In early 2008, Colgan will begin operating the Bombardier (BBD) Q400s as part of a new 10-year, capacity purchase agreement between its parent company, Pinnacle (PNCL), and Continental Airlines (CAL). The 15, 74-seat aircraft, scheduled to begin delivery in December, will be used to serve short- to medium-distance routes to Continental’s Newark hub as part of its Continental Connection network.
The move finally resolves the open-ended question as to whether Continental will acquire the Q400, something that has been in the wind for some time. Pinnacle will purchase the aircraft and Continental will purchase all Q400 capacity at predetermine rates and industry-standard, pass-through costs. Fuel will also be purchased by CAL and provided to Colgan at no cost. Deliveries of the new aircraft begin next December and run through June 2008.
After Pinnacle presentations before Calyon Securities last week, Analyst Ray Niedl said, that while the Q400 is not widely used in the U.S., he believes that Pinnacle will be on the cutting edge in this potentially large growth market. He also quoted management as envisioning the use of up to 45 aircraft on their system eventually. It expects its Colgan operation to represent about 30 percent of its total revenues this year. Niedl also said the company plans to grow primarily by expanding on its two platforms, Pinnacle for RJs and Colgan for turbo props, but it has not ruled out further mergers and acquisition activity.