Delta Partner Pinnacle Airlines Files for Chapter 11
Pinnacle Airlines-which provides regional flights for Delta Air Lines, United Airlines, and US Airways-has filed for Chapter 11 bankruptcy protection.
The Memphis, Tennessee-based airline said Sunday that the company's current business model is not sustainable and that it has been hurt by rising operating costs and increasing debt. It listed assets of $1.5 billion and liabilities of $1.4 billion in its filing with the U.S. Bankruptcy Court in New York.
Under the terms of the reorganization plan, Pinnacle will receive a $74.3 million loan from Delta-$44.3 million of which will be used to repay a debt to Delta; the remaining $30 million will help Pinnacle continue operations during the bankruptcy process.
Delta Air Lines accounts for 80 percent of Pinnacle's flights, according to a Star Tribune report. Pinnacle flies planes for the larger carrier under the Delta Connection name and reportedly represents 31 percent of Delta's flights out of the Twin Cities.
Meanwhile, Pinnacle plans to exit two other contracts with United Airlines and US Airways. It will stop providing regional service for United by November 30 and cease flying for US Airways by June, according to court documents.
“As major carriers have aggressively cut costs and decreased capacity, they have transformed the market for regional air service, consuming and paying less and demanding more from their regional partners,” John Spanjers, Pinnacle's chief operating officer, said in the company's bankruptcy filing. “The result has been a race to the bottom, as [Pinnacle] and other regional airlines have been forced to bid ever-lower rates and accept increasingly unfavorable contract terms to win the business of major carriers.”
Pinnacle has 97 daily departures from the Minneapolis-St. Paul International Airport, the Star Tribune reported. The airline reportedly said that its bankruptcy would not have an immediate effect on flights out of the Twin Cities.
Pinnacle said that in addition to unfavorable contracts, its losses were also due to high labor costs and difficulties in integrating the operations of Mesaba Airlines, a former Delta subsidiary that Pinnacle bought in 2010. The company said that it will seek to cut labor costs through wage reductions for Pinnacle employees.
Pinnacle has more than 7,500 employees, 1,200 of whom are in Minnesota. It offers more than 1,300 daily departures to destinations in the United States, Canada, and Mexico.