On April 1, Pinnacle Airlines Corp. and its subsidiaries Colgan Air and Pinnacle Airlines filed voluntary petitions under Chapter 11 of the United States...

On April 1, Pinnacle Airlines Corp. and its subsidiaries Colgan Air, Mesaba Aviation and Pinnacle Airlines filed voluntary petitions under Chapter 11 of the United States Bankruptcy Code for protection from creditors and existing contracts.

Pinnacle Airlines Corp. and its subsidiaries filed their petitions in the U.S. Bankruptcy Court for the Southern District of New York.


The companies say they intend to use the Chapter 11 bankruptcy process to continue implementing a comprehensive turnaround plan aimed at addressing Pinnacle Airlines’ operational and financial challenges in a rapidly evolving U.S. regional airline industry.

Pinnacle also says that, during this process, it 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 Airlines, a subsidiary of Pinnacle Airlines Corp., operates 57 Bombardier CRJ900s and 142 CRJ200s for the Delta Connection network. The CRJ900s are configured with 12 first-class seats and 64 economy-class seats, while all the CRJ200s are outfitted with 50 economy-class seats

During its period of Chapter 11 bankruptcy protection and its restructuring process, Pinnacle expects to accomplish several key initiatives to help ensure that it returns to profitability and remains viable over the long term as the U.S. 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.

“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,” says Sean Menke, president and CEO of Pinnacle.

“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,” says Menke

Adds Menke: “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 continues: “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, Pinnacle will use $44.3 million of this funding to repay a secured promissory note held by Delta. The company says 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 Airlines Corp. subsidiary Colgan Air has been operating 31 Bombardier Q400 turboprops (seating 71 or 74 passengers depending on whether the aircraft is outfitted in two-class or one-class seat configuration) for the Continental Express/United Express network, but the carrier's flying for United was due to end by August 1, 2012. Colgan Air also operates 31 Saab 340B turboprops, each seating 34 passengers. The carrier had been operating 18 for the United Express network and four for US Airways Express on Essential Air Service contracts, but again this flying was due to end. Colgan operated the remaining Saab 340Bs on its own services

Pinnacle has filed a series of customary motions with the court so it can continue 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.

The company 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 turboprops.

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. Similarly, Colgan’s Bombardier Q400 operations will be wound down by November 30, 2012 and the company will return 28 Bombardier Q400s to Canada’s Export Development Corporation, which financed them for Colgan Air.

More information about Pinnacle’s restructuring is available online at www.pinnaclerestructuring.com. Court filings and claims information are available at http://dm.epiq11.com/PinnacleAirlines.

Davis Polk & Wardwell LLP and Akin Gump Strauss Hauer & Feld LLP are serving as the company’s legal advisors in the restructuring. Barclays Capital and Seabury Group LLC are serving as financial advisors.

Pinnacle Airlines Corp. has more than 8,000 employees. Flying as Delta Connection, United Express and US Airways Express, Pinnacle Airlines and Colgan Air operate 199 regional jets (142 Bombardier CRJ200s and 57 CRJ900s )and 62 turboprops (31 Bombardier Q400s and 31 Saab 340Bs) on more than 1,540 daily flights to 188 cities and towns in the United States, Canada, Mexico and Belize.

The parent company’s corporate offices are located in Memphis and its hub operations are located at nine major U.S. airports. Visit www.pncl.com for more information on Pinnacle Airlines Corp.

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