Pinnacle reports second quarter profit

Pinnacle Airlines Corporation has reported a second quarter 2009 net income of $6.0 million.

Excluding certain nonrecurring items, the company achieved net income of $7.3 million in the second quarter of 2009. This represents an increase of 107% over the net income of $3.5 million in the second quarter of 2008, excluding nonrecurring items.

"Despite a challenging year for our industry, I am pleased to report solid financial performance for the second quarter of 2009 at both of our operating subsidiaries," said Phil Trenary, the company's president and CEO. "Our investments in new aircraft and improvements to our pro-rate operations are beginning to produce positive results for all of our stakeholders."

During the second quarter, Pinnacle recorded a nonrecurring charge of $1.5 million ($1.0 million net of income taxes) related to the retirement of the Beech 1900 fleet operated by the Colgan Air subsidiary. In addition, the company recorded a net loss of $0.3 million ($0.3 million net of income taxes) related to its portfolio of auction rate securities.

For the six months ended 30 June 2009, the company reported net income of $24.8 million. In addition to the nonrecurring items mentioned, the company's year-to-date financial results include a number of previously announced nonrecurring items that increased net income by $14.4 million. Excluding these nonrecurring items, the company achieved net income of $10.4 million for the first six months of 2009, an increase of 118% over net income of $4.8 million in the first half of 2008, excluding nonrecurring items.

Pinnacle recorded consolidated operating revenue during 2Q09 of $211.3 million, a decrease of $9.9 million, or 4%, over the same period in 2008. The decrease is primarily related to the reduction in pro-rate operations and the decrease in CRJ200 capacity at the Pinnacle Airlines, Inc., subsidiary. These decreases are offset by an increase of $8.6 million and $6.1 million in revenue earned under the CRJ900 DCA and Continental CPA.

Consolidated operating income excluding nonrecurring items was $23.7 million for the second quarter of 2009. Consolidated operating income for the second quarter of 2008 was approximately $15.1 million, excluding nonrecurring items. Pinnacle reported second quarter 2009 operating income and an operating margin of $17.0 million and 11.0%, an increase of $1.6 million and 1.1 points, respectively, from the second quarter of 2008. This increase is primarily related to a reduction of certain airport and ground handling expenses totalling $1.3 million resulting from a reversal of accrued amounts that Pinnacle no longer expects to pay. This one-time reduction of operating expenses increased net income by $0.8 million. Additionally, increases in Pinnacle's operating income related to its new CRJ900 operations were offset by unit cost increases related to salaries, wages and benefits and maintenance. Pinnacle continues to experience increased maintenance costs related to its CRJ200 fleet, and a decrease in labour productivity associated with reduced attrition of pilots and flight attendants.

Excluding nonrecurring items, Colgan reported operating income and an operating margin of $6.7 million and 11.8%, an increase of $7.0 million and 12.3 points, respectively, from the second quarter of 2008, excluding nonrecurring items. The addition of Colgan's Q400 operations under its capacity purchase agreement with Continental Airlines contributed to the improvement in operating income during 2009.

In addition, Colgan's fuel costs within its pro-rate operations decreased dramatically year-over-year. Colgan's fuel cost per gallon during the second quarter of 2009 was $1.90, down 50% as compared to 2008, improving operating income by approximately $5.2 million. Colgan also benefited from changes to its pro-rate operations implemented by the company during 2008. These changes included the elimination of certain unprofitable markets, the retirement of six Saab and five Beech aircraft, and the restructuring of many of its Essential Air Service markets for more profitable operations. These improvements were offset by a 3% decrease in revenue per available seat mile (RASM).