January 11, 2013
The Delta Air Lines deal with Pinnacle Airlines lets the regional carrier return all of its 140 Bombardier CRJ200 aircraft and spare engines to the mainline carrier without performing any of the maintenance that makes the 50-seat planes more attractive for lease or sale.
Delta is shedding 50-seaters from its operations to avoid hundreds of millions of dollars in maintenance costs over the next few years.
Delta is aiming to dispose of more than 200 50-seat aircraft—predominantly CRJs—by the end of 2015 because high fuel costs have made the aircraft unprofitable on many routes.
The agreement between Delta and Pinnacle, detailed in documents filed as part of the regional carrier’s Chapter 11 bankruptcy court restructuring, does not include a schedule for the return of the CRJ200s, noting instead that the two carriers will agree on a schedule, or Delta will provide 90 days advance written notice for when particular aircraft are to be taken out of service and returned.
Pinnacle “will not need to comply with aircraft return conditions for such CRJ200 aircraft and shall have no liability to Delta with respect to the early termination and return of such aircraft,” according to the documents.
Absent that arrangement, Pinnacle would have been compelled under the original lease terms to spend more than $100 million on maintenance and repairs before returning the aircraft, the regional carrier told the court.
The court filings also reveal details for Pinnacle’s tentative labor deal with its pilots, considered critical to the survival of the airline beyond this month and its exit from bankruptcy. The plan is for Delta, which provided the debtor-in-possession financing and currently is Pinnacle’s only customer, to end up with ownership of the carrier upon exit, contingent on approval of the labor concessions.
The pilots union will complete its vote on the deal on Jan. 15.
The labor deal’s reduction in pay and benefits and modifications to work rules will save Pinnacle about $30 million a year once it transitions from 140 CRJ200s and 41 CRJ900s to its new fleet of 81 CRJ900s, with “substantially higher savings” during the transition period.