Times have been tough for many airlines. A difficult economic climate in combination with tighter wallets for travelers has led to a decline in the amount of purchased plane tickets. Airlines are consolidating and merging to survive, while others that are not as lucky must file for Chapter 11 bankruptcy.
The potential of Chapter 11 is very real for Pinnacle Airlines Corp., a regional flights provider based in Memphis, Tennessee. Their stocks plummeted 12% at last week's close, and their Chief Executive Officer painted a bleak picture.
"On the current path, our financial position will continue to worsen at an alarming rate; we need to act immediately," he said, labeling 2012 as an "extremely challenging" upcoming year without new labor and debt accords. An analyst with knowledge of Pinnacle's situation called Chapter 11 a "high probability" for the company.
A few problems have confronted Pinnacle, which operates flights for Delta and United Continental. A set of planes attributed to United Continental are resulting in losses due to the expenses associated with that fleet, and another fleet, attributed to Delta, has maintenance costs that threaten to get worse as the year goes on.
Should Pinnacle file for Chapter 11, they would have the ability to reorganize their debts. That could keep the airline operator in business, affording them some time to readjust their business plan and potentially turn things around. With complex decisions of this nature, bringing in an experienced and reputable bankruptcy lawyer could help a struggling business reorganize. The legal knowledge, guidance and support provided by an attorney can expedite any Chapter 11 proceeding.
Source: Bloomberg, "Pinnacle Falls 12% as CEO Sees Bankruptcy Without Cost Cuts," Mary Jane Credeur, Jan. 20, 2012