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Pinnacle Has ‘High Probability’ of Bankruptcy, Maxim Says

Pinnacle Airlines Corp., the regional carrier that flies for Delta Air Lines Inc. and others, has a “high probability” of filing for bankruptcy, according to a Maxim Group LLC analyst.

“We do not see any indicator of a significant turnaround over the next 12 months” and Pinnacle may run out of cash first, the New York-based analyst, Ray Neidl, wrote in a note to clients today. Pinnacle had $82 million in unrestricted cash on Sept. 30, according to a company statement on Nov. 3.

Pinnacle said on Dec. 8 it was seeking concessions from airline partners, aircraft lessors, debt holders and employees to lower costs. The Memphis, Tennessee-based carrier hired Seabury Group LLC, Barclays Capital and the law firm Davis Polk & Wardwell LLP to help with those efforts. The airline fell 23 percent that day in Nasdaq trading, the most in almost three years.

The shares slid 8.9 percent to 97 cents at 4 p.m. in New York trading, extending the drop so far this year to 88 percent. Pinnacle declined to comment on its plans beyond the remarks in its Dec. 8 statement, a company spokesman, Joe Williams, said today in an e-mail.

Neidl, who made a “sell’ recommendation on Pinnacle, began his career in the aviation industry at American Airlines, where he held financial and planning positions, according to Maxim’s website. He has since covered the industry for two decades as an analyst, and was co-author of ‘‘Airline Odyssey: The Airline Industry’s Turbulent Flight into the Future” (McGraw-Hill, 1995).

Cost Dispute

The company relied on Delta for 75 percent of its revenue for the nine months ended Sept. 30, and 20 percent came from United Continental Holdings Inc., according to a regulatory filing.

Pinnacle and Delta have disputed whether certain costs for maintaining aircraft costs must be reimbursed by Delta. Pinnacle posted $4.5 million less in revenue in the first nine months of this year as a result of the disagreement and a “tentative settlement,” according to a regulatory filing.

The company also had higher crew costs such as overtime pay and overnight hotel bills. In part, that’s because schedule changes by Delta increased expenses by $12.7 million in the first nine months of 2011. Pinnacle had a net loss of $8.8 million in that period, compared with a profit of $17 million a year earlier.

Pinnacle operated 141 planes for Delta as of December 2010, while its Colgan unit operated 46 planes for United and nine aircraft for US Airways Group Inc., according to Pinnacle’s annual report.

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