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VOL. 127 | NO. 77 | Thursday, April 19, 2012

Menke Resigns as Pinnacle CEO

By Bill Dries

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Sean Menke conceded earlier this year that the job of turning around Memphis-based Pinnacle Airlines Corp. would be more difficult than he thought when he became chief executive officer of the regional air carrier in July.

“In fact, it has become apparent to me that our challenges are more severe than had been forecasted,” Menke wrote in a January letter to employees that was the first specific indication Pinnacle might file for bankruptcy reorganization in a restructuring Menke announced in December.

Less than a month after Pinnacle filed in federal bankruptcy court in New York and outlined a plan for a smaller footprint coming out of that reorganization, Menke has announced his resignation effective June 1 as chief executive officer.

The Thursday, April 19, announcement comes about a year after Phil Trenary announced his sudden resignation as CEO.

John Spanjers will become the new permanent CEO. He had been the company’s chief operating officer under Menke since September. The company confirmed he will not act as interim CEO while the Pinnacle board searches for replacement – which happened after Trenary’s resignation.

Spanjers, who will lead the company through the reorganization process, filed the bankruptcy declaration earlier this month that detailed both airline industry challenges as well as problems with the structure of Pinnacle, which he said contributed to the financial problems.

Like Menke, Spanjers is an airline industry veteran. He is a former president of Mesaba Airlines, a regional air carrier that underwent bankruptcy reorganization.

Among Spanjers’ tasks will be wage concession negotiations with the three labor unions representing most of Pinnacle’s employees. Prior to Menke’s decision to resign, Menke has already secured and announced new permanent agreements with its global carrier partners – Delta Air Lines Inc., United Airlines and American Airlines. The result will be a phasing out of Pinnacle’s business with United and American and new terms for the flying it does for Delta.

The company said Thursday the bankruptcy reorganization goals and timeline will not change with the transition in leadership.

Menke came to Pinnacle from a consulting firm that followed his tenure at Frontier Airlines, another regional air carrier that also underwent bankruptcy reorganization.

“As with that situation, I once again find myself leading an organization facing very significant challenges,” Menke said in January.

Tom Bacon, a former vice president at Frontier during its bankruptcy and reorganization, said Pinnacle isn’t alone in a difficult adjustment to a new reality.

“There are just too many of these small planes and it’s not the fault of anybody. It’s not the fault of labor,” he said. “It’s hard to get labor down low enough to offset the diseconomy of these planes and the higher fuel burn and so on. There’s a shakeout under way. … There still is a need for regional jets and a role for the regional players. But it just is smaller than it was before. I see that the big airlines that are buying this capacity have a bit of a challenge. Although there are too many of them, they rely on them in their schedules right now. It has to be a smooth transition.”

Bacon, who also led planning and revenue efforts at Mesa Airlines and American Eagle, viewed Menke’s resignation as another phase in a difficult process.

“Sean has done a job of restructuring. But this is positioning it for the next guy,” he said. “It’s going to be a different job than it was a few years ago. It’s going to be a smaller airline. Regionals not very long ago were growth airlines.”

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