Pinnacle files CH. 11

[Kev3188]

One of about a bazillion links here...

Of note:

• DL is providing DIP financing.
• They're looking to wind down flying for UAL (currently done by Colgan)
• Also plan to end EAS flying

 

[eolesen]

They're also winding down the US flying they were doing, and will wind up being entirely dependent on Mother
Delta.

I'm half-convinced you'll see a shotgun wedding of Pinnacle with someone else, maybe Comair. Consolidation is good, right?...

 

[WorldTraveler]

correct me, Kev, but wasn't Pinnacle entirely owned by NW at one time anyway? So, yes, E, Pinnacle will be back under its parent again....
The real question in my mind is how DL will use Pinnacle's BK to reduce its 50 seat flying. It is indeed possible that DL could transfer some of the flying to other DCI carriers - perhaps in return for them lowering some of their rates - but I believe Pinnacles fleet is younger than many other CRJs.
It is possible that DL as the likely largest stockholder of Pinnacle could reduce many of Pinnacle's contracts but end of placing the aircraft elsewhere - perhaps swapping the newer CRJs for some of the olders and then turning around and parking them - presumably since the newer ones are apparently lower cost.
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I doubt DL will miss the opportunity to get rid of some RJ flying.... and at the same time, this might accelerate their interest in the 717s - which will be lower CASM aircraft.
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You can't miss that DL is pressuring Pinnacle to quickly dump some US and UA flying just as DL is building up its LGA hub.

 

[Kev3188]

They're also winding down the US flying they were doing, and will wind up being entirely dependent on Mother
Delta.

Which to me is interesting, since one of the main reasons originally cited for the 9E/9L tie up was the idea that they would be able to fly for other carriers besides DL.

 

[WorldTraveler]

Which to me is interesting, since one of the main reasons originally cited for the 9E/9L tie up was the idea that they would be able to fly for other carriers besides DL.

except that the flying being cut is all on older, less economical turboprops... apparently even UA agreed to temporarily increase the rates being paid to offset some of the losses so that Pinnacle wouldn't cut the flying the day they walked into court.
There is also EAS flying which is at best still a partial subsidy... not many airlines are in a position to fly for a loss in the name of allowing some other airline to increase their market share.

 

[eolesen]

except that the flying being cut is all on older, less economical turboprops...

The Q400 is an older, less economical turboprop? Wow. Learned something new.

I've always thought that the Q400 was considered a low CASM airframe.

 

[Kev3188]

You beat me to it, E.

Who knew?

 

[WorldTraveler]

Yet Pinnacle/Colgan and United have apparently both agreed to terminate the agreement on a rather expeditious timeline with no replacement of the aircraft, no attempt by Pinnacle to replace the aircraft with another carrier, and UA footing the bill for much of the operation of those aircraft from the filing date until the aircraft are withdrawn from service.
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If the Q400 was an efficient aircraft, you would think it would be snapped up by somebody or UA would be willing to renegotiate the contract, yet they are not.
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Apparently manufacturer advertising claims don't translate into actual results in the real world.

 

[Kev3188]

Whatever.

In the interim, this statement by you that "the flying being cut is all on older, less economical turboprops" is still incorrect:

 

[WorldTraveler]

Whatever.

In the interim, this statement by you that "the flying being cut is all on older, less economical turboprops" is still incorrect:

ok.. I can accept your comment... but it would still seem that if the aircraft could generate acceptable revenue under more suitable contract arrangements, they would have been placed with another carrier or UA would have recognized the value in keeping the aircraft under more suitable terms.
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It would appear that the Colgan -CO agreement involved Colgan taking on a significant amount of risk w/ the flying... but if the CASMs of the aircraft were acceptable, then it would seem they could work well at other carriers.
Maybe CO drove a hard bargain when the contract was negotiated but I'm sure you remember that they had high expectations that these aircraft would help them compete effectively esp. to/from EWR
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If the aircraft show up at another carrier and Q400 flying is added elsewhere, then I would tip my hat to you (I still might. 🙂 )
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[eolesen]

You're a jackass at times, Tim. You got caught being the know-all, and you screwed up... instead of admitting it, you go off on a tangent...

It's been less than 48 hours since they filed. Give it a couple weeks to react, reject, or decide where the planes go next.

Maybe the Q400's will wind up flying for AMR now that the real old & inefficient ATR72s are being retired. Maybe some of the CR9's being pulled will also wind up at AMR.

Or not. Maybe we'll know in another 48 hours...

 

[WorldTraveler]

You're a jackass at times. You got caught being the know-all, and you screwed up...

It's been less than 48 hours since they filed. Give it a couple weeks. Maybe the Q400's will wind up flying for AMR now that the real old & inefficient ATR72s are being retired. Maybe some of the CR9's being pulled will also wind up at AMR.

I screwed nothing up... the leases were rejected not on day 55 but right out of the gate in Pinnacle's BK.
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Either Pinnacle is just plane dumb and doesn't know what assets they actually have to work with or there really isn't the market for the aircraft that you would like to believe there is... the aircraft apparently do not have the economics to successfully compete in today's market or UA would have chosen to keep them and Pinnacle would have chosen to dump them.
If they were CASM competitive, they would not have been dumped... plain and simple.

And if they do end up at AA, then it will be clear the planes still have value and can be economically used.
Compared to 40 seat Embraer's, I'm sure the Q400 does look good... but whether they are good enough to make a long term commitment is the real issue... and for now, the planes won't be flying much beyond the summer.

 

[WorldTraveler]

This article says that UA has already decided to place the Q400s at another regional carrier which would support the position that the problem was the price UA/CO had contracted with Colgan/Pinnacle and not the aircraft itself.

There is no further news on the Saab flying which is also being cut.

http://www.cbc.ca/news/business/story/2012/04/02/pinnacle-bankruptcy.html?cmp=rss

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Note that 25% of the regional carrier capacity in the US is operated by companies in BK... still less than the percent of capacity operated by legacy carriers in the early/mid 2000s. It is very likely that the curent round of BKs by regional carriers will produce long-term changes in the regional carrier industry - which grew at the expense of the network carriers several years ago - and the ways in which the network carriers work with them.

 

[BoeingBoy]

And then there's this from an article about Pinnacle's bankruptcy...

Perhaps counter-intuitively, Pinnacle's strategy is focused on shedding the aircraft normally regarded as its most fuel efficient, such as Bombardier CRJ900s and Q400 turboprops. The carrier instead would rebuild the company around a fleet of 140 50-seat CRJ200s operated for Delta Air Lines.

Odd that when every legacy wants to increase the size of the RJ fleets that Pinnacle and DL would ditch larger, more efficient planes in favor of the CRJ-200's...

Jim

 

[WorldTraveler]

Was there something said about DL getting rid of the CR9s or that Pinnacle is just not going to be flying them... DL does own a number of the CR9s which it assigns to a connection carrier to operate although I don't think this is the current arrangement w/ Pinnacle... perhaps part of the funding DL will provide is to take over some of the leases.... there are still alot of moving parts that haven't come into ploace....the Q400s are not DL's decision to make.
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Perhaps part of the issue is that Pinnacle found DL willing to bail them out and Pinnacle must do what DL wants - which means not using DL money to resuscitate a company that will provide air services for other network carriers.
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I don't think we have seen the last word on what will happen w/ all of the 50 seaters, either. I still wouldn't be the least bit surprised to see DL figure out some way to reduce its overall 50 seat fleet (contract and owned) through the Pinnacle BK process.