Tag Archives: Pinnacle Airlines Corporation

Pinnacle Airlines Corporation files for Chapter 11 bankruptcy protection, will phase out Colgan’s SAAB 340Bs and Q400s

Pinnacle Airlines Corporation (Memphis) yesterday (April 1-not an April Fool’s Day joke) announced that the Company and its subsidiaries have filed voluntary petitions for relief under Chapter 11 of the United States Bankruptcy Code in the U.S. Bankruptcy Court for the Southern District of New York (the “Court”). Pinnacle intends to use the Chapter 11 process to continue implementing a comprehensive turnaround plan aimed at addressing its operational and financial challenges in a rapidly evolving regional airline industry.

According to the company, “During this process, the company will remain focused on providing passengers with safe, reliable and timely service in collaboration with its network partners, Delta Connection, United Express and US Airways Express.”

Pinnacle expects to accomplish several key initiatives during the restructuring process to help ensure that it returns to profitability and remains viable over the long term as the regional airline industry continues to contract and transform. These initiatives include restructuring its key operating agreements with Delta Air Lines, winding down its operations with United Airlines, completing the wind-down of its Essential Air Service (EAS) flying with US Airways, achieving cost savings from its workforce, identifying additional opportunities across the organization to reduce costs, and ensuring that it has the appropriate fleet, staffing levels and network to operate profitably on an ongoing basis.

Sean Menke (formerly the CEO of Frontier Airlines), President and CEO of Pinnacle, said, “We intend to use the Chapter 11 process to reset our financial and operational structure in order to position Pinnacle for viability over the long term.  Quite simply, our current business model is not sustainable, as increasing operating expenses, liquidity constraints, business integration delays and difficulties associated with combining our operations have hindered our ability to maximize our growth potential.  Following a lengthy review process, and with the assistance of independent financial, industry and legal advisors, our Board of Directors determined that a court-supervised restructuring is the only feasible course of action to implement our turnaround plan.”

Menke continued, “We are committed to delivering safe, reliable travel throughout this process, and thank all of our employees for their continued focus on providing our mainline partners and their customers with on-time flights and superior in-flight service.  Our objective is to emerge from this process as a stronger, more focused company, with a revised business model, a substantially improved cost structure and operating agreements that will position us for profitable growth in the future.”

In conjunction with the filing, Pinnacle has received a commitment for secured super-priority debtor-in-possession financing (“DIP Financing”) from Delta Air Lines, Inc. in the amount of $74.3 million. Following Court approval, $44.3 million will be used by Pinnacle to repay a secured promissory note held by Delta. The remaining $30 million in DIP financing, combined with cash generated by Pinnacle’s ongoing operations, will be available to help ensure that Pinnacle has sufficient liquidity to meet its operational and restructuring needs.

Pinnacle has filed a series of customary motions with the Court seeking to ensure the continuation of normal operations, including requesting Court approval to continue to pay employee wages, salaries and benefits without interruption and to pay suppliers for fuel and other goods and services provided after the filing date.

Pinnacle noted that it previously filed withdrawal notices with the U.S. Department of Transportation (DOT) for all of the Essential Air Service (EAS) markets currently served by Colgan Air, a Pinnacle subsidiary. Pinnacle has asked the DOT to establish an accelerated process to identify replacement carriers for the EAS markets it serves, which are currently served by SAAB 340B aircraft.

The remaining SAAB 340B fleet that Colgan operates for United Express will be wound down over the next several months, with these operations projected to end by August 1, 2012.  Similarly, Colgan’s Bombardier DHC-8-402 (Q400) aircraft operations will be wound down by November 30, 2012 (see below).

Pinnacle Airlines Corporation is the parent company of Pinnacle Airlines, Inc. and Colgan Air, Inc. Flying as Delta Connection, United Express and US Airways Express, Pinnacle Airlines Corporation operating subsidiaries operate 199 regional jets and 62 turboprops on more than 1,540 daily flights to 188 cities and towns in the United States, Canada, Mexico and Belize.

Top Copyright Photo: Jay Selman.

Delta Connection-Pinnacle Slide Show: CLICK HERE

United Express-Colgan Air Slide Show: CLICK HERE

Middle Copyright Photo: Mark Durbin.

Bottom Copyright Photo: TMK Photography.

