Northwest in talks to acquire regional carrier Mesaba

Both airlines are working through bankruptcy reorganizations. And now they're weighing the wisdom of emerging from bankruptcy with Mesaba as part of Northwest.

Aviation consultant Doug Abbey of the Velocity Group notes the two carriers are considering marriage despite a relationship that's often strained.

"In light of the history, I find that interesting," says Abbey. "The not necessarily acrimonious, not necessarily contentious but certainly difficult relationship between the two carriers by virtue of Northwest's bankruptcy. And Mesaba having to go into bankruptcy as a result of that."

Historically, Mesaba has had relatively little say in the relationship. It has no planes of its own. Mesaba has leased all of its planes from Northwest. Northwest sets Mesaba's schedule and sells the tickets. Last year, Mesaba carried about 5.7 million passengers for Northwest. But this year, Northwest has been reducing Mesaba's flying by about 30 percent.

Now, Northwest says buying Mesaba would allow Northwest to make the most efficient use of some 50 Saab turbo-props Mesaba flies. Northwest figures it would save money if Mesaba flew the planes with Northwest piloting the airline as a subsidiary.

Northwest says any deal for Mesaba would be a non-cash transaction. But it's not saying much more than that about its talks with Mesaba.

Mesaba is owned by Minneapolis-based MAIR Holdings. And the biggest shareholder in MAIR is Northwest Airlines. Northwest owns about 27 percent of Mesaba's parent company. Banker Carl Pohlad is another big shareholder, with a 10-percent stake. A MAIR spokesman says negotiations are very preliminary. Mesaba spokeswoman Elizabeth Costello says a union with Northwest would strengthen Mesaba.

"An ownership agreement with Northwest would present a number of opportunities for Mesaba and also provide benefits for the passengers we serve," she said.

Costello says a deal with Northwest could position Mesaba to add more planes and flights.

Mesaba has been hoping to fly some of the new 76-seat regional jets Northwest is buying.

Tom Wychor, head of the pilots union at Mesaba, figures Mesaba's prospects will be much brighter if it's truly part of Northwest.

"Look at the officers and directors of Mesaba," says Wychor. "All of them have a pedigree coming from Northwest. Clearly, we are very well connected to Northwest. The fact the relationship will be extended with some form of purchase is good for the employees and good for the Northwest system."

A spokesman for the Northwest pilots' union said the union needs more information before commenting on the possible deal for Mesaba.

Mesaba serves dozens of smaller cities throughout the Upper Midwest. It's often the only provider of air service for communities such as Thief River Falls.

"I don't think it would would make any difference," according to Ronald Lindbergh, who oversees the regional airport in Thief River Falls. "I'm sure we'd get the same quality service as we have in the past. Hopefully, the service would be enhanced."

Northwest now splits its regional flying between Mesaba and Memphis-based Pinnacle Airlines. Northwest owned Pinnacle before spinning it off a few years ago. This summer, Northwest will launch a new subsidiary carrier, dubbed Compass. It will fly regional jets for Northwest.

Tom Wychor, the Mesaba pilot union leader, says airlines like to split flying between several groups of pilots. The split allows a big airline to try to play pilot groups against each other when it comes time to bargain contracts.

Northwest's merger talks with Mesaba come amid a wave of merger speculation that has washed over the airline industry. Some industry experts are skeptical many deals will actually happen. But the historic and operational links between Northwest and Mesaba, make their combination appear perhaps the most likely.

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