Pinnacle Airlines will emerge from bankruptcy as a subsidiary of Delta Air Lines based on a new agreement struck with the regional airline's unsecured creditor's committee, Delta and its pilot group.
"The reorganisation plan will provide for Delta or an affiliate to acquire the equity in the reorganised Pinnacle Airlines Corp. after it emerges from bankruptcy," Memphis-based Pinnacle says in a release,
The carrier will become a Delta subsidiary and separate entity through the new agreement pending court approval, Delta says. It will continue to fly under its own operating certificate.
Pinnacle has until 15 February to submit a reorganisation plan to the bankruptcy court that Delta deems acceptable. The bankruptcy court would rule on Pinnacle's reorganisation plan by 15 May, according to a timeline outlined in a 2 January bankruptcy filing.
The whole of Pinnacle's new common stock will be issued to Delta, the filing shows.
Atlanta-based Delta has served as Pinnacle's debtor-in-possession lender through out the reorganisation process. The carrier agreed to issue $74.3 million in financing, a decision that received court approval on 18 May, and has agreed to seek repayment in the form of exit financing and common stock to allow Pinnacle to emerge from bankruptcy.
Delta will also provide up to $30 million of additional liquidity for Pinnacle to exit Chapter 11 and up to $22 million in loans to satisfy terms within a new collective bargaining contract with the Air Line Pilots Association. Pilots started voting 4 January and a final tally is expected on 15 January.
A bankruptcy filing says that Delta is the only source of this additional liquidity and adds that Pinnacle likely would not be able to operate beyond February without it.
Pinnacle has made plans to remove all of its owned CRJ900s from its fleet, and the rest of the aircraft in its fleet are being leased from Delta under capacity purchase agreements for Delta Connection flying.
Delta closed its regional subsidiary Comair on 28 September after striking an agreement with its pilots union in June that allowed it to cut 218 50-seater regional jets from its fleet in favor of 70 new 76-seat jets.
As a result, Pinnacle has had to re-fleet and plans to morph into a large regional jet operator of 81 CRJ900s. Delta ordered 40 CRJ900s from Bombardier in December with 30 options, and Pinnacle later announced on 18 December that it would shrink its fleet to focus on operating these aircraft and remove the 50-seat CRJ200s from its fleet.
Pinnacle now operates 54 CRJ900 aircraft for Delta, but that number will drop to 41 as it removes 13 of its owned aircraft from the fleet early this year. Flightglobal reported in October that these aircraft would be operated by SkyWest and ExpressJet, pending court approval.
In a hotline message from Pinnacle's ALPA master executive council to pilots on 17 December, the union said it did not anticipate any of its 140 CRJ200s leaving the fleet before June 2013. Pinnacle said that it would remove them over the next two to three years.
Source: Air Transport Intelligence news
