Pinnacle Income Drops Precipitously

Pinnacle Airlines Corp. reported first quarter 2008 net income and fully diluted earnings per share of $2.7 million, down dramatically from the year-ago period when it posted $9.4 million in first quarter net income. In addition, its earnings per share dropped from 38 cents in the year-ago period to 15 cents at the end of Q1. Consolidated operating income and operating margin were $6.7 million and 3.3 percent, respectively compared to $12.8 million and 7.1 percent, respectively in Q107.
As expected, the company cited the $5 million operating loss at subsidiary Colgan Air, almost completely caused by the fuel increases. Related Story  Its average cost per gallon of fuel increased 54 percent compared to the first quarter of 2007, adding approximately $3.9 million in fuel costs. Colgan's financial performance is also affected by seasonal changes in demand, with unit revenue typically weaker in the first quarter. In addition, the operating performance of Pinnacle Airlines, Inc. was below incentive levels contained in Pinnacle's contract with Northwest. Pinnacle's completion factor, on-time performance, and customer complaints fell below the incentive standards forcing the company to record a $2.5 million performance-related reduction of revenue as an estimate of what it might owe to Northwest related to the first quarter of 2008. The ultimate amount owed to Northwest will not be determined until after June 30.
Pinnacle cited severe winter weather and an increase in the number of operational maintenance events for its performance. The company also estimated that Pinnacle's operating income was reduced by approximately $2 million because of lost revenue associated with cancelled flights and increased interrupted trip and passenger re-accommodation costs related to the higher level of cancelled and delayed flights.