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Pinnacle Airlines Corp., a regional carrier that flies under contract for Delta, United, Continental and US Airways, has filed for bankruptcy protection to deal with its mounting debt.
The Memphis, Tenn.-based airline said late Sunday its current business model isn't sustainable. It had tried for months to blend its operating subsidiaries to save money and recover from lost business with major airlines due to flying cutbacks. In its filing Sunday, it lists $1.42 billion in debt and $1.54 billion in assets. It ended the third quarter -- the most recent quarter for which financial results are available -- with just $81.8 million in cash and cash equivalents.
Pinnacle, which mostly flies between major airports in the East, has been hurt by rising costs and integration problems. It plans to wind down the United Express flights it operates for United Continental Holdings Inc. It will continue Delta Connection flights for Delta Air Lines Inc. It's already in the process of winding down its service with US Airways.
Pinnacle's Colgan Air subsidiary operated a plane that crashed into a home near Buffalo, N.Y., in 2009, killing 50 people. It was operating under the banner of Continental Connection. With the termination of contracts with US Airways and United, Pinnacle will end flying at Colgan Air.
The airline lost $8.8 million in the first nine months of 2011 in contrast to a profit of $17 million in the same period a year earlier. Revenue improved in that time, but costs accelerated at a faster pace. Traffic in the first two months of the year was virtually flat while the carrier dramatically scaled back its number of available seats. After a review, the company's board decided that reorganization under Chapter 11 was its best option.
With Pinnacle's filing, one-quarter of the regional airline industry market is in bankruptcy protection. American Eagle filed along with American Airlines under parent company AMR Corp. in November.
Pinnacle said it will ask its pilots and other employees, both union and non-union, to help it cut costs. That almost certainly means that some of the company's 7,800 employees will lose their jobs.
The airline is also examining its overall business structure and executive functions for possible ways to streamline its operation.
Pinnacle's President and CEO Sean Menke also oversaw a Chapter 11 filing at Frontier Airlines. Pinnacle is losing its chief financial officer to Spirit Airlines Inc. this month.
Pinnacle has received a commitment for $74.3 million in debtor-in-possession financing from Delta that will allow it to continue operating while it restructures. Shares plunged 54 percent to just 63 cents in early trading Monday.
Pinnacle's filing marks the 43rd time an airline has sought bankruptcy protection since the Sept. 11 attacks, and the 191st time since the industry was deregulated in 1978. Several airlines have gone through the process more than once.
Pinnacle filed its petition in U.S. Bankruptcy Court for the Southern District of New York.
AP Business Writer Bree Fowler in New York contributed to the report.