##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 10-Q
 þ
    
    Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the quarterly period ended March 31, 2007
 or
 o
    
    Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the transition period from  to
 Commission File Number 001-31898
 PINNACLE AIRLINES CORP.
 (Exact name of registrant as specified in its charter)
 Delaware
    
    03-0376558(State or other jurisdiction
    
    (I.R.S. Employerof incorporation or organization)
    
    Identification No.)1689 Nonconnah Blvd, Suite 111Memphis, Tennessee
    
    38132(Address of principal executive offices)
    
    (Zip Code)
 901-348-4100  (Registrants telephone number, including area code)
 þ o
  o þ o
 o þ




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##### 



Table of Contents
 PART I. Financial Information
    
    
    1Item 1.Financial Statements
    
    
    1Condensed Consolidated Statements of Income (Unaudited)
    
    
    1Condensed Consolidated Balance Sheets (Unaudited)
    
    
    2Condensed Consolidated Statements of Cash Flows (Unaudited)
    
    
    4Notes to Condensed Consolidated Financial Statements (Unaudited)
    
    
    5item 2. Managements Discussion and Analysis of Results of Operations and Financial Condition
    
    
    22Item 3. Quantitative and Qualitative Disclosure about Market Risk
    
    
    33Item 4. Controls and Procedures
    
    
    34PART II. Other Information
    
    
    35Item 1. Legal Proceedings
    
    
    35Item 1A. Risk Factors
    
    
    35Item 2. unregistered sales of equity and Use of Proceeds
    
    
    35Item 3. Defaults Upon Senior Securities
    
    
    35Item 4. Submission of Matters to a Vote of Security Holders
    
    
    35Item 5. Other Information
    
    
    35Item 6. Exhibits
    
    
    36Ex-31.1 Section 302 Certification of the CEOEx-31.2 Section 302 Certification of the CFOEx-32 Section 906 Cetification of the CEO & CFO




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##### Table of Contents



Part I. Financial Information
 
 Item 1. Financial Statements
 Pinnacle Airlines Corp.
 
 Condensed Consolidated Statements of Income (Unaudited)
 (in thousands, except per share data)
 Three Months Ended March 31,2007
    
    
    2006Operating revenuesRegional airline services
    
    $
    174,499
    
    
    $
    205,005Other
    
    
    5,051
    
    
    
    2,084Total operating revenues
    
    
    179,550
    
    
    
    207,089Operating expensesSalaries, wages and benefits
    
    
    47,301
    
    
    
    34,427Aircraft maintenance, materials and repairs
    
    
    17,548
    
    
    
    10,262Aircraft rentals
    
    
    33,719
    
    
    
    66,031Aircraft fuel
    
    
    6,437
    
    
    
    26,701Other rentals and landing fees
    
    
    13,914
    
    
    
    11,251Ground handling services
    
    
    24,422
    
    
    
    22,359Commissions and passenger related expense
    
    
    4,495
    
    
    
    875Depreciation and amortization
    
    
    2,054
    
    
    
    962Other
    
    
    18,287
    
    
    
    12,675Provision for (decreases) increases in losses associated with
bankruptcy filings of Northwest and Mesaba
    
    
    (1,452
    )
    
    
    17Total operating expenses
    
    
    166,725
    
    
    
    185,560Operating income
    
    
    12,825
    
    
    
    21,529Operating income as a percentage of operating revenues
    
    
    7.1
    %
    
    
    10.4
    %Nonoperating income (expense)Interest expense
    
    
    (2,074
    )
    
    
    (1,500
    )Interest income
    
    
    3,065
    
    
    
    504Miscellaneous income, net
    
    
    18
    
    
    
    28Total nonoperating income (expense)
    
    
    1,009
    
    
    
    (968
    )Income before income taxes
    
    
    13,834
    
    
    
    20,561Income tax expense
    
    
    4,469
    
    
    
    7,265Net income
    
    $
    9,365
    
    
    $
    13,296Basic earnings per share
    
    $
    0.43
    
    
    $
    0.61Diluted earnings per share
    
    $
    0.38
    
    
    $
    0.61Shares used in computing basic earnings per share
    
    
    21,990
    
    
    
    21,945Shares used in computing diluted earnings per share
    
    
    24,672
    
    
    
    21,975
  1




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##### Table of Contents



Pinnacle Airlines Corp.
 
 Condensed Consolidated Balance Sheets
 (in thousands, except share data)
 March 31,
    
    
    December 31,2007
    
    
    2006(Unaudited)AssetsCurrent assetsCash and cash equivalents
    
    $
    24,098
    
    
    $
    705Short-term investments
    
    
    324,150
    
    
    
    72,700Receivables
    
    
    34,731
    
    
    
    100,925Spare parts and supplies, net
    
    
    16,155
    
    
    
    8,061Prepaid expenses and other assets
    
    
    55,026
    
    
    
    15,003Current portion of deferred taxes
    
    
    3,085
    
    
    
    Total current assets
    
    
    457,245
    
    
    
    197,394Property and equipmentFlight equipment
    
    
    86,153
    
    
    
    38,436Other property and equipment
    
    
    31,468
    
    
    