Pinnacle Airlines has received an open letter from one of its major stockholders

Pinnacle Airlines (Memphis) has received the following open letter from a group of stockholders calling for representation on the board for two stockholders. The group is unhappy with the massive decline in the value of the stock. Here is the statement:

“Wayne King, Private Investor, and Ryan Morris of Meson Capital Partners, LLC, the general partner of Meson Capital Partners, LP (the “Pinnacle Stockholders for Representation”), holders of 1,182,466 shares or 6.18% of the Pinnacle Airlines, Corporation, today release an open letter to stockholders.

Dear Fellow Pinnacle Stockholders:

In our December 23, 2011 press release, we called on Pinnacle to promptly appoint two stockholder representatives to the board. We were contacted by dozens of individual stockholders and received universal support for our proposal. We encouraged all stockholders to communicate their views directly to Pinnacle. On February 17, 2012 we met with Donald Breeding, Chairman of the Board, and Susan Coughlin, Director and Head of the Nominating and Corporate Governance Committee to discuss the merits of our proposal.

At the meeting, we alerted the Pinnacle representatives to the current outrage among stockholders due to the following:

  1. 93% drop in Pinnacle’s market value (currently at $24mm) since January 1, 2007.
  2. Non-performing capital investments of $173mm since January 1, 2007.
  3. A mere 1.09% share ownership by the eight non-employee Directors.
  4. Virtually no shares purchased in the open market by Board members in the last 5 years.
  5. Outsized board compensation vs. market value, compared to peers.
  6. Corporate bylaws designed to entrench current board members.
  7. Lack of transparent communications with stockholders.

Without meaningful ownership at the board level, Pinnacle Stockholders for Representation believes board and stockholder financial incentives are dangerously out of alignment. Warren Buffett insightfully remarked, “Who bothers to take a rental car to the car wash?” By appointing us to the board (stockholders who collectively own 6.18%), the board could immediately begin to correct this critical misalignment. We emphasized to Mr. Breeding and Ms. Coughlin that a rejection of our proposal would force us to engage in an expensive and time consuming proxy contest in which we would nominate three directors for a stockholder vote at the Company’s annual meeting in May 2012.

Our proposal offers Pinnacle’s board a golden opportunity to make a positive, pro-active, stockholder friendly move that would begin rebuilding stockholder trust: a root problem that is easily fixed with stockholder representation on the board.

Regrettably, the board has responded to our proposal with a de-facto rejection, claiming that “it is not the ‘concept’ of adding you to the board that we are struggling with. It is the timing.” In addition to this rejection, the board has disenfranchised stockholders by indefinitely delaying the annual meeting, originally scheduled for May 2012.

We could not disagree more with the board’s stated reason for rejecting our proposal on the basis of bad “timing.” Indeed, we believe strongly that NOW, during this chaotic period for the Company, where decisions with long term consequences for stockholders will be made, is EXACTLY the time when stockholder representation is needed most. An expensive and time-consuming proxy contest is not in the best interest of all parties, yet the board has currently chosen a path of entrenchment that leads directly to it.

We reiterate that we are supportive of CEO, Sean Menke and applaud the progress he is making and the intellectual honesty with which he is approaching the significant hurdles facing Pinnacle. We believe that, by choosing to engage in a proxy contest and not being open to stockholder representation at this critical juncture, the board is dangerously undermining Mr. Menke’s efforts to transform Pinnacle into a sustainable enterprise.

Entrenchment tactics will not work. As one stockholder who contacted us said: “Enough is enough!” Delaware law permits the court to order an annual meeting if management does not call one within 13 months after the previous meeting on May 17, 2011 and we are fully prepared to petition the court to order an annual meeting.

There has never been a more critical time for Pinnacle stockholders to have proper representation. We urge the board to listen to the Company’s stockholders and to accept our proposal today.

Thank you for your support as fellow owners of the Company,

Pinnacle Stockholders for Representation”

Copyright Photo: Bruce Drum.

Delta Connection-Pinnacle Slide Show: CLICK HERE


Sean Menke attempts to turn around Pinnacle

Pinnacle Airlines Corporation (Memphis) hired Sean Menke in July as its new chief executive officer (CEO). Menke, formerly the CEO of Frontier Airlines (2nd) (Denver), faces some tough decisions — cut the carrier’s costs, cut a deal for more cash from Delta Air Lines and possibly move to larger aircraft according to this article by The Commercial Appeal of Memphis.

PAC is the holding company of Pinnacle Airlines, Mesaba Airlines and Colgan Air (2nd).

