Pinnacle to Fly Large RJs for Delta as It Loses Some Jets to Mesaba

April 30, 2007

MEMPHIS, Tenn. – After losing planes on Friday due to unresolved labor issues, regional airline Pinnacle Airlines Corp. on Monday won the right to fly larger aircraft for a new partner, Delta Air Lines.

On Monday, Pinnacle said it agreed to buy and operate 16 76-seat Bombardier CRJ-900s as part of the Delta Air Lines Delta Connection program. Pinnacle did not say how much the planes will cost.

The company will receive the planes starting in November and begin operating as a Delta Connection carrier in December. The pact with Delta is for 10 years.

However, on Friday, its long-time partner, Northwest Airlines, announced that it would pull 12 percent of its CRJ 200s from Pinnacle and give them to Mesaba Airlines. Unlike the new Delta deal, Northwest owns the aircraft and pays a regional airline to fly them.

Starting in September, Northwest will take back two aircraft a month, presumably turning them over to Mesaba, which Northwest formally acquired Tuesday when the regional airliner emerged from bankruptcy.

"I'm certainly not happy about this, but our people run a great airline," said Phil Trenary, Pinnacle president and chief executive. "That's why I am confident we'll get another customer with larger aircraft."

Until late in December when Pinnacle signed a new deal with Northwest, it had been flying solely as a regional carrier for Northwest, shuttling passengers between hubs and serving markets that were more profitable for Northwest flown on Pinnacle's 50-seat regional jets.

The deal let it seek other customers. It also gave Pinnacle 17 additional 50-seat regional jets, with the stipulation that Northwest could take them back if Pinnacle and its pilots did not have a deal by March 31.

"Northwest made a threat; now they have to carry through on it," said George Hamlin, principal at Hamlin Transportation Consulting outside Washington. "Northwest won. Both the others lost. Pinnacle won't be as big and therefore will not have as many opportunities for pilots." Hamlin was interviewed before the Delta announcement.

Because the planes were not committed to Pinnacle on a long-term basis, Pinnacle is entitled to the full amount of its unsecured $42.5 million claim in bankruptcy proceedings.

It plans to quickly sell it and apply the proceeds to the bottom line.

The company and its pilots - some of the lowest-paid entry-level pilots in the nation - have been negotiating since February 2005 and in mediation since September.

"We had made great progress as of noon on March 30," Trenary said. " ... I was real surprised when it didn't happen."

When Northwest announced its bankruptcy in September 2005, it grounded 15 Pinnacle planes, reducing Pinnacle's quarterly revenue projections by 7 percent and forcing it to seek voluntary furloughs.

The Associated Press and The Commercial Appeal contributed to this report.

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