Pinnacle Identifies Path Out of Chapter 11
Pinnacle Airlines and its wholly owned subsidiaries have entered into a series of agreements that would provide a path forward for the company to emerge from bankruptcy under the ownership of Delta Air Lines or an affiliate, the company announced Thursday. The centerpiece of the new plan would take the form of a deal with Delta to fly another 40 dual-class Bombardier CRJ900s, an order for which it placed last month.
Now flying 41 seventy-six-seat CRJ900s, Pinnacle would begin receiving a new batch of 40 regional jets this fall and take the last by the end of 2014, giving it 81 in total. Meanwhile, Pinnacle would remove all of its 140 fifty-seat CRJ200s from operation “over the next two or three years” as part of Delta’s plan to shed all but 125 of the type from its entire regional network.
Still subject to court approval, the agreements among Pinnacle, Delta, the Air Line Pilots Association and the creditors’ committee in Pinnacle’s Chapter 11 cases include a requirement that the Memphis-based regional airline file an acceptable reorganization plan by February 15 that provides for the sale of a controlling interest to Delta or an affiliate. They also include an amendment to the company’s existing debtor-in-possession credit facility that would give Pinnacle another $30 million to support its continued operation through emergence from Chapter 11 and a further $22 million to fund a bridge agreement with its pilots calling for furlough benefits and hiring preference at Delta.
While the removal of the 140 CRJ200s would result in a loss of several hundred pilot jobs at Pinnacle, management insists it sees no alternative means to avoid a complete liquidation of the company. Last month ALPA’s Pinnacle unit signed a tentative agreement with management to amend its labor contract to allow for various cost-cutting measures, including significant salary cuts. The union expects to announce the results of the vote by January 15.