Thursday, July 31, 2008

What is a sandwich and other questions.

Some time back - about 50 years more or less - there was a controversy in the airline industry over the definition of a sandwich. Coach class flights did not serve complete meals. They served sandwiches. Scandinavian Airlines (SAS) came under attack for serving gorgeous, artfully arranged and delicious open faced sandwiches on their coach flights. I know. I flew SAS on vacation to Europe in 1959 and was treated to these gourmet creations. When other competing airlines protested that they weren't playing fair, SAS responded, "We are only serving sandwiches, after all."

You see in those days of government regulated airlines, they competed for passengers by trying to outdo one another with great passenger service. What a concept!

I am reminded of this because of another controversy playing out in the current Northwest - Delta saga. Definition is again a key word. What defines "corporate headquarters?"

It seems that loan covenenants between NWA and the Metropolitan Airports Commission (MAC) require that NWA retain its headquarters and hub in the Twin Cities and maintain certain employment levels in Minnesota. In response to reports that corporate headquarters of the merged airline would be located in Atlanta, the MAC has lots of questions. Chairman Jack Lanners says that the MAC holds "leverage points" over Delta and Northwest, and it could require a merged Delta to immediately pay off $230 million in bond debt when Northwest's Eagan headquarters closes. Under the agreement, NWA has until 2022 to pay off the debt. Northwest CEO Doug Steenland and Delta CEO Richard Anderson claim that the vast majority of Minnesota jobs would be preserved after a merger. Anderson testified before the Senate Commerce Committee that Delta would keep pilot and flight attendant bases in the Twin Cities, reservations centers in Chisholm and the Twin Cities, a cargo facility at Minneapolis-St Paul International Airport, a pilot training facility, a data center in Eagan and other front-line workers needed to operate the hub.

Do those combined operations constitute corporate headquarters? Or do the offices of executive leadership constitute corporate headquarters? What constitutes a hub?

In May, NWA CEO Steenland said that the merged airline would be prepared to pay off the MAC bonds, but that executives want to renegotiate the terms of the loan with the MAC. Stay tuned. This could get interesting.

As for me, I'm thinking about those tasty open faced sandwiches I enjoyed on SAS. Which raises another question . . . is a regular sandwich a closed face sandwich? Just wondering.


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