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Form 10-Q/A for PINNACLE AIRLINES CORP RE Colgan Air

suupah

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Outlook for Colgan Air, Inc.
We retain options and cancelable orders for 30 additional Q400 aircraft to be delivered beginning in the summer of 2009 and extending through 2010. Continental has the option under our capacity purchase agreement to increase the number of Q400 aircraft under contract with Colgan by 15. We are actively marketing the remaining 15 option/firm cancelable aircraft to other carriers. We believe that in the current high fuel cost environment, the Q400 is a very attractive, cost efficient alternative to regional jets of similar or smaller size. However, most major airlines are reviewing their networks and undertaking steps to reduce capacity, including regional aircraft, to remove marginal flights that are not profitable at current fuel costs. We believe there will be long-term demand for our services with the Q400 aircraft; however, we do not yet know whether we will exercise our options for delivery of any of the 30 Q400 aircraft for which we have options.
A large portion of Colgan's existing operations are conducted under revenue pro-rate code-share agreements. Under this type of agreement, we select our own routes, manage our fares and inventory of unsold seats, and incur all of the costs of operating and marketing our flights. We market our flights under the brand of our code-share partners, and we pro-rate the revenue from passengers who purchase a connecting ticket between flight segments operated by us and our partners. Under this type of flying, we bear the risk of changes in the pricing structure and demand for travel in markets we serve, and we bear the risk of changes in fuel prices. Colgan experienced an operating loss before corporate overhead allocations of $4.9 million during the first quarter of 2008 related to its existing base of revenue pro-rate operations. Colgan incurred significantly higher fuel costs during the first quarter, with the average price paid per gallon increasing 54% from the first quarter of 2007. Colgan's pro-rate operations will not be profitable at current fuel prices without significant changes in its revenue and cost structure. We are currently focused on initiatives to increase Colgan's revenue and decrease Colgan's non-fuel costs in an effort to create a sustainable business model at current or higher fuel prices. These initiatives include:
��� Filing with the Department of Transportation ("DOT") to terminate service under the majority of Colgan's Essential Air Services ("EAS") contracts. The EAS program provides Colgan with a subsidy from the DOT to provide air service in very small markets that do not have passenger levels to sustain commercial air service. Although we have filed to request termination of Colgan's EAS contracts, we intend to rebid these contracts with an increased EAS subsidy to account for the dramatic increase in fuel prices that we have incurred. We expect this process to take several months, and we do not yet know whether we will be successful in increasing market subsidies under the EAS program.

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Outlook - (Continued)
��� Relocating nine markets from Pittsburgh under Colgan's US Airways code-share agreement to Washington/Dulles airport under Colgan's United code-share agreement, which we completed during the first quarter. Washington/Dulles is a larger hub airport than Pittsburgh with substantially more connecting opportunities for our passengers. We expect this change to increase the number of passengers that we carry in these markets, thus increasing our passenger revenue with little to no expected increase in operating expenses.
��� Relocating Colgan's maintenance base from Manassas, Virginia to Washington/Dulles airport. Relocating this maintenance base will significantly reduce the number of ferry flights in our system, lowering our operating costs. We expect this move to be completed during the second quarter.
��� Implementing fuel conservation initiatives, such as tankering fuel at locations where we can purchase it at a lower cost, better planning of the amount of fuel we carry on our flights, and other measures designed to reduce the amount of fuel that we use.
��� Reducing maintenance costs by simplifying our maintenance structure, reducing the number of outstations where we maintain a line maintenance presence, and reducing the time it takes us to perform routine maintenance procedures. In addition to reducing our maintenance costs, these measures will increase the number of aircraft available for scheduled service, thus increasing the utilization of our Saab fleet.
��� Eliminating our Beech 1900 subfleet, thus reducing the carrying costs associated with supporting multiple aircraft types and reducing crew training costs. We plan to retire the last Beech 1900 aircraft during the fourth quarter of 2008.
To the extent that we cannot significantly reduce Colgan's losses, we will make plans to reduce or eliminate the pro-rate operations at Colgan. These actions could result in significant one-time costs associated with exiting the fleet. Such steps would involve removing leased aircraft from service and returning them to third party lessors in advance of lease expirations, removing and remarketing owned Saab aircraft, selling or disposing of Colgan's inventory of Saab parts, and potentially furloughing employees. These actions could result in future write-downs of the carrying value of our tangible assets. In addition, we will continue to evaluate Colgan's intangible assets for impairment. As of March 31, 2008, Colgan's intangible assets had a balance of approximately $16 million.
Colgan's financial performance is also subject to seasonal fluctuations. Colgan has historically reported lower unit revenue during the first and fourth quarters each year when demand for air travel declines, and reported higher unit revenue during the second and third quarters each year when air travel demand is higher. We expect this seasonality to continue to affect Colgan's pro-rate financial results in future periods.
While we expect Colgan's financial performance to improve during the second and third quarters of 2008 as compared to the first quarter of 2008, Colgan could still incur operating losses during these periods. The initiatives we implement may not improve Colgan's performance enough to restore profitability. In addition, decreases in unit revenue or increases in the price of fuel may further deteriorate Colgan's financial performance. We will likely incur a significant loss on Colgan's pro-rate operations for the full year of 2008.
 

