MEMPHIS, Mon Apr 2, 2012 – Pinnacle Airlines Corp. filed for bankruptcy protection late on Sunday, as the U.S. regional airline fell victim to high fuel prices and dampened travel demand that has negatively impacted some of the major players in the industry.
In the past, upon facing financial trouble, United Continental Holdings Inc’s. United Airlines and Delta Air Lines Inc. have taken the Chapter 11 route to cut costs and later found merger partners. AMR Corp., the parent of American Airlines, had also filed for bankruptcy late last year.
In a filing with a U.S. bankruptcy court, Pinnacle said it seeks to resolve its operational and financial difficulties through the Chapter 11 process. It also seeks to implement a turnaround plan by cutting costs and restructuring certain agreements with major airlines.
Pinnacle is a regional airline headquartered in Memphis, Tennessee that provides transportation between hubs and smaller outlying cities for passengers ticketed by major carriers.
At present, Pinnacle’s primary customer is Delta Air Lines, with additional flying currently provided to United Airlines and, to a much lesser extent, US Airways.
In light of high fuel costs and weak travel demand, Pinnacle said major carriers have aggressively cut costs and decreased capacity.
“The result has been a race to the bottom, as the debtors and other regional airlines have been forced to bid ever-lower rates and accept increasingly unfavorable contract terms to win the business of major carriers,” Pinnacle said in the filing.
The regional airline said it had received a commitment for $74.3 million of debtor-in-possession financing from Delta Air Lines that would help it to carry out normal operations.
As part of the bankruptcy plan, Pinnacle said it would restructure its key operating agreements with Delta Air Lines and would wind down its operations with United Airlines.