JEFatCLT

Pinnacle Reveals Tenuous Nature Of
Latest Delta Feeder Contract

Pinnacle Airlines’ agreements to
continue flying 50-seat Bombardier
CRJ200 and 76-seat CRJ900
aircraft for Delta Air Lines through
July 2022 contain no minimum usage
requirements and a rate reset
in 2018—potentially fatal provisions,
given the regional carrier’s
current reliance on Delta as its only
long-term customer and its assertion
that it is already losing money
on the contracts.

The Memphis, Tenn.-based regional
carrier disclosed details of
the contracts in a legal brief seeking
bankruptcy court approval to impose
cost cuts on its unionized pilots.

Additional details reveal how
much influence Delta—and the state
of the U.S. regional airline industry
in general—is having on Pinnacle’s
latest contract offer to its pilots. And
for the first time Pinnacle publicly
discloses what it wants the pilots
to concede, much of which is calcu-
lated on seniority-based pay and as
much as 25% in retroactive wage
reductions.

“The regional airline industry is in
crisis, and Pinnacle must adapt immediately
or it will liquidate,” the carrier
says in its brief. “Older airlines
like Pinnacle are particularly exposed
because of the relative seniority of
their workforce, contributing to substantially
higher labor costs.”

The airline asserts it will reach
“critically low liquidity levels within
a matter of months or less” absent
the $60 million in savings it is seeking
from its pilots and $16.5 million
from other unions and work groups.
It also is at imminent risk of violating
the terms of its debtor-in-possession
financing from Delta, it says.
Delta, which is providing the
financing to allow Pinnacle to attempt
a Chapter 11 restructuring,
also is driving the regional carrier’s
current crisis.

First, Delta reached an agreement with its own pilots
that gives it the tools to cut its 50-seat Delta Connection
services by more than 200 aircraft by 2015—a decision
that will reduce the 50-seat feeder fleet to about 125
aircraft. Based on expiring contracts and other arrangements
already negotiated, Delta soon will have reduced
its 50-seat fleet to 225 aircraft, of which 140 are flown
by Pinnacle and 85 by SkyWest subsidiaries SkyWest Airlines
and ExpressJet Airlines, Pinnacle says.

Second, in mid-June Delta informed Pinnacle that it had
conducted a cost comparison of Delta Connection carriers
“to determine whether Pinnacle would be a candidate for
future lift awards from Delta.” Its conclusion: not at the
rates in the existing contracts.

Delta specified how much higher Pinnacle’s rates for
CRJ200 and CRJ900 flying are than the Delta Connection
carrier average. Pinnacle says Delta would not disclose all
the details of how it arrived at those figures—which Pinnacle
will not publicly disclose—but the regional carrier contracted
with several experts who made some assumptions and confirmed
the mainline carrier’s calculations.

Pinnacle says it appears that the average Delta Connection
rate is being driven by the youngest providers,
such as Compass Airlines and GoJet Airlines. Those two
carriers started operations in 2007 and 2005, respectively,
so none of their pilots has more than seven years of
seniority. But many of Pinnacle’s pilots have been with the
airline for 20 years or more, an imbalance exacerbated by
recent Pinnacle layoffs of its most junior pilots.

To compensate, Pinnacle is proposing retroactive pay
cuts for captains of 7-13% at each seniority level through
year 12, with no seniority step-up after that. The most
senior captains would see salaries cut 21-25%.

First officers would take pay cuts of 10-16% at seniority
levels 2 through 4, with no seniority step-up after year 4,
for a 19-24% reduction for top-of-scale flyers. First officers
promoted to captain would start at first-year captain
pay instead of getting credit for their first-officer service.

The only offset to the loss in pay—and other cuts in benefits
and changes in work rules—is a new profit-sharing program
that would pay employees 10% of profits up to 4% of
the company’s pre-tax margin and 15% of profits above 4%.

-Andrew Compart, [email protected]

surreal1221

Do you have a link to the article?

Not finding it on aviationweek's website.

BlueMoon

"Retroactive wage reductions"

So essentially you'll have to pay them when a new contract is signed. Nice.

Skypilotsv1984

It's all scare tactics and fear mongering to ram their concessions down our throats and turn public perception against us just like AMR. Let it burn.

Avroman

If the company is truly that sick, it needs to be taken out back and put down. Then take any money left over to go after Trenary for basically pulling an Enron.

Boomer

Their source? They pretty much took a five-year-old press release and replaced "Comair" with "Pinnacle".

This sucks guys. I wish I could tell you guys the right thing to do, but I can't. Comair couldn't find the "right" answer for Big D.

I do know the wrong thing to do... staying till the end, thinking that your concessions will get you more airplanes.

captainv

Here's the problem, you could vote to adopt GoJet's pay rates and work rules tomorrow but you'll never change the fact that your pilot group is more senior than them. Oh, plus all those 50-seaters.

Voting in concessions won't work. We tried that at Comair, repeatedly. Full pay till the last day? Bankruptcy judge will take it away anyway, even if you prove in court that you're profitable.

On the plus side, if you leave (or get furloughed) early and have lots of total time, you can upgrade pretty quickly wherever they send your 70/90s.

B00sted

Why are you blaming him? Seems to me the company has gone down the tube since he left!
9e always made money when Trenary was running the show. When XJ mgmt took over things went south.

Avroman

except it seems most of those hiring today don't want captains, they want fo's that dont have the time to leave anytime soon if they are hired....

N2Core

C'mon... Really?