Pinnacle Signs New Agreement With Northwest

The agreement removes all restrictions preventing Pinnacle from providing regional airline services to other major airlines, with the exception of operating flights into or out of Northwest's hub cities of Minneapolis/St. Paul, Detroit, and Memphis.


Pinnacle Airlines Corp. announced today that it has reached agreement with Northwest Airlines, Inc. for an amended and restated Airline Services Agreement between the two parties, subject to confirmation by the bankruptcy court overseeing Northwest's chapter 11 bankruptcy proceedings. The agreement provides, among other things, that Pinnacle will continue to be a long-term partner of Northwest through at least 2017. In addition to reaching terms on an Amended ASA, Northwest and Pinnacle have also reached an agreement on certain corporate governance issues and agreed that Pinnacle will receive an allowed unsecured claim of $377.5 million (subject to adjustment in certain circumstances) in Northwest's bankruptcy proceedings in settlement of all claims that Pinnacle may have against Northwest. Once approved, the Amended ASA and related agreements will become effective January 1, 2007.

"All of us at Pinnacle are pleased and proud to continue our relationship with Northwest Airlines," said Philip H. Trenary, President and CEO of Pinnacle Airlines Corp. "By working together and flying one of the most reliable, cost-efficient fleets of regional jets in the world, our People have positioned Pinnacle as one of Northwest's most valuable contributors. This is a win for all parties."

Tim Griffin, Northwest's Executive Vice-President for Marketing and Distribution added, "We are pleased to continue this relationship that reaches back over 20 years. Pinnacle is an outstanding operator and partner for Northwest. We look forward to continued mutual success."

Restrictions on Operations for Other Airlines Removed

The Amended ASA removes all restrictions preventing Pinnacle from using its wholly owned subsidiary, Pinnacle Airlines, Inc., to provide regional airline services to other major airlines, with the exception of operating flights into or out of Northwest's hub cities of Minneapolis/St. Paul, Detroit, and Memphis. Pinnacle may also operate aircraft with seating capacities of 76 seats, or such other size that does not cause Northwest to violate its collective bargaining agreement with its pilots union. Further, the existing provision that requires Pinnacle to allocate its overhead between multiple operations, thus reducing the amount Northwest pays to Pinnacle for overhead, will not be applicable until Pinnacle has added at least 24 aircraft with another partner.

Fleet Size

The Amended ASA will provide that Pinnacle will retain its existing fleet of 124 CRJ-200 aircraft. Pinnacle's fleet size will further be adjusted under the following conditions:

-- 17 CRJ-200/440 aircraft will be delivered to Pinnacle during 2007. Northwest will commit to either a three- or ten-year term for these aircraft with Pinnacle prior to March 31, 2007. However, if Pinnacle has not entered into an amended collective bargaining agreement with the Airline Pilots Association ("ALPA"), the union representing its pilots, prior to March 31, 2007, Northwest will have an ongoing option to remove these 17 aircraft from Pinnacle at any time at a rate of three aircraft per month. Pinnacle's contract with ALPA is currently amendable.

-- To the extent that Pinnacle operates regional jets on behalf of another major airline, Northwest will have limited rights to remove some aircraft from Pinnacle's fleet. Northwest may remove one aircraft for every two aircraft that Pinnacle operates for another partner above an initial base of 20 regional jets. Northwest may remove no more than 20 aircraft subject to this option and no more than five aircraft in any 12-month period. Notably, Northwest may only exercise this option if the removed aircraft are not operated by or on behalf of Northwest after their removal.

-- Northwest may exchange CRJ-200 aircraft in Pinnacle's fleet for aircraft configured with 70 or more seats on a one-for-one basis and on similar economic terms and conditions.

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