A recent filing for bankruptcy by Pinnacle Airlines Corp., a Memphis-based airline, has led this company to publicly announce that their current business model is not sustainable. The company, which flies under contract by many well-known airlines such as US Airways, Continental, United and Delta, filed for bankruptcy protection on Sunday, April 1, 2011 in the U.S. Bankruptcy Court for the Southern District of New York to combat its surmounting and overwhelming debt, a similar type of debt that many other people and businesses are struggling with throughout the country. The company listed its $1.42 billion in debt and $1.54 billion in assets, ending their most recent quarter with only $81.8 million in cash and cash equivalents.
While the company saw a profit of $17 million during the first nine months of 2010, it saw a loss of $8.8 million in the same period for 2011. While revenue appeared to be on the rise in 2011, the company could not keep up with accelerating costs of operation. With the rising costs, the company is forced to slowly break ties with United Express and US Airways. It is expected to terminate flying altogether at the company's subsidiary, Colgan Air, with the ending of the contracts between the company and US Airways and United Express. After reviewing all of the different options and aspects of their current business model, the company decided that Chapter 11 bankruptcy protection would be the best possible solution.
With this recent filing, it is estimated that approximately one-fourth of the regional airline industry is now under bankruptcy protection, with American Eagle's and American Airline's recent filings as well. To make up for losses and to create a more effective business model for the airline company, they have announced a plan to ask employees and pilots to help them cut costs. Unfortunately, this may lead to many job losses for the 7,800-person company.
Pinnacle has received a $74.3 million commitment from Delta that will allow the company to continue operating as it restructures the debt it owes. The President and SEO of Pinnacle, Sean Menke, has been through this before, overseeing a Chapter 11 filing at Frontier Airlines in the past. They are also going to suffer the loss of their chief financial officer to Spirit Airlines, Inc. later this month. The filing by Pinnacle marks the 43rd time that an airline has reached for protection under Chapter 11 bankruptcy since September 11, 2011, and the 191st occurrence since the deregulation of the industry in 1978, with several companies having gone through bankruptcy more than once.
Chapter 11 bankruptcy is form of protection offered by the U.S. courts in regards to substantial and overwhelming debt that has been accrued. While it is arguably much easier for a company to accumulate debt than an individual, they should be offered the same opportunity to eliminate this debt through restructuring their business model. As in the case of Pinnacle Airlines Corp., the business model will be reviewed as the company looks to restructure their debts and get back to making a profit.
If you are a business owner who has accumulated overwhelming debts and fear that your business will suffer as a result, you need the help of your local bankruptcy attorney. By hiring a bankruptcy lawyer for your case, you will be able to get your business back on track as you seek protection under the United States Bankruptcy Code. While there are many options available for individuals and small business owners, filing a Chapter 11 petition is often the best solution made available for large businesses and nationwide corporations, such as Pinnacle, American Airlines, and American Eagle. If you would like to continue learning more about related bankruptcy topics or obtain the support of a skilled attorney, don't hesitate to contact your local bankruptcy lawyer today!