20-Aug-2012 12:03 PM

Pinnacle Airlines submits revised Chapter 11 business plan

Pinnacle Airlines COO John Spanjers, in a letter to employees, stated (17-Aug-2012) the carrier has presented its revised Chapter 11 business plan to labour groups, and "resumed negotiations to achieve the concessions and cost savings needed for the plan to succeed and for Pinnacle to emerge from Chapter 11 able to compete and thrive". Mr Spanjer noted that while the carrier's original business plan identified approximately USD43 million in wage, work rule, benefits and non-labor savings, the amount of savings now required is approximately USD76 million, reflecting changes by Delta Air Lines in their regional operations. The following items will apply to all employees (union and non-union) once labor agreements have been modified:

  • Wage reductions (for non-unionised employees it is 6%);
  • Reduction of annual vacation time by one week for all eligible employees, except for newer employees who only have one week of accrued vacation. Those new employees retain one week of vacation, but will not be eligible to earn the second week until five years of service rather than two. These changes would be retroactive for all employees;
  • Reduction of the company match to the 401(k) retirement plans, effective 2013;
  • Elimination of our traditional PPO health plan, replaced by a consumer-driven health reimbursement plan, effective 2013. [more - original PR]

Pinnacle Airlines: "Our goal in Chapter 11 is not a quick, short-term fix, but a permanent solution to the fundamental factors that have encumbered Pinnacle for years and ultimately made Chapter 11 unavoidable. If we can successfully address these factors through our business plan, Pinnacle will be on a path to becoming a viable competitor for years to come. What are those fundamental factors? Many are inherent in the regional airline industry – for example, rising costs, shrinking demand, and other challenges that have caused the failure of numerous regional airlines over the past ten years, and forced most others into either significant restructuring plans or Chapter 11. Other factors are more specific to us. As an older, legacy competitor, Pinnacle is particularly vulnerable to the difficulties plaguing our industry. Because costs tend to grow over time, the fact that our airline has been around longer means we have higher costs in areas like pay rates (driven by seniority), health plans and retirement plan contributions. Those higher costs are compounded at Pinnacle by inefficient work rules and a workforce with even higher average
seniority due to our shrinking fleet," John Spanjers, COO. Source: Company statement, 17-Aug-2012.

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