Pinnacle Airlines to Continue Flying for Delta

If you remember back to my last post on Pinnacle, I wrote about the ramifications of Delta attempting to cancel their contract with Pinnacle. On Friday Pinnacle announced that they have resolved the conflict with Delta and the contract will continue on the same terms. In my prior post I said that Delta is desperate to get out of the contracts it had with the regionals and I predicted that Delta wouldn't be able to cancel the contract it has with Pinnacle. My reasons were, Mesa was able to get a court injunction to stop Delta from canceling their contract earlier last May for a similar operating issue to Pinnacle's, also the operating issues were caused by factors out of Pinnacle's control (a very bad winter weather pattern for airlines and unrealistic scheduling imposed by Delta).

As part of the agreement reached with Delta Pinnacle will take delivery of the remaining 7 CRJ-900 five months later then originally planned. This won't effect Pinnacle much because the manufacturer will deliver the plans later to correspond to the change. I think that the uncertainty surrounding the Delta contract over the past month continues to cloud Pinnacle even though the issues are resolved. With the significant free cash flow that will be coming in from the new contracts, I think Pinnacle is very undervalued.