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VOL. 126 | NO. 34 | Friday, February 18, 2011

Pinnacle Earnings Fall, Revenue at $1B

By Sarah Baker

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Pinnacle Airlines Corp.’s year-end earnings fell short of analysts’ estimates, something company officials blamed on the combination of a tentative contract agreement, added aircraft to one of its subsidiaries and December’s winter weather storms.

But the company reached $1 billion in operating revenues, it said Thursday during its year-end and quarterly earnings report. Memphis-based Pinnacle is the parent of Pinnacle Airlines Inc., Colgan Air Inc. and Mesaba Aviation Inc., employing more than 7,000. Memphis International Airport is one of Pinnacle’s 10 operating U.S. hubs.

Pinnacle on Thursday reported a net income of $2.6 million during the fourth quarter of 2010 and diluted earnings per share of $0.14, excluding a $10.9 million one-time signing bonus and related payroll taxes for pilots under a bargaining agreement with the Air Line Pilots Association.

Pinnacle president and CEO Phil Trenary in a Thursday afternoon earnings call announced an agreement with ALPA for an industry standard contract that brings together the pilots of Pinnacle, Mesaba and Colgan.

Including this charge, Pinnacle reported a net loss of $4.3 million and a net loss per share of $0.23 for Q4 2010. Pinnacle reported net income and EPS of $5.6 million and $0.31, respectively, for Q4 2009.

Excluding the signing bonus, Pinnacle’s consolidated net income for 2010 was $19.6 million, a decrease of 16 percent compared to 2009 net income excluding special items. Full year 2010 EPS excluding the Pilot Signing Bonus was $1.06, a decrease of 17 percent as compared to 2009 EPS excluding special items.

Pinnacle’s Q4 financial results were impacted by costs related to the delivery of six Q400 service for United Airlines by Colgan – Pinnacle’s regional turboprop operating subsidiary. Colgan incurred interest and depreciation expense and labor costs associated with hiring and training crews.

Implementation of the Q400 fleet will continue through the first quarter, after which Pinnacle expects the Q400 growth to have a favorable impact to 2011 earnings.

The third factor that negatively impacted airline’s financial results for the quarter was December’s severe winter storms. Pinnacle’s subsidiaries cancelled a higher percentage of flights during irregular operations than its major airline partners so as to minimize the number of passengers affected by weather cancellations.

“We had a challenging fourth quarter,” Trenary said.

Mesaba, which Pinnacle acquired on July 1, 2010, achieved operating income of $3.8 million and $6.8 million for the three and 12 months ended Dec. 31, respectively.

After taking into account interest expense on a $63.3 million note issued as part of the acquisition, Mesaba’s financial results have been accretive to Pinnacle’s consolidated net income and EPS. Pinnacle’s operating cash flows were also improved by about $23 million during 2010 due to Mesaba acquisition.

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