DoinTime

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uhm that is 70% of the current flying colgan does. yeah get ready to lose the 0le job.

How do you feel about a combined seniority list now??? :D
 

JoeMerchant

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All you Colgan kids who voted against ALPA last year should go downstairs and cry to your Mama's again.

Yeah if you had voted in ALPA, your job would be secure because ALPA protects their member's jobs...:rolleyes:
 

sinkrate

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Coplgan is a wholly owned subsidiary with no public stock. What does a holding company do with a subsidiary that is burning through cash and has no hope of making any? The holding company - Pinnacle Corp - is starting to have its own liquidity problems because it parked most of its cash in Auction Rate Securities they can't sell. Where will they get the cash to support Colgan? Can a 30 aircraft fleet split between two types actually make money? Will they sell it? Will they buy another airline and merge them together? The drama of it all.
 

MalmsteenFan

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Yeah if you had voted in ALPA, your job would be secure because ALPA protects their member's jobs...:rolleyes:



I'm on the street right now from a ALPA company... didn't protect my job...

ALPA is the most useless union in the world, its all about big money for the top people.

I lived with some coal miners in West Virginia, when one of their workers had a problem they will shut down entire mines across the US.

You will NEVER see that kind of unity with pilots or ALPA.
 

JoeMerchant

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I'm on the street right now from a ALPA company... didn't protect my job...

ALPA is the most useless union in the world, its all about big money for the top people.

I lived with some coal miners in West Virginia, when one of their workers had a problem they will shut down entire mines across the US.

You will NEVER see that kind of unity with pilots or ALPA.

Your absolutely correct....Now can you convince Rez and PCL128?
 

vectorvictor

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uhm that is 70% of the current flying colgan does. yeah get ready to lose the 0le job.

Not true. All the US air flying falls into this category. Continental EWR, IAH, and I think the United flying, is pay for departure.
 

DoinTime

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Not true. All the US air flying falls into this category. Continental EWR, IAH, and I think the United flying, is pay for departure.

The only capacity purchase agreement Colgan has is the Q400s for Continental. The rest is all pro rate or EAS service. Reference page 13 of the 10Q.
 

BirdCatcher

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Not true. All the US air flying falls into this category. Continental EWR, IAH, and I think the United flying, is pay for departure.


Not true, Saabs are pro-rated contracts. Which is why they are loosing money. We pay for fuel and loads aren't enough to pay costs. We went to USAir to raise the fees with the pro-rate agreement and they said no, hence why we dropped service. Only the Qs are Fee for Departure.

Which is why if oil keeps going up Colgan is big trouble.
 

