On Air
0:00
0:00
Open In Popup
MPR News

Northwest Airlines reaches deal to buy Mesaba, whose parent company has yet to sign on

Share story

Mesaba Saab turboprop aircraft
A Saab turboprop aircraft at MSP, part of the Mesaba fleet
MPR Photo/Jeff Horwich

The deal was negotiated among Northwest, Mesaba's management and the committee, which represents Northwest's unsecured creditors.  Under the plan, Northwest would owe $145 million towards Mesaba's bankruptcy estate, provide the feeder airline $10 million in cash for operational expenses, and keep Mesaba as its primary regional carrier.

The proposal also requires Mesaba to file a reorganization plan by January 15th, that's one day before Northwest's own reorganization plan is due.  

But in order for the deal to go through, Mesaba's board has to approve the reorganization plan.  MAIR Holdings, Mesaba's parent company appears to be trying to delay or block the deal.  Earlier this week, MAIR used its right to add another member to Mesaba's board, and the board has yet to act on the deal. A MAIR spokesman declined to comment. But one of MAIR's biggest shareholders is also objecting to the deal.

So Mesaba's unsecured creditors committee, which consists of the airline's pilots and flight attendants union, in addition to some vendors, says Mesaba can't be trusted to settle the deal with Northwest in a timely manner.   Tim Robinson, a lawyer for the creditors committee, says the members want Mesaba's bankruptcy judge to give the committee control of the reorganization plan.

"As things stand presently, we're concerned the debtor may not be able to take action in accordance with the timeline set forth in the proposed transaction with Northwest," he says.

"Discussions have lead to a fully negotiated stock purchase and reorganization agreement with no significant open issues remaining."

A spokeswoman for Mesaba says the company needs more time to consider the filing before commenting.  

Northwest says it's pleased by the committee's action. She says  Northwest believes the proposed deal is in the best interests of Mesaba's creditors, employees, and customers.  And she offered the company's statement that, "there are no significant open issues requiring further negotiation."  The spokeswoman indicated Northwest's board would consider the proposal soon, without naming a date.  Tim Robinson, the lawyer for the creditors, said Northwest's vote would happen Friday.

Robinson says Mesaba's continued role as Northwest's feeder carrier is essential to the smaller airline's emergence from bankruptcy.

"We believe the transaction with Northwest will provide significant if not 100 percent recovery for the creditors in Mesaba. Secondly, we see it as a positive development that Northwest wants to firm up longstanding relationship with Mesaba and place additional jets at Mesaba.  It will obviously bode well for continued employment of Mesaba employees," he says.

Mesaba's bankruptcy judge will hold a hearing January 9th to consider the creditors committee's request to take over the airline's reorganization plan. Lawyer Tim Robinson says the committee is still hoping such a decision won't be necessary, and that Mesaba's and MAIR's boards of directors will simply sign off on the Northwest deal.