Pinnacle generous with executives as it shortchanges pilots
Bankrupt airline's pay problems belie largess at top in Flight 3407 aftermath
Updated: April 4, 2012, 12:37 PM

WASHINGTON — Pinnacle Airlines is having trouble paying its pilots — but the struggling regional carrier didn't have any problem agreeing to pay its departing CEO $1.7 million, or giving its new top executive a $250,000 raise less than two weeks before the company filed for bankruptcy.

Pinnacle's pilots union spelled out the payroll problems in a March 29 memo to its members, which was obtained by The Buffalo News.

"It is simply not acceptable that so many of our pilots are waiting — in some cases for weeks — for a significant amount of the wages they have already earned," the Air Line Pilots Association unit at Pinnacle told its members in the memo.

Meanwhile, the $1.7 million consulting arrangement with departing CEO Philip H. Trenary and the $250,000 raise for his successor, Sean E. Menke, were spelled out in filings that Pinnacle made with the Securities and Exchange Commission.

The pilot pay problem, combined with the money made by Pinnacle's top executives, outraged family members of the victims of Continental Connection Flight 3407. Pinnacle owns Colgan Air, which operated the regional flight that crashed in Clarence Center in February 2009, killing 50 people.

"I don't know if shortchanging employees' pay is a common occurrence when a company is contemplating bankruptcy, but messing with the pilots' pay strikes me as a dangerous thing to do," said Susan Bourque, whose sister Beverly Eckert, a 9/11 activist, was killed in the crash. "On top of that, you wonder if this is just the tip of the iceberg."

The March 29 memo from the union indicated that the pilot pay problems began at Colgan last May but have spread throughout Pinnacle this year with the installation of a new payroll software system.

Captain Tom Wychor, chairman of the pilots union at Pinnacle, termed the problems "very extensive."

Some pilots find their base salary missing from their paychecks, Wychor said, while others are missing their overtime or per diem payments.


"In the end, pilots are getting paid, and the company is making them whole, but sometimes when these problems occur it takes weeks to get a response from the company," Wychor said.

In some cases, pilots "don't have enough money to pay their mortgage" because of the payroll problems, Wychor said.

The typical Pinnacle captain makes between $60,000 and $70,000 a year, but the average co-pilot earns only $30,000, with a base salary of about $28,000.

That's far more than the $16,000 that Rebecca L. Shaw, the co-pilot on Flight 3407, earned back in the days when Colgan did not yet have a union contract. But Wychor said Pinnacle pilots struggle if they go without pay, given that many have student loan debts of about $150,000.

A personnel shortage at Pinnacle is partly to blame for the company's failure to respond to pilots who have complained of lost pay, but the union said the company has also ignored its offers to work on the problem together.

"The fact that we still have pilots who have received neither any response nor pay is nothing less than a complete fiasco," the union memo said.Asked for an explanation of the pay problems, Pinnacle spokesman Joe Williams blamed them on the new payroll system and efforts to consolidate payroll activities at Pinnacle and its Colgan and Mesaba subsidiaries.

"We experienced some implementation issues that impacted paychecks for some pilots," Williams said. "Pinnacle is taking the situation very seriously and working quickly to correct those problems."

The revelations about Pinnacle's pilot pay problems come a year after Trenary left the company's top job — while signing a two-year, $1.7 million consulting contract with Pinnacle.

"I don't believe there's been a better time in several years to change the leadership here," he told Aviation Week when he departed a year ago. "It's very stable right now."

That turned out not to be the case.

Pinnacle filed for Chapter 11 bankruptcy protection Sunday, saying that it would otherwise be in danger of running out of operating cash by mid-April.

The company blamed its problems on labor costs, problems integrating its purchase of Mesaba Airlines into the rest of the company, and unprofitable contracts with the major airlines that it serves. In its bankruptcy filing, Pinnacle said that it was part of a "race to the bottom" among regional carriers that have to bid low in order to win the business of the major airlines.

Ironically, that's the same phrase that the Flight 3407 families have used in warning that regional airlines may risk safety to cut costs.

Pinnacle's cost-cutting, however, does not extend to executive salaries. In a filing March 20 with the SEC, the troubled airline said that it was increasing Menke's salary from $425,000 to $675,000. The chief operating officer, John G. Spanjers, will see his pay hiked from $275,000 to $400,000.

The raises "reflect additional responsibilities" the two men picked up because of the departure of other Pinnacle executives as well as the company's restructuring.

That restructuring will involve "achieving cost savings from its workforce," Pinnacle said in the news release announcing its bankruptcy filing. The company has already said that it is seeking a 5 percent pay cut from employees.

That move drew the ire of the Flight 3407 families, who have contended that low pilot salaries at regional airlines have been among the factors that have made them less safe than the big carriers.

Wychor said the pilots union was willing to meet with management "to find solutions to actual problems," but he added: "Those solutions need to maintain contract standards that attract and retain quality pilots."

Meanwhile, the union's memo advised Pinnacle pilots to keep a cool head:

"Despite the fact that you have every right to be frustrated and angry, please continue to focus on continuing to perform your job with the same level of professionalism and focus on safety that has made us successful so far. We will likely be facing more challenges in the months to come, and our ability to do our jobs safely and reliably will play a very important role in our collective future."

-----

Big pay at the top
Pinnacle Airlines is struggling to pay its pilots, but:

Last year it agreed to give outgoing CEO Philip Trenary $1.7 million in severance.
Last month it boosted the salary of current CEO Sean Menke from $425,000 to $675,000.
Last month it increased the pay of Chief Operating officer John Spanjers from $275,000 to $400,000.
Source: Security and Exchange Commission filings.

[email protected]