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Pinnacle Airlines Corp.'s chief warned Friday that a three-month-old restructuring effort is still a work in progress with an uncertain outcome.

President and CEO Sean Menke said officials had made progress, but weren't sure they could avoid a Chapter 11 bankruptcy filing.

"Something I'm starting to sense through comments I've received from employees is a feeling that we're somehow out of the woods," Menke wrote in a letter to 8,000 employees. "It's important for everybody to understand that while we've made some progress, the challenges requiring us to initiate the restructuring plan still remain."

He continued, "We still have work to do to reduce our costs and we still have work to do to make our partner agreements profitable."

The company has negotiated temporary rate increases for its least profitable flying, but Menke said, "Unless we have long-term agreements in place, the best way for us to improve our financial performance and ensure a viable future for our company may still be the court-supervised Chapter 11 process I explained earlier."

Menke's letter seemed intended to reinforce previous calls for shared sacrifice, including concessions from unionized workers such as pilots, said analyst Helane Becker of Dahlman Rose & Co.

The company has proposed 5 percent pay cuts companywide, but no agreement has been reached with the major unions.

"I think his message to pilots is this deal has to be permanent," Becker said. "It can't be temporary. We need to get everybody on board. We need to get our partners, lenders, employees, all on board."

Pinnacle shares closed Friday at $1.24, down 5 cents, in NASDAQ trading.

Menke pointed out the Memphis-based regional airline operator's troubles are shared across the regional airline industry.

Mainline carriers such as Delta and United contract with Pinnacle to fly shorter routes that are less profitable for the bigger airlines. Regional profits have taken a hit as mainline partners squeeze out costs to maintain profitability in the face of permanently higher fuel prices.

Menke encouraged employees to read a gloomy assessment of the regional airline industry that appeared in a recent Aviation Week magazine blog.

Its author, Darren Shannon, saw no clear solution to the industry's troubles, concluding, "It simply cannot survive with the current business model."

Becker agreed with the author's conclusion, but said the problem can be solved by regional airline companies assuming more risk and asserting control over revenues.

"Our view has been that the regional airline industry is broken," Becker said. "They've got to go back to being real airlines."

WIPilot

The guy's right! This sure is working for republic. Maybe we should get on board.

AxialFlow

Shared sacrifice??? How will Menke manage to survive on $425k a year??? Can we please pass around a hat for the man!?

Let it burn...

Boomer

So the best plan management can come up with is to start breaking your promises?

That's a sound strategy.

newarkblows

Every regional is a dirtbag outfit. We exist because airline management is screwing mainline employees. If one regional doesn't do the flying then another will.

clearprop

Pinnacle, Pilots At Odds Over Permanent Pay Cut | AVIATION WEEK

etflies

Awesome that they use an fNWA 747 tail for the article too.

clearprop

I thought that was a nice touch.

FlyJSH

Oh!! Didn't you hear the good news????? We are getting some new aircraft! Except that isn't a 74, it is the new Q Four THOUSAND. However, at 287 feet long and still only a few feet above the runway, rotation (or the lack there of) can be a bit tricky to master.

etflies

They'll replace the Saabs but keep the pay rates. And bidding for the seats will be anything but seniority based. 9L guys first, ShyGuy last