Read the full article: CLICK HERE

Copyright Photo: Bruce Drum.

 

Pinnacle Airlines Corporation to take steps to improve liquidity and profitability

Pinnacle Airlines Corporation (Memphis) announced today (December 8) that it has commenced a comprehensive program to reduce short- and long-term costs and enhance liquidity.

Planned initiatives include seeking modifications to the company’s agreements with its mainline airline partners, equipment lessors, debt holders, real property lessors and vendors. The company will also seek to work with its pilots and other employees (both union and non-union) to reduce labor costs. As part of its efforts, the company will examine and further rationalize its business lines, organizational structure and executive and director level functions.

Pinnacle Airlines Corporation has engaged the services of Seabury Group LLC’s consulting division, Barclays Capital, and the law firm of Davis Polk & Wardwell LLP to assist with these efforts.

PAC is the parent company of Pinnacle Airlines, Mesaba Airlines and Colgan Air.

Copyright Photo: Jay Selman. Please click on the photo for additional information.

Pinnacle Airlines Corporation reports a net loss in the third quarter

Pinnacle Airlines Corporation (Memphis) Net loss and net loss per share for the third quarter of 2011 were $3.5 million and $0.19, respectively. Excluding special items, net loss and net loss per share for the third quarter of 2011 were $1.7 million and $0.09, respectively.

PAC is the holding company with 7,700 employees and is the parent company of Pinnacle Airlines, Inc.; Mesaba Aviation, Inc.; and Colgan Air, Inc. flying as Delta Connection, United Express and US Airways Express carriers. Pinnacle Airlines Corporation operating subsidiaries operate 199 regional jets and 82 turboprops on more than 1,540 daily flights to 188 cities and towns in the United States, Canada, Mexico and Belize.

The holding company is planning to transfer all of its regional jet operations under the Pinnacle Airlines certificate by the end of 2011. Turboprop operations are also expected to be merged under the Mesaba AOC.

Delta Connection-Pinnacle Slide Show: CLICK HERE

Copyright Photo: Bruce Drum.

Pinnacle Airlines’ flight attendants ratify the new contract

Pinnacle Airlines (Delta Connection)(Memphis) announced the revised tentative agreement with the United Steelworkers AFL-CIO (USW) to amend the collective bargaining agreement covering 871 flight attendants has been ratified. The contract provides a five-year extension to the collective bargaining agreement that became amendable on Jan. 31, 2011.

Pinnacle operates as a Delta Connection carrier and operates from five Delta hubs, specifically Detroit, Memphis, Minneapolis/St. Paul, New York (JFK) and Atlanta.

Delta Connection-Pinnacle Airlines Slide Show: CLICK HERE

Copyright Photo: Bruce Drum. Please click on the photo for additional information.

Colgan Air to end most EAS service from Boston

Pinnacle Airlines Corporation (Memphis) has announced it will be discontinuing most of its operations in Boston, including service to Plattsburgh and other northeast airports operated for US Airways Express by Colgan Air’s SAAB 340Bs.

According to the airline, Pinnacle is notifying the U.S. Department of Transportation (DOT) this week of its need to relinquish its various Essential Air Service (EAS) contracts linked to Boston.

Read the full story from WPTZ: CLICK HERE

Colgan Air Slide Show: CLICK HERE

Copyright Photo: Brian McDonough. Please click on the photo for information on Colgan.

Pinnacle Airlines Corporation loses $2.4 million in the second quarter

Pinnacle Airlines Corporation (Memphis) reported a net loss and net loss per share for the second quarter of 2011 of $2.4 million and $0.13, respectively.

Pinnacle Airlines Corporation is the airline holding company with 7,700 employees and is the parent company of Pinnacle Airlines, Inc.; Mesaba Aviation, Inc.; and Colgan Air, Inc. flying as Delta Connection, United Express and US Airways Express.

Pinnacle Airlines Corporation operating subsidiaries operate 202 regional jets and 84 turboprops on more than 1,500 daily flights to 196 cities and towns in the United States, Canada, Mexico and Belize.

The 35% year-over-year increase in the price per gallon of aircraft fuel negatively impacted Colgan’s Pro-Rate operations by $2.1 million during the second quarter of 2011.

Copyright Photo: Bruce Drum. Please click on the photo for the aircraft information.

