Pinnacle Unveils Drastic Plans To Cut Costs

 - January 2, 2012, 1:10 AM

Memphis-based Pinnacle Airlines last month announced that it had begun what it called a comprehensive program to cut costs and enhance liquidity, centering on initiatives to modify its agreements with mainline airline partners, equipment lessors, debt holders, real estate lessors and vendors.

The company also confirmed plans to introduce new cost concessions from its pilots and other employees, regardless of whether the group in question enjoys union representation. As part of its efforts, the company said it would “examine and further rationalize its business lines, organizational structure and executive and director level functions.”

Flying under contract with Delta Air Lines, US Airways and United Airlines, the company employs some 7,800 people at its Pinnacle Airlines, Colgan Air and Mesaba Airlines divisions.

“Pinnacle Airlines Corp. is facing a convergence of events that, if left unaddressed, will make 2012 an extremely challenging year,” said Pinnacle president and CEO Sean Menke in a statement. “We have a great deal of hard work ahead of us, but these efforts are necessary to ensure we can operate as a profitable business for our shareholders, mainline flying partners, employees and other stakeholders.”

The airline lost $8.8 million in the first nine months of last year. During the same period in 2010, it turned a profit of $17 million. In its latest earnings report, it attributed much of its $3.5 million third-quarter net loss to cost increases related to its new pilot contract, which took effect last February, partner schedule changes that required re-staging of certain flight crews to different locations and a 40-percent year-over-year rise in fuel costs that reduced Colgan Air’s pro-rate returns by $1.2 million.

The company reported unrestricted cash and cash equivalents of $82 million as of Sept. 30, 2011.

Comments

Ceenit Before's picture

Sean, Sean, Sean, maybe if you focused on the important things like avoiding those pesky million dollar FAA fines, maybe you wouldn't find yourself in this position. You need to clean house a bit more before you come to the rank and file to get back what was negotiated and ratified in October. The people who signed that contract on behalf of Pinnacle obviously were under the impression after doing the math that it made sense for the business. Since that negotiation, you've lost no contracts and you're not threatening to park aircraft so the flying hasn't been reduced any more than it normally does is time of year. Were your negotiators given faulty information or better yet, is it another case where the right hand has no idea what the left is doing?

Think About It's picture

Previous management misbid the pilot contract, offering more than what Pinnacle could afford. Now pilots, though their pay boost makes Pinnacle increasingly uncompetitive, will torpedo their own ship by making certain that Pinnacle loses money. Fools rest on the idea that Pinnacle has "lost no contracts;" Delta has all the leverage and negotiating power and can renege on anything without batting an eye. If anyone needs a reminder, try reading the history of Mesa Airlines' bankruptcy.

Everyone at Pinnacle needs to give. The selfish and ignorant will undoubtedly refuse to sacrifice, not realizing they shoot themselves in the foot. Who loses in a Pinnacle bankruptcy, if not for employees? Employees, whether pilots, management or rank-and-file, would do well to heed the call and give. Ask not what your company can do for you, but what you can do for your company.

MESABA INTEGRITY LIVES ON's picture

"Pinch-a-Nickel" problems are just beginning! As of 1-4-12 their problems will increase to a new level.

Think About It's picture

Previous management misbid the pilot contract, offering more than what Pinnacle could afford. Now pilots, though their pay boost makes Pinnacle increasingly uncompetitive, will torpedo their own ship by making certain that Pinnacle loses money. Fools rest on the idea that Pinnacle has "lost no contracts;" Delta has all the leverage and negotiating power and can renege on anything without batting an eye. If anyone needs a reminder, try reading the history of Mesa Airlines' bankruptcy.

Everyone at Pinnacle needs to give. The selfish and ignorant will undoubtedly refuse to sacrifice, not realizing they shoot themselves in the foot. Who loses in a Pinnacle bankruptcy, if not for employees? Employees, whether pilots, management or rank-and-file, would do well to heed the call and give. Ask not what your company can do for you, but what you can do for your company.

George Babbitt's picture

To 'Ceenit Before', your suggestions are accurate, but what you miss is that these very suggestions are already being done (or have been done). If you missed the announcement a couple of weeks ago, Sean has already cut 9 VP jobs and will be combining others to reduce VP's even more. The ranks of Directors and Managers are thinning down too, and then the remaining management will take pay cuts equal in percentage to what everyone else is being asked to give. And as for the million-dollar fines. . .yes, those need to be stopped, but if you read the details, you'll see those fines are for events that happened before Sean came to Pinnacle. I think he's put the hammer down pretty well already.

Richard 's picture

If Pinnacle goes into Chapter 11, Ceenit Before, and others like him, will be wondering what happened. The judge will throw out your union contract among other things and if you don't like it, tough!!! Us retired Delta pilots along with the United and US Air pilots found out how all powerful a federal bankruptcy judge is. Better to give now with the chance to recoup later than to take a hard headed stand like you apparently want to take. You have no chance of winning if you take that stand.

Carl's picture

And their woes continues to spread....look at American Airlines and American Eagle now! Enough said!

George Babbitt's picture

Right on the money. If somebody thinks holding out for bankruptcy court is a better option, they are just plain wrong. They have no idea what can happen or how much worse it can be when a judge is deciding your contract rather than working out an agreement with the company--no matter how distasteful giving in to the company might seem. And all we have to do is look around at the industry and compare to what is going on everywhere else. Frontier is probably going to get shut down; Comair definitely will get shut down; XJET is disappearing and Eagle will likely disappear. I would take the opportunity in a heartbeat to find a way to make my company survive rather than spouting 'full pay to the last day'. When that happens, enjoy your new job at the car wash.

Stewart's picture

This isn't an airline that pays anywhere close to a livable wage to it's ground crews and other employees. Their pilots have been at the bottom of the salary scale for years. They finally negotiate a contract that still is woefully low and they are expected to give back? This can't be compared to an AMR, DAL, or UAL bankruptcy. After reorganization, their employees could at least stay out of the soup kitchen and didn't make a salary that would qualify them for food stamps. Ive never worked for Pinnacle in my life, but a quick pay scale search reveals pay so low that I can't see how anything can be cut.

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