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Pinnacle Airlines Corp. warned investors Tuesday that earnings could be as much as 25 cents per share less than Wall Street expects when it reports first-quarter results next week.
In a filing with the Securities and Exchange Commission, Memphis-based Pinnacle said it expects earnings will be as low as 12-15 cents per diluted share. A poll of analysts shows they expected earnings to be 37 cents per share.


Pinnacle blames the shortfall on fuel prices that cost its Virginia-based Colgan Air $4.2 million in the quarter. A series of weather and maintenance issues also forced it to cancel or run late on flights for Northwest Airlines, costing it as much as $4.5 million in lost incentives and revenue.




"In the first quarter, anybody flying in the Northeast and Upper Midwest took a beating," said Joe Williams, a Pinnacle spokesman. "Weather was a major factor."
While the company reported extra maintenance, Williams said it was routine in cold weather. "It takes a lot longer to do routine maintenance when the guys are out in windchill of 20-below and seven or eight inches of snow."
Calyon Securities lowered its outlook for the year from $2.08 to $1.20, noting the variables, including Pinnacle's misses with Northwest.
"This could put the contract with Northwest at risk, something we will need to evaluate further," said Ray Neidl of Calyon.
Pinnacle, which has about 2,000 employees in Memphis, flies for Northwest, Delta, United and Continental.
As part of its agreement with Northwest, Pinnacle must meet certain benchmarks outlined in the contract, including specific on-time performance and customer satisfaction goals.
Pinnacle fell short in both cases, which is expected to cost it $2.5 million in incentives from Northwest plus $2 million in revenue and incremental costs associated with canceled flights.
While Pinnacle said its performance has improved with the weather in the last few weeks, it is possible it could miss the incentives for the second quarter because they are calculated over six-month intervals.
Analysts say Pinnacle is more proof of the extreme operating environment fuel prices are causing businesses.
"This the worst operating environment in terms of costs I've ever seen for anybody," said Darryl Jenkins, aviation consultant in Virginia.
"Allegiant Air made money but other than that, I don't think anyone else with these oil prices has a long-term viable business plan, including Southwest Airlines.
"Clearly, 95 percent of all routes are losing money right now. Probably only the large hub-to-hub routes are making money and that's because they are flying a lot of business travelers," Jenkins said.
Jet fuel in the last year has increased 80 percent. At Colgan, which flies commuter routes for large carriers, mostly in the Northeast, jet fuel in early March was $3.10 a gallon. By the end of the month, it was $4.60 a gallon, Williams said.
Although Pinnacle does not have the same exposure in its Northwest contracts because Northwest pays fuel costs, it is feeling the strictures that are choking major carriers, he said.
"Anytime our major partners are as severely impacted as they are now, obviously that affects the entire system including us," Williams said.
"At $105 oil, every $1 increase in the price of a barrel of oil costs Northwest $42 million and Delta $60 million," Williams said.
"When you see oil where it is now, it reverberates through the economy. The first thing to go is leisure travel, and businesses look at how to stretch their budgets. When that happens, it really affects the overall economy, not just the airlines."
To shave nonfuel costs, Pinnacle is moving Colgan's maintenance bay from Manassas, Va., to Dulles International Airport, saving it the cost of routing planes empty for maintenance. It has also moved flights routing through Pittsburgh to Dulles, offering passengers four times the number of connecting routes, Williams said.
Jenkins doubts it will be enough, saying that jet fuel today accounts for 60 percent of operating costs, up from 15 percent seven years ago.
"How do you even hedge against that? Who, last year, foresaw $120-barrel oil," he asked.
"We've seen airlines go out of business. The ones that are left probably have cash on hand to make it through the year. But next year is a different ballgame."
Pinnacle shares have lost more than half their value in the last year. The stock closed Tuesday at $8.10.
Contact Jane Roberts at 529-2512.

higney85

Not so much..... Just because Colgan cost PNCL corp some money we (PNCL) are well above any threshold to be cut off by NWA and these issues are 2 different issues. DL performance is bad but we are just starting up and we are still above the performance threshold. The mgmt team at PNCL has tried the "doom and gloom" speech but truth and scare tactics are not abnormal around here.

MudPupppy

So in the last six months Colgan has cost PNCL 8.7 million in losses, with no end in sight. While the 15 Qs may reduce those losses the fact that the rest of Colgans flying is pro-rated with Colgan paying for fuel at $115 will not change anytime soon. Maybe a little less of a loss during the summer with increased loads but I expect major changes at Colgan later this year.

The Juice

Nobody knows what is going to happen. These "major changes" are so unclear. Boo hoo, PNCL Corp still made money, 12 to 15 cents per share is a profit unlike how many airlines out there?

PNCL Corp knew Colgan had to pony up their own fuel and pay their operating costs, this should be no suprise to the genius' and rocket sciences they have working up at HQ.

So where is our raise? When do we get a taste of the goodness when company makes a buck...that's what I thought.

MudPupppy

Your comparing apples to oranges. Compare PNCLs earnings with Skywest, Republic etc... not legacies.

When they purchased Colgan they did not expect oil to be where it is now.... investors won't be happy next week and will expect solutions to stop the bleeding on the 9L side.

PinnacleFO

pinnacle would have to operate at 75% completion factor for 21 days before NWA could do anything. That would be really hard to do.

POPA

Apples and Oranges: A Comparison
http://improbable.com/airchives/pape...-3-apples.html

MudPupppy

haha point made apples to shoes.... got one for that?

Airsupport

ha! what a misleading thread title. Did you even read the article before you posted it. this has nothing to do with nwa. its all about colgan costing us more money than what we bought them for. nothing to do with the pinnacle side of flying.

kalyx522

Where are you getting 8.7 million.. in the bold it says Colgan cost Pinnacle 4.2 mil and Pinnacle cost Pinnacle 4.5 mil. ("A series of weather and maintenance issues also forced it to cancel or run late on flights for Northwest Airlines, costing it as much as $4.5 million".. as you know Colgan doesnt operate any flights for NW so they are talkin about Pinnacle here)
so the loss of 8.7 was a combined effort of both airlines.