Visit our new website: CLICK HERE

Pinnacle hires former Frontier CEO Sean Menke

Pinnacle Airlines Corporation (Memphis) has named Sean E. Menke as its new President and CEO. Menke, a veteran airline executive and Managing Partner at Vista Strategic Group LLC in Denver, Colo., succeeds Philip H. Trenary. He is expected to begin his new duties on July 1, 2011. Menke will also become a member of the company’s board of directors.

According to the holding company, “Mr. Menke, 42, brings 20 years of airline management experience. He was previously Executive Vice President and Chief Marketing Officer of Republic Airways Holdings Inc. and President and CEO of Frontier Airlines, where he helped position Frontier as one of the lowest cost and most efficient airlines in North America.”

Prior to his senior posts at Republic and Frontier, he was Executive Vice President and Chief Commercial Officer at Air Canada; and Senior Vice President and Chief Operating Officer at Frontier, where he was also Senior Vice President of Marketing and held Vice President positions in planning and revenue management. Additionally, he held management positions with United Airlines, Western Pacific Airlines and America West Airlines.

Pinnacle Airlines Corporation is a $1 billion airline holding company with 7,800 employees and is the parent company of Pinnacle Airlines, Inc.; Mesaba Aviation, Inc.; and Colgan Air, Inc. Flying as Delta Connection, United Express and US Airways Express, Pinnacle Airlines Corp. operating subsidiaries operate 202 regional jets and 88 turboprops on more than 1,650 daily flights to 196 cities and towns in the United States, Canada, Mexico and Belize.

Copyright Photo: Jay Selman. Please click on the photo for additional information.

Pinnacle’s first quarter net profit slips to $100,000

Pinnacle Airlines Corporation (Memphis) reported financial results for the first quarter of 2011. Net income and diluted earnings per share were $0.1 million ($100,000) and $0.01, respectively, excluding a special item.

This is the first period in which the holding company is experiencing the effects of the new pilot contract with the Air Line Pilots Association (ALPA) that was entered into in February 2011, increasing pilot compensation and benefits costs by $2.1 million for the quarter.

The holding company recorded $5.8 million ($3.1 million, net of related income taxes) of special charges for integration, severance, and contract implementation costs. Including these special items, the Company’s net loss and net loss per share were $(3.0) million and $(0.16), respectively.

Breakdown by each company:

Pinnacle Airlines, Inc. (Memphis) reported first quarter 2011 operating income and an operating margin of $9.0 million and 5.5%, a decrease of $4.8 million and 3.3 points, respectively, from the first quarter of 2010. Pinnacle’s operating income decreased primarily as a result of weather related performance penalties and increased pilot wages under the new labor agreement with ALPA.

Mesaba Aviation (Minneapolis/St. Paul) reported operating income and an operating margin of $1.1 million and 1.6%, respectively. Mesaba’s financial results were negatively impacted by weather conditions during the quarter as well as the wind-down of Delta’s turboprop operations as structured under the capacity purchase agreement (“Saab DCA”). The Saab DCA is structured to adjust revenue at the beginning of each year and on a prospective basis to reflect increased pilot and mechanic costs associated with the wind-down of operations. During the first quarter of 2011, the Company did not record estimated revenue of approximately $0.5 million associated with this rate adjustment. Revenue will be recorded upon final determination of the rate adjustment, which the Company expects to occur in the second quarter of 2011.

Colgan Air, Inc. (Memphis) reported an operating income and an operating margin of $2.0 million and 2.9%, an improvement of $3.1 million and 4.8 points, respectively, from the first quarter of 2010. The increase in operating margin was mainly attributable to the growth of Q400 operations during the quarter with United, partially offset by lost revenue from cancellations associated with winter weather. The improved operating results were also negatively impacted by an increase in pilot wages and a 32% year-over-year increase in the price per gallon of aircraft fuel.

Pinnacle Airlines Corporation is a $1 billion airline holding company with 7,700 employees and is the holding company of Pinnacle Airlines, Inc.; Mesaba Aviation, Inc.; and Colgan Air, Inc. Flying as Delta Connection, United Express and US Airways Express, Pinnacle Airlines Corp. operating subsidiaries operate 202 regional jets and 88 turboprops on more than 1,600 daily flights to 196 cities and towns in the United States, Canada, Mexico and Belize. Hub operations are located at 11 major U.S. airports.

Copyright Photo: Brian McDonough. Please click on the photo for additional information.

Colgan’s routes in the Northeast: