Pinnacle Saga Ends With Move North

By Bill Dries

The city of Memphis did not promise any incentives to Pinnacle Airlines as the regional air carrier weighed the decision it made Thursday, Jan. 24, to move its headquarters from Memphis to Minneapolis.

Former Pinnacle Airlines CEO Phil Trenary spoke in late 2010 as the company announced its move to One Commerce Square.

(Daily News File Photo: Lance Murphey)

And Memphis Mayor A C Wharton Jr. emphasized in his first reaction to the decision that the city didn’t give Pinnacle any direct incentives in 2010 when the airline made the decision to become the anchor tenant of One Commerce Square Downtown. And no city funds were used for improvements to the skyscraper itself.

“Pinnacle did not receive any funds from the city of Memphis,” Wharton said, explaining the Center City Revenue Finance Corp. did use public money for parking garage renovations with the Downtown Parking Authority then leasing a certain number of spaces to Pinnacle.

“Once Pinnacle exercised its right in bankruptcy to reject the lease, then of course that freed up those spaces,” Wharton continued. “Those spaces are now available to the city of Memphis to use for public purposes, which we always need the parking, or as an inducement to get other top notch tenants into that building.”

Pinnacle executives plan to be out of One Commerce Square and the parking spaces by May, about two and half years after the corporation became the anchor tenant in a part of the city’s skyline that was bought by local ownership during the city’s drive to keep Pinnacle from relocating to Olive Branch.

The move to vacant space held by Delta Airlines in Minneapolis cements already strong ties to Delta in Pinnacle’s plan for recovery. Under the bankruptcy reorganization plan approved in Federal Bankruptcy Court in New York earlier this month, Delta could take in Pinnacle as a wholly owned subsidiary as Pinnacle emerges from bankruptcy. Pinnacle is heavily dependent on contracts with Delta to fly regional flights, dropping its contracts with other legacy global air carriers in its bankruptcy reorganization to focus on the contracts with Delta.

“We had the responsibility to explore every aspect of our business to find opportunities to reduce costs, including evaluating our property leases, to find the most economical options for Pinnacle,” Pinnacle president and CEO John Spanjers said in a written statement. “Our analysis covered everything from the available labor pool and operational alignment to economic incentives. … In the end, it was an economic decision.”

Wharton said he didn’t know if Pinnacle got a deal from Delta on the space at Minneapolis-St. Paul International Airport but suspects it may have.

“It’s hard to separate Delta from Pinnacle. Now Pinnacle is essentially Delta,” Wharton said when asked about the city’s already “complex” relationship with Delta, which has steadily cut its own air service at Memphis International Airport. “I don’t think that relationship can become anymore complex than it already is.”

Mark Herbison, senior vice president of economic development for the Greater Memphis Chamber, likens Pinnacle’s departure to that of Birmingham Steel in 2000. The company built a mini-steel mill in Pidgeon Industrial Park in the mid-1990s, emphasized that it planned to pay workers low wages and work them hard and then went bankrupt.

“Before Birmingham Steel came … the community had to show the piece of property by helicopter because there was no road to where the site was,” Herbison said. “By them coming here we leveraged an incredible amount of state and federal incentives to build roads, infrastructure – electrical water and sewer. Sometimes things that look like really a bad situation turn out to be something we can leverage into something really good.”

What followed Birmingham Steel was Nucor Steel in the same plant and the Canadian National Railway Co. intermodal facility as well as the coming openings of the Electrolux North America Products plant and the Mitsubishi plant.

Wharton stressed that his administration wouldn’t spend much time holding a grudge against Pinnacle, which has had four CEOs and filed for bankruptcy since he and other civic leaders rallied at the building to convince the Pinnacle board to “land in Memphis.”

“This is a high-stakes game,” he said. “And you’ve got to be prepared to win some and lose some. Any city that expects it is going to win, win, win – you better get out of the business. You are going to get your feelings hurts. As far as I am concerned, it’s not going to deter us at all. We are going to redouble our efforts.”