BankAccount=0$

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Your absolutely correct....Now can you convince Rez and PCL128?

ummm are you forgetting that ALPA is not a true union?? it is an association built out of individual subgroups run by their own local members. A true union would have all members on one seniority/call out list governed by the national unions work rules and policies. Locals in most if not all of the labor unions are simply barganing agents for their geographic location.

ALPA national is simply a store that the various airlines pilot groups can shop for the services they need. Are you going on strike?? ALPA*Mart aisle 2 is where you find the strike preparedness folks. Trying to find out some EF&A information?? ALPA*Mart aisle 12 is where the economics folks live.
 

JoeMerchant

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ummm are you forgetting that ALPA is not a true union?? it is an association built out of individual subgroups run by their own local members. A true union would have all members on one seniority/call out list governed by the national unions work rules and policies. Locals in most if not all of the labor unions are simply barganing agents for their geographic location.

ALPA national is simply a store that the various airlines pilot groups can shop for the services they need. Are you going on strike?? ALPA*Mart aisle 2 is where you find the strike preparedness folks. Trying to find out some EF&A information?? ALPA*Mart aisle 12 is where the economics folks live.

I'm not forgetting that....you are absolutely correct!
 

DoinTime

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ummm are you forgetting that ALPA is not a true union?? it is an association built out of individual subgroups run by their own local members. A true union would have all members on one seniority/call out list governed by the national unions work rules and policies.

Unfortunately, pilots as a whole will never be smart enough to surrender our autonomy. We pilots know more than anyone after all, right? How dare anyone come in and tell me whats right and how could I ever expected to stand by quietly while someone else mettles in my affairs.

For the same reason Joe can't keep his treasonous mouth shut, ALPA will never achieve its potential.
 

JoeMerchant

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Unfortunately, pilots as a whole will never be smart enough to surrender our autonomy. We pilots know more than anyone after all, right? How dare anyone come in and tell me whats right and how could I ever expected to stand by quietly while someone else mettles in my affairs.

For the same reason Joe can't keep his treasonous mouth shut, ALPA will never achieve its potential.

Treason?? Is that what questioning ALPA is now....Treason?

ALPA will never achieve it's potential because of the autonomy you speak of and because it is run by politicians like Rez and PCL128....

DoinTime....what is your vision of ALPA "achieving it's potential"? Tell us how it should work....

Treason.....that's good.....:rolleyes:
 
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Turtlesfly

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Hey Joe,

could you summarize for me: if somebody asked you what your bottom line opinion of ALPA/unions are in the airline business, what is your whole beef about? And what about REZ/PCL? What is the one-liner that defines you 3 guys' opinions? I don't have time to read 14,000 posts to figure it out
 

JoeMerchant

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Hey Joe,

could you summarize for me: if somebody asked you what your bottom line opinion of ALPA/unions are in the airline business, what is your whole beef about? And what about REZ/PCL? What is the one-liner that defines you 3 guys' opinions? I don't have time to read 14,000 posts to figure it out

Either we are together as one....Or we are separate and doing what is best for each of us.....

That about sums it for me....
 

DoinTime

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Treason?? Is that what questioning ALPA is now....Treason?

Joe, you do not question ALPA. With your every breath you spew anti-ALPA rhetoric, incite rebellion, and foster division. That is treason. Not only towards ALPA but towards our profession.
 

JoeMerchant

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Joe, you do not question ALPA. With your every breath you spew anti-ALPA rhetoric, incite rebellion, and foster division. That is treason. Not only towards ALPA but towards our profession.

:laugh: :laugh: :laugh: :laugh: :laugh: :laugh:

They taught us that at ALPA leadership training in Herndon also.....They taught us not to ever question ALPA in public...little role playing skit with Beebe and a few others.....The funny thing is that 2 of the role playing actors were USAir ALPA folks....worked real well for them....

I don't "incite rebellion" or "foster division"....ALPA does a fine job of that by dividing pilots as "regional" and "mainline".....I just question authority....It is healthy to question authority....
 
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