Jan. 20--WASHINGTON -- The company that owns Colgan Air, which operated the doomed Continental Connection Flight 3407 that crashed in Clarence nearly three years ago, may be forced to file for bankruptcy.
Pinnacle Airlines Corp. said in a letter to employees that it may need to seek bankruptcy protection unless it can reach cost-cutting deals with its unions and other partners.
"On the current path, our financial position will continue to worsen at an alarming rate; we need to act immediately," Pinnacle's chief executive officer, Sean Menke, said today in a letter to employees. "What happens next is not yet clear."
Among the airline's problems, Menke said, was a deal with United Continental Holdings Inc. to operate flights with the Bombardier Dash 8 Q400 turboprop plane -- the type of plane that crashed in Clarence, killing 50.
Pinnacle's contract with United Continental means that flights with the Q400 "are not covering the expenses" required to operate the planes, Menke said.
"The losses incurred on this operation are not sustainable," Menke said.
Maintenance costs on the CRJ-900 fleet operated for Delta Airlines "will worsen over time" and exacerbate Pinnacle's financial problems, Menke said.
In addition, a new pilot contract has been more costly than anticipated, and efforts to integrate Pinnacle's three airlines -- Pinnacle, Colgan and Mesaba Airlines -- have been more time-consuming than expected.
"The delayed integration of our three airlines has resulted in extended redundant costs and business complexity," said Menke, who delivered a blunt assessment to employees about the company's prospects.
"We cannot continue to operate businesses that are losing money," he said. "We do not have the cash to sustain it."
Pinnacle's announcement today, included in a filing at the Securities and Exchange Commission, comes after several difficult years for its Colgan operation.
Federal investigators blamed the 2009 crash in Clarence on pilot error, and the National Transportation Safety Board's final report on the crash criticized Colgan's pilot training and hiring practices.
And last year, the Federal Aviation Administration fined Colgan $1.89 million because the airline assigned 84 flight attendants to 172 flights without the required safety training.
Shares of Pinnacle stock fell 90 percent last year, and dropped another 1.9 percent this morning, to 93 cents, Bloomberg News reported.
Copyright 2012 - The Buffalo News, N.Y.
