From Al to Avista

In 1982 I wrote the “good-bye” story for the old Minneapolis Star when it ceased publication and was folded into the morning Tribune. Mike Finney, the gentlemanly and thoughtful managing editor at the time, asked me to do the story, he said, “because everyone else around here is a mess.”

What he didn’t know was that I was in the same shape — in shock, but more in mourning.  To prove that, I remember listening to then-editor Steve Isaacs give his “we’re being folded into the Tribune, our arch-enemy, speech,” and being asked, “Did you get that?” by my friend Bob Ostmann, the metro editor.  I turned to him with a blank and embarrassed stare and said, “No.” I had completely forgotten to take notes.

It didn’t matter. And it shouldn’t have mattered, because that speech was for us, the Minneapolis Star family. We had experienced a death — our voice, our cause, which had been to do something bold and different. I had lived that cause with a desperate passion for the two years I had worked there.

So it is with a similar sense of mourning that I read to day that the Star Tribune is filing for Chapter 11. We all knew the patient was very, very ill. That’s been obvious for so long now. No, it’s not a death, but it is a form of cancer: disruptive, debilitating, weakening. Will the operation work? Maybe; maybe not.  But in the end, something surely will be lost. The body will be weaker. Scars. Long rehabilitation. Maybe worse.

But these are our times. Which brings us to Al — that’d be Al Checci. Al did exactly to Northwest Airlines what the Avista people, and before them, McClatchy, did to the Strib: leveraged a high fixed-cost business.  Look at what that bought us with Northwest Airlines:  First, a bankruptcy, now a merger with Delta.  He took an unleveraged, profitable airline — potentially a Minnesota version of a Southwest Airlines — and ruined it, depriving our community of thousands of jobs and a strong, healthy Fortune 500 enterprise.

It’s the number one Don’t in business. Whether it’s airplanes, coupled with the high variable cost of fuel, union contracts and the high level of economic sensitivity, or printing presses, a big fleet of delivery trucks and union labor, you don’t borrow big money to buy those types of assets.

The variables are just too unpredictable and the fixed costs too high to pile up a bunch of debt against them. To be sure, the Strib was cash flowing like a banchee when Avista bellied up to the table, but interest rates were also at an historic low, the economy was humming, and the private equity money flooding in to firms like Avista, looking for a home.  So it made sense — sort of — for Avista to have taken a hard look at the Strib.  After all, they were taking it off McClatchy’s hands for roughly half what McClatchy had paid for the property.  Times were good; the business was performing.

But shoot:  What about that pesky internet? Craig’s List? Oil prices (delivery costs, ink)?  Inflation? Didn’t these guys model for that? Really? Didn’t Checci model to cover the financing costs of hundreds of leased jets should business slow down? Oil prices increase? Recession slow down the economy?  Or didn’t they even care?  I strongly suspect the latter; I really do.

So now, thanks to leverage — a fancy word for a Jumbo Mortgage — we have sickened another one of our key community; nay CIVIC, resources. Again, a bunch of people playing with Other Peoples’ Money in a strong economy where risk premiums had been cut to nothing, prompting ever-more risk-taking for ever-lower returns.  Now we, as a community, get to reap the benefits: Fewer reporters, smaller newsholes, fewer high-paying jobs, potentially less government oversight, less coverage of the arts, our community, our culture.

Swell. Just swell.

Okay Vance: It’s time to step up to the plate.  Bring Our Paper home.