MEMPHIS, Tenn. (AP) -- Pinnacle Airlines Corp. said Wednesday that a court approved an agreement that clears the way for it to emerge from bankruptcy protection as a subsidiary of Delta Air Lines Inc.
The Memphis-based regional airline filed for Chapter 11 bankruptcy protection in 2012 to deal with its mounting debt.
Pinnacle used to fly under contract with Delta prior to the bankruptcy filing. Under Pinnacle's new agreement, it will operate a fleet of 81 fuel-efficient, two-class regional jets for Delta. While Pinnacle originally envisioned a larger fleet, the company said Wednesday that this arrangement will allow it to emerge with a competitive cost structure and a viable long-term business plan.
The company must file a plan of reorganization that is acceptable to Delta and its creditors by Feb. 15.
Big airlines like Delta hire regional feeders such as Pinnacle to handle flights on smaller aircraft. However, Delta and other major airlines have recently pressured these regionals to cut costs, as it's become difficult to fly small jets profitably.
Pinnacle also said that the court approved an amendment to its existing debtor-in-possession credit facility to provide Pinnacle with another $30 million to pay for operations and another $22 million to fund certain required payments to its pilots. The court also approved a new bargaining agreement with pilots.
Pinnacle's President and CEO John Spanjers said the agreements represent a significant milestone in its restructuring and provide a "clear and achievable" path toward its emergence from bankruptcy protection.