Pinnacle being dropped as Delta Connection partner
By HARRY R. WEBER – 7 hours ago
ATLANTA (AP) — Pinnacle Airlines Corp. shares fell more than 25 percent Tuesday after it disclosed that Delta Air Lines Inc. plans to cancel its flying contract with the regional carrier, citing poor on-time performance.
Northwest Airlines Corp., Pinnacle's biggest customer, has no current plans to change its relationship with Pinnacle. However, Delta is acquiring Northwest, worrying investors about what that might mean for Pinnacle's future if the contract termination sticks.
"We think today's news shows how a Delta-Northwest merger may hurt Pinnacle," Standard & Poor's airline analyst Jim Corridore said in a research note.
Memphis, Tenn.-based Pinnacle called the move against it by Delta "wrongful," saying its on-time performance has been hurt by factors beyond its control. It said the operational schedule created by Delta is a key factor affecting on-time performance.
Pinnacle said it plans to pursue "appropriate remedies," though it wasn't more specific. The move by Delta would affect nearly 5 percent of the fleet maintained by Pinnacle Airlines Corp., which operates Pinnacle and Colgan Air. The Delta contract represents about $3.5 million in monthly revenue for Pinnacle, which recorded $787 million in annual revenue last year, Pinnacle spokesman Joe Williams said.
Its the latest move by Atlanta-based Delta to terminate a contract with one of the regional carriers that handles connecting flights for the nation's third-largest airline.
A federal judge late last month blocked Delta's effort to terminate a contract with a Mesa Air Group subsidiary. Delta has said it will appeal that decision.
Delta has said it has the right to terminate the contract with Mesa subsidiary Freedom Airlines because Freedom did not maintain at least a 95 percent completion rate for three months within a six-month period late last year and early this year.
Delta, meanwhile, stood by its decision regarding Pinnacle, saying Pinnacle's operational performance has fallen below minimum levels required under the contract.
"Today, it's more important than ever that Delta and its Delta Connection partners meet operational and customer service levels," Delta spokeswoman Betsy Talton said.
Pinnacle said Delta plans to stop the agreement as of July 31.
The airline said its schedule, routes and employees will not be immediately affected.
Pinnacle currently has nine CRJ-900 aircraft for use as a Delta Connection carrier under an agreement reached in 2007. It has seven more of those aircraft on order.
Pinnacle's deal with Eagan, Minn.-based Northwest appears safe, at least for now.
"At this time, we have no plans to change our relationship with Pinnacle as a Northwest Airlink partner," Northwest spokeswoman Tammy Lee said Tuesday.
Pinnacle operates a fleet of 138 regional jets in the United States and Canada as Northwest Airlink and Delta Connection. Colgan Air operates a fleet of 57 regional turboprops as Continental Connection, United Express and US Airways Express.
Together, the operating units make over 1,000 daily flights.
Pinnacle shares fell $1.54, or 25.8 percent, to $4.44 after falling to a 52-week low of $4.20 earlier in the session. Delta shares slid 16 cents to $5.93.
AP Business Writer Joshua Freed contributed to this report from Minneapolis
