Posted on: 17 February 2011 by Mark Howells
Pinnacle Airlines Corporation (PNCL) has reported fourth quarter 2010 net income of $2.6 million, excluding a $10.9 million ($6.8 million after-tax) special charge for a signing bonus and related payroll taxes for pilots under a new collective bargaining agreement (the “Pilot Signing Bonus”) which, when included, leaves a net loss of $4.3 million for the quarter.
This result is down on the fourth quarter 2009 reported net income of $5.6 million. Excluding the Pilot Signing Bonus, the company’s consolidated net income for the full year 2010 was $19.6 million, a decrease of 16% compared to 2009 net income excluding special items.
In addition to the Pilot Signing Bonus, PNCL’s 4Q10 financial results were hit by the costs of starting a new Q400 service for United Airlines. Colgan Air, the company’s regional turboprop operating subsidiary, took delivery of six Q400s during the fourth quarter. Prior to placing the aircraft into service under the capacity purchase agreement with United, Colgan incurred interest and depreciation expense on the aircraft and labour costs associated with hiring and training crews for the aircraft. Implementation of the Q400 fleet expansion will continue throughout the first quarter of 2011, after which PNCL expects the Q400 growth to have a favourable impact on 2011 earnings.
The 4Q10 results were also adversely affected by winter storms in December. PNCL’s subsidiaries cancelled a higher percentage of flights during irregular operations than the company’s major airline partners so as to minimise the number of passengers affected by weather cancellations.
“We had a challenging fourth quarter,” admitted PNCL’s president and CEO Phil Trenary. “Winter storms impacted our operations during the quarter, at the same time that we were implementing growth with the delivery of Q400s.”
Mesaba Aviation, which PNCL acquired on 1 July 2010, achieved operating income of $3.8 million and $6.8 million for the three and twelve months ended 31 December 2010, 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 the company’s consolidated net income. In addition, the company’s operating cash flows were improved by approximately $23 million during 2010 due to the acquisition of Mesaba.