Monday, April 02, 2012

With Pinnacle Airlines Filing for Bankruptcy, New Questions About Declining Air Service in Small and Mid-Size Markets

Pinnacle Airlines filed for bankruptcy Sunday night, raising new questions about the viability of regional-airline service to many small and mid-sized markets.

Pinnacle, with its subsidiary Colgan Air, flies regional jets and turbo-props as a contractor for major airlines, including Delta Connection flights and other flights operating as United Express and U.S. Airways Express.

About a month ago, United PR reps insisted to me that the United Express flights operated by Colgan from Washington Dulles International were viable, blaming ongoing serious disruptions on weather -- even as it was clear to anyone outside the PR loop that other problems besides weather were at work in flight cancellations and disruptions to the southern tier and central regions of New York state and upstate Pennsylvania in particular.

Regional airlines like Pinnacle account for more than 50 percent of the daily flights in the U.S., operating as subcontractors on major airline routes and flying under those major airlines' colors.

In a statement today, Pinnacle said it hopes to "restructure" its most important contract, with Delta. It said it is "winding down its operations with United Airlines [and] completing the wind-down of its Essential Air Service (EAS) flying with US Airways." And it said it would further increase efforts in "achieving cost-savings from its workforce."

Pinnacle and Colgan fly 199 regional jets and 62 turbo-props on more than 1,540 daily flights to 188 cities and towns. The turbo-prop [Note: correcting typo, originally said turbo-jet] planes had already been scheduled for imminent retirement.

Look for disruptions ahead in the already badly disrupted air-travel service system in small and mid-sized cities that are totally dependent on regional airline flights operated for the major carriers.

By the way, aviation reporters always misunderstand what "regional airline" means. Basically, a regional airline is not really an airline, but rather a subcontractor that operates regional jets and turbo-prop planes, at lower cost and service levels, to supply "lift" to and from major hubs for the major carriers.

In keeping with that grand airline-company tradition of stiffing the workers while dumping cash into the pockets of the executives, Pinnacle disclosed in an SEC filing just last week that it had rewarded two of its top executives with hefty salary increased. The top guy, Sean Menke, got a 60 percent raise from $425,000 to $675,000, according to the Memphis Business Journal.



Jeremy said...

You wrote: "Pinnacle and Colgan fly 199 regional jets and 62 turbo-props on more than 1,540 daily flights to 188 cities and towns. The turbo-jet planes had already been scheduled for imminent retirement."

Is that a typo and you mean the turbo-*prop* planes are scheduled for retirement? The word "jet" after all is short for "turbojet" and I don't think it's the 199 regional jets that would be retired.

I don't understand why retiring turboprops makes sense however. They are much more fuel efficient in short haul markets and do not have any time or performance penalties. Yes, some customers "demand" jets rather than propeller planes, but this could be overcome with appropriate marketing about the "green" credentials of turboprops, if the airlines had half a brain.

n.b. in Austrlaia, Virgin is replacing all of its smaller Embraer jets with ATR turboprops, and Qantas is continuing to expand its Bombardier Q400 fleet...

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