Bill Rochelle, the bankruptcy columnist for Bloomberg News, reports that Pinnacle Airlines Corp. will emerge from Chapter 11 bankruptcy as a wholly owned subsidiary of Delta Air Lines Inc. under a reorganization plan supported by the official unsecured creditors' committee and the pilots' union. After completing reorganization, Pinnacle will continue as a feeder airline for Atlanta-based Delta, operating 81 regional jets with 76 seats. Currently, Pinnacle is operating about 190 regional jets for Delta, mostly the 50-seat variety. Delta is already providing Pinnacle with $74.3 million in financing to continue operating while in Chapter 11. According to the report, to prevent Pinnacle from running out of cash in February, Delta is increasing the secured loan by $30 million. Delta is now Pinnacle's only customer. The report adds that Delta will loan an additional $22 million, with $20 million paid to Pinnacle pilots on emergence from Chapter 11. The payments to each pilot are on sliding scale depending on years of service. The longevity payments are an integral part of a new contract negotiated by the union and being voted on by the pilots. Pinnacle currently flies 41 of the larger regional jets for Delta, which will deliver 40 more to Pinnacle between the fall of 2013 and the end of 2014. Pilots who lose their jobs from a reduction in the size of the fleet will receive severance and other benefits financed with the $22 million loan. A feature of the new contract requires Delta to interview Pinnacle pilots for jobs at the parent airline. The new agreements require Pinnacle to emerge from Chapter 11 by May 15. Delta will set aside $2.25 million for payment of unsecured creditors' claims. Although it will have an approved unsecured claim for $95.4 million, Delta won't receive any payments from the unsecured creditors' pool. In return for contract concessions, the pilots and flight attendants will have approved unsecured claims. The pilots' claim is $138.5 million. Pinnacle agreed not to sue creditors for preferences, or payments within 90 days of bankruptcy. Delta will acquire the new Pinnacle stock in exchange for some of the debt financing the Chapter 11 effort. Some of the existing loan will survive emergence from bankruptcy. Pinnacle said the new pilots' contract will save $30 million a year, largely from a 9% wage reduction. Pilots will have wage increases from 2015 through 2019. In November, the bankruptcy judge in New York turned down Pinnacle's motion to modify the existing pilots' contract. At the time, the judge described provisions in the proposed contract that needed to change before receiving court approval. The agreement to support the plan will come to court for approval at a Jan. 16 hearing. At the hearing, Pinnacle will also ask the judge to extend its exclusive plan-filing deadline by three months to April 25. About Pinnacle Airlines Pinnacle Airlines Corp. (NASDAQ: PNCL) -- http://www.pncl.com/ -- a $1 billion airline holding company with 7,800 employees, is the parent company of Pinnacle Airlines, Inc.; Mesaba Aviation, Inc.; and Colgan Air, Inc. Flying as Delta Connection, United Express and US Airways Express, Pinnacle Airlines Corp. operating subsidiaries operate 199 regional jets and 80 turboprops on more than 1,540 daily flights to 188 cities and towns in the United States, Canada, Mexico and Belize. Corporate offices are located in Memphis, Tenn., and hub operations are located at 11 major U.S. airports. Pinnacle Airlines Inc. and its affiliates, including Colgan Air, Mesaba Aviation Inc., Pinnacle Airlines Corp., and Pinnacle East Coast Operations Inc. filed for Chapter 11 bankruptcy (Bankr. S.D.N.Y. Lead Case No. 12-11343) on April 1, 2012. Judge Robert E. Gerber presides over the case. Lawyers at Davis Polk & Wardwell LLP, and Akin Gump Strauss Hauer & Feld LLP serve as the Debtors' counsel. Barclays Capital and Seabury Group LLC serve as the Debtors' financial advisors. Epiq Systems Bankruptcy Solutions serves as the claims and noticing agent. The petition was signed by John Spanjers, executive vice president and chief operating officer. As of Oct. 31, 2012, the Company had total assets of $800.33 million, total liabilities of $912.77 million and total stockholders' deficit of $112.44 million. Delta Air Lines, Inc., the Debtors' major customer and post- petition lender, is represented by David R. Seligman, Esq., at Kirkland & Ellis LLP. The official committee of unsecured creditors tapped Morrison & Foerster LLP as its counsel, and Imperial Capital, LLC, as financial advisors.
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