. 

That fall, an eight-member search committee led by Carl Pohlad selected a group of candidates to interview for the MAC’s executive director position. In November, Jeff Hamiel, then 38 years old, was selected to lead the MAC, which at the time had 250 employees.

Hamiel had been hired in 1977 by Ray Glumack, the MAC’s former executive director. Over the years Hamiel had held five different jobs at the MAC, the most recent being deputy executive director.
Also in 1985, an independent study of the airport predicted 29 million passengers by 2003, while passenger volume had totaled 11.5 million in 1983. The report spurred renewed talk of the need for a new airport, farther from the Twin Cities’ urban center.

The airport’s dual track planning process did not begin until 1989. However, it actually had its roots in a decades-old lawsuit filed against the MAC, leading to a 1985 Minnesota State Supreme Court decision.
In Ario vs. MAC, the court’s decision in 1985 suggested there was a class of about 27,500 property owners near the airport who might have a common legal standing against the MAC, due to aircraft noise.

The court also found that a decline in the market value of homes affected by airplane noise had not been proven.

With the Ario decision and continuing passenger growth at MSP as the backdrop, in 1989 the Minnesota State Legislature passed the Metropolitan Airport Planning Act, which became known as the “Dual Track Process.”

Essentially, the airport was directed to study whether the best solution for the airport’s future – given the complaints about airplane noise and anticipated growth in passenger numbers – was to either expand the existing airport’s capacity, or build a new airport out beyond existing suburban development.

Northwest and Republic merge

Northwest Airlines and Republic Airlines were both major operators at MSP in the 1980s. As Republic started pulling domestic travelers away from Northwest, a former Republic executive approached Northwest with what was called a “fish-buys-whale” idea.

The plan led eventually to Northwest buying Republic for $884 million in 1986. The deal built up Northwest’s domestic network and gave Republic fliers easier access to Northwest’s international destinations. Northwest dropped the “Orient” from the end of its name after the acquisition.

Republic’s four major hubs had been MSP, Detroit, Memphis and Phoenix -- the first three of which would become the core of Northwest Airline’s hub presence following the purchase. Republic also operated the world’s largest fleet of DC-9s, an aircraft that would have a presence at MSP for years to come.
With the acquisition, Northwest almost doubled in size at MSP and became the unparalleled dominant carrier at MSP.

Northwest Airlines’ leveraged buyout

As the decade closed, the airline industry had one more surprise for MSP.
The 1980s era of leveraged buyouts -- a popular tool for private equity groups -- was near its end. But financiers began eyeing Northwest Airline’s operations and it routes to Asia, which were seen as under-valued. 

Gary Wilson, a former NWA board member and Al Checchi (pictured below), a former associate of the wealthy Bass family of Texas, had acquired about 5 percent of NWA stock and were planning a takeover involving a large debt-load. 

Marvin Davis, a billionaire real estate developer, was also making a move to acquire Northwest.
Ultimately, the Wilson-Checchi group prevailed, putting together a $3.65 billion leveraged buyout of Northwest. In September of 1989, Northwest CEO Steven Rothmeier and his team resigned, replaced by Checchi and a new management group.

In the early 1990s, the airline would negotiate with the MAC and the state of Minnesota on financial terms to keep Northwest in Minnesota and retain MSP as a key hub.

Sources: MAC archive materials. Minnesota State Historicial Society archives. Newspaper clips, Minneapolis StarTribune; other publications.