    24,470117,621
    
    
    
    62,906Less accumulated depreciation
    
    
    (23,831
    )
    
    
    (21,921
    )Net property and equipment
    
    
    93,790
    
    
    
    40,985Noncurrent deferred taxes
    
    
    78,986
    
    
    
    Other assets, primarily aircraft deposits
    
    
    59,193
    
    
    
    31,240Goodwill, net
    
    
    26,796
    
    
    
    18,422Intangible assets, net
    
    
    18,291
    
    
    
    13,232Total assets
    
    $
    734,301
    
    
    $
    301,273
  2




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##### Table of Contents



Pinnacle Airlines Corp.
Condensed Consolidated Balance Sheets
(in thousands, except share data)
 March 31,
    
    
    December 31,2007
    
    
    2006(Unaudited)Liabilities and stockholders equityCurrent liabilitiesAccounts payable
    
    $
    27,163
    
    
    $
    18,201Accrued expenses
    
    
    59,286
    
    
    
    26,190Current maturities of debt and capital leases
    
    
    24,638
    
    
    
    Bank line of credit
    
    
    8,375
    
    
    
    Current portion of deferred taxes
    
    
    
    
    
    
    6,815Income taxes payable
    
    
    99,002
    
    
    
    16,658Senior convertible notes
    
    
    121,000
    
    
    
    121,000Current portion of deferred revenue
    
    
    23,096
    
    
    
    Other current liabilities
    
    
    22,405
    
    
    
    5,980Total current liabilities
    
    
    384,965
    
    
    
    194,844Deferred revenue, net of current portion
    
    
    224,963
    
    
    
    Long-term debt, net of current maturities
    
    
    11,515
    
    
    
    Capital leases, net of current maturities
    
    
    4,504
    
    
    
    Deferred income taxes
    
    
    
    
    
    
    7,112Other liabilities
    
    
    1,941
    
    
    
    2,296Commitments and contingenciesStockholders equityPreferred stock, par value $0.01 per share; 1,000,000 shares authorized,
no shares issued
    
    
    
    
    
    
    Series A preferred stock, stated value $100 per share; one share
authorized and issued
    
    
    
    
    
    
    Series common stock, par value $0.01 per share; 5,000,000 shares
authorized; no shares issued
    
    
    
    
    
    
    Common stock, $0.01 par value; 40,000,000 shares authorized; 22,156,896
and
22,080,585 shares issued
    
    
    222
    
    
    
    221Additional paid-in capital
    
    
    86,678
    
    
    
    86,152Retained earnings
    
    
    19,513
    
    
    
    10,648Total stockholders equity
    
    
    106,413
    
    
    
    97,021Total liabilities and stockholders equity
    
    $
    734,301
    
    
    $
    301,273
  3




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##### Table of Contents



Pinnacle Airlines Corp.
 
 Condensed Consolidated Statements of Cash Flows (Unaudited)
 (in thousands)
 Three Months Ended March 31,2007
    
    
    2006Operating activitiesNet income
    
    $
    9,365
    
    
    $
    13,296Adjustments to reconcile net income to cash provided by
operating activities:Provision for (decreases) increases in losses associated
with bankruptcy
filings of Northwest and Mesaba
    
    
    (1,452
    )
    
    
    17Depreciation and amortization
    
    
    2,387
    
    
    
    1,318Deferred income tax benefit
    
    
    (95,998
    )
    
    
    (48
    )Recognition of deferred revenue
    
    
    (5,228
    )
    
    
    Other
    
    
    827
    
    
    
    582Changes in operating assets and liabilities:Increase in deferred revenue, primarily from assignment of
Northwest claim
    
    
    241,439
    
    
    
    Receivables
    
    
    75,469
    
    
    
    (2,131
    )Spare parts and supplies
    
    
    (916
    )
    
    
    (319
    )Prepaid expenses and other assets
    
    
    (6,759
    )
    
    
    (4,313
    )Accounts payable and accrued expenses
    
    
    17,419
    
    
    
    5,472Other liabilities
    
    
    (2,930
    )
    
    
    (1,441
    )Income taxes payable
    
    
    82,345
    
    
    
    3,033Cash provided by operating activities
    
    
    315,968
    
    
    
    15,466Investing activitiesPurchases of property and equipment
    
    
    (3,358
    )
    
    
    (512
    )Aircraft pre-delivery payments
    
    
    (27,838
    )
    
    
    Acquisition of Colgan Air, Inc., net of cash acquired
    
    
    (8,366
    )
    
    
    Purchases of short-term investments
    
    
    (521,875
    )
    
    
    (130,600
    )Proceeds from sales of short-term investments
    
    
    270,425
    
    
    
    117,560Cash used in investing activities
    
    
    (291,012
    )
    
    
    (13,552
    )Financing activitiesPayments on capital leases
    
    
    (175
    )
    
    
    Payments on debt
    
    
    (1,388
    )
    
    
    Cash used in financing activities
    
    
    (1,563
    )
    
    
    Net increase in cash and cash equivalents
    
    
    23,393
    
    
    
    1,914Cash and cash equivalents at beginning of period
    
    
    705
    
    
    
    31,567Cash and cash equivalents at end of period
    
    $
    24,098
    
    
    $
    33,481
  4




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##### Table of Contents



Pinnacle Airlines Corp.
 
