A few months ago Pinnacle Airlines, an operator of regional aircraft in the USA filed for Chapter 11 bankruptcy protection. At that time they announced a few immediate plans, namely cutting service for everyone other than Delta and realizing a significant cash infusion from Delta to maintain operations over the restructuring period. Pinnacle is cutting aircraft from its fleet and winding down parts of the operation, but they initially seemed to be set on a reasonable course for fixing their operations and structure.
That no longer appears to be the case. Despite signing an extension of the contract to operate 50-seat aircraft for Delta over the next 10 years, Pinnacle now appears to be teetering on the brink, thanks in large part to Delta’s aggressive pursuit of retirement of those planes from its fleet. The most recent contract Delta has with its pilots – currently being voted on by the ALPA members – calls for drastic cuts in the 50-seat regional market and growth in the 76-seat space. Generally a good thing for passengers but it runs the potential of putting Pinnacle out of business.
Pinnacle was hoping to use the bankruptcy process to restructure its union contracts, mostly cutting pilot salaries which are among the highest in the industry for a regional carrier. In the past week, however, the carrier has suspended those efforts. They have indicated to the pilots that the company now is working to "reformulate" its business. In other words, just cutting the salaries isn’t going to fly.
Delta’s actions make a lot of sense. They’re getting more aircraft that their passengers enjoy flying on and they’ve come to an agreement with their pilots’ union. Still, it is hard to believe that it made sense for them to front Pinnacle ~$70mm just a couple months ago if the intention is to put the carrier out of business. A strange industry, indeed.
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