Pinnacle Clears Another Obstacle in Path Out of Bankruptcy

The pilots of Pinnacle Airlines ratified a bankruptcy restructuring contract on Tuesday, thereby avoiding what could have proved a messy court battle with management and potentially saving the Memphis-based regional from liquidation. Eight-five percent of the pilots who cast ballots voted in favor of the agreement.

“The pilots were given a stark choice between holding on to our current contract and seeing Pinnacle wound down or accepting drastic cuts to our pay and work rules in order to save the airline and the jobs of employees in all areas of Pinnacle’s operations,” said Tom Wychor, chairman of the Air Line Pilots Association’s Pinnacle Airlines bargaining unit. “I am proud of our pilots for making this difficult decision to preserve the company and to move forward as a group. Now we must work to protect our investment by continuing to provide our passengers with safe, reliable and professional service.”

The new seven-year agreement includes, among other cuts, a 9-percent reduction in pay for all pilots, along with longevity caps to all pay scales that will further cut the pay of more than half of Pinnacle’s pilots by as much as another 16 percent. In addition to almost 25-percent pay cuts, the deal increases health-care costs for all pilots while reducing retirement benefits by more than 50 percent for Pinnacle’s most senior pilots.

“Management failures are responsible for Pinnacle’s current financial crisis,” added  Wychor. “But only this sacrifice by the pilots could preserve a future for the airline and its employees. In that future, we will seek out new employment opportunities for our pilots who no longer see a viable career path at Pinnacle while we protect and shore up the restructured contract for those who remain.”

In return for the concessions, the contract includes a bridge agreement that provides a one-time longevity transition payment and guaranteed hiring for many Pinnacle pilots at Pinnacle's sole mainline code-share partner, Delta Air Lines.

Earlier last month Pinnacle Airlines and its wholly owned subsidiaries entered into a series of agreements that would provide a path forward for the company to emerge from Chapter 11 under the ownership of Delta or an affiliate. The centerpiece of the new plan takes the form of a deal with Delta to fly another 40 dual-class Bombardier CRJ900s, an order for which it placed in December.

The plan calls for Pinnacle to begin receiving a new batch of 40 regional jets this fall and take the last by the end of 2014, giving it 81 of the 76-seat jets in total. Meanwhile, Pinnacle would have to remove all of its 140 fifty-seat CRJ200s from operation “over the next two or three years” as part of Delta’s plan to shed all but 125 of the type from its entire regional network.