 Notes to Condensed Consolidated Financial Statements (Unaudited)
 (all amounts in thousands, except per share data)
 1. Description of Business and Basis of Presentation
     Number of
    
    
    Standard SeatingAircraft Type
    
    Aircraft
    
    
    ConfigurationCRJ 200
    
    
    124
    
    
    
    50CRJ 440
    
    
    15
    
    
    
    44Total Pinnacle aircraft
    
    
    139Saab 340
    
    
    40
    
    
    
    34Beech 1900D
    
    
    11
    
    
    
    19Total Colgan aircraft
    
    
    51Total aircraft
    
    
    190
    5




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##### Table of Contents



Pinnacle Airlines Corp.
Notes to Condensed Consolidated Financial Statements (Unaudited)
(all amounts in thousands, except per share data)
 1. Description of Business and Basis of Presentation (continued)
   Accounting Policies
  Revenue Recognition
   2. Acquisition of Colgan Air, Inc.
    6




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##### Table of Contents



Pinnacle Airlines Corp.
Notes to Condensed Consolidated Financial Statements (Unaudited)
(all amounts in thousands, except per share data)
 2. Acquisition of Colgan Air, Inc. (continued)
  Purchase PriceAllocationCurrent assets
    
    $
    19,038Property and equipment
    
    
    50,253Other assets
    
    
    2,656Intangibles
    
    
    5,450Goodwill
    
    
    8,418Total assets acquired
    
    
    85,815Less: Accounts payable assumed
    
    
    (13,104
    )Accrued expenses assumed
    
    
    (11,884
    )Bank line of credit assumed
    
    
    (8,375
    )Long-term debt and capital leases assumed
    
    
    (30,460
    )Other liabilities assumed
    
    
    (508
    )Purchase price, including $1,484 of transaction costs
    
    
    21,484Less: Note payable issued
    
    
    (10,000
    )Less: Cash acquired
    
    
    (1,088
    )Cash paid for acquisition
    
    $
    10,396
  EstimatedAccumulated
    
    
    Amortization
    
    
    Weighted
    
    
    AnnualAmortization
    
    
    Expense
    
    
    Average
    
    
    AmortizationGross
    
    
    through
    
    
    Through
    
    
    Amortization
    
    
    Expense forCarrying
    
    
    March 31,
    
    
    March 31,
    
    
    Period
    
    
    2007 throughAmount
    
    
    2007
    
    
    2007
    
    
    (in years)
    
    
    2011Code-share and EAS
agreements
    
    $
    3,800
    
    
    $
    63
    
    
    $
    63
    
    
    
    10
    
    
    $
    380Landing slots
    
    
    1,650
    
    
    
    28
    
    
    
    28
    
    
    
    10
    
    
    
    165Goodwill
    
    
    8,748
    
    
    
    
    
    
    
    
    
    
    
    N/A
    
    
    
    Total
    
    $
    14,198
    
    
    $
    91
    
    
    $
    91
    
    
    
    
    
    
    $
    545
 7




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##### Table of Contents



Pinnacle Airlines Corp.
Notes to Condensed Consolidated Financial Statements (Unaudited)
(all amounts in thousands, except per share data)
 2. Acquisition of Colgan Air, Inc. (continued)
    Three Months EndedMarch 31, 2006Operating revenues
    
    $
    249,634Operating income
    
    
    19,636Net income
    
    
    10,951Basic and diluted earnings per share
    
    $
    0.50
 Disclosures About Segments of an Enterprise and Related Information
 3. Code-Share Agreements with Partners
  Percentage ofRegional AirlineCode-Share Partner
    
    Services RevenueNorthwest
    
    
    81
    %US Airways
    
    
    10
    %Continental Airlines
    
    
    6
    %United Airlines
    
    
    3
    %Total
    
    
    100
    %
 Northwest Airlines
  8




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##### Table of Contents



Pinnacle Airlines Corp.
Notes to Condensed Consolidated Financial Statements (Unaudited)
(all amounts in thousands, except per share data)
 3. Code-Share Agreements with Partners (continued)
    Reimbursement payments
 Payments based on pre-set rates
 Margin payments
  9




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##### Table of Contents



Pinnacle Airlines Corp.
Notes to Condensed Consolidated Financial Statements (Unaudited)
(all amounts in thousands, except per share data)
 3. Code-Share Agreements with Partners (continued)
  US Airways
   Continental Airlines
   10




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##### Table of Contents



Pinnacle Airlines Corp.
Notes to Condensed Consolidated Financial Statements (Unaudited)
(all amounts in thousands, except per share data)
 3. Code-Share Agreements with Partners (continued)
  United Airlines
  Other
   4. Northwest Bankruptcy Filing
   11




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##### Table of Contents



Pinnacle Airlines Corp.
Notes to Condensed Consolidated Financial Statements (Unaudited)
(all amounts in thousands, except per share data)
 4. Northwest Bankruptcy Filing (continued)
  5. Mesaba Bankