Submitted by the Bond & Botes Law Offices - Wednesday, April 4, 2012
Pinnacle, a regional airline serving northwest Alabama, has filed for bankruptcy protection in the face of increasingly high debt. The company has been forced to admit that its business model, in which it provided regional and commuter service to the newly-merged United and Continental airlines, plus US Airways and Delta, had become “unsustainable.” In its bankruptcy filing, Pinnacle listed $1.42 billion in debt, compared to $1.54 billion in assets.
The airline will end its agreements with United/Continental and US Airways, but retain its relationship with Delta.
Costs have been rising, and integration among its own subsidiaries has proven problematic. A 2009 accident involving an aircraft flying for Colgan Air, a subsidiary of Pinnacle, killed 50; under the bankruptcy plan, Pinnacle will no longer operate under the Colgan name.
Pinnacle’s problem is not unique. One in four regional airlines is now in bankruptcy protection, with Pinnacle joining American Eagle, a subsidiary of American Airlines. American Eagle filed for bankruptcy in November of last year.
Delta has agreed to provide $74.3 million in financing to allow Pinnacle to continue operations during the bankruptcy process. That will entail massive cost-cutting, up to and including layoffs of some of the company’s 7,800 employees.
The Times Daily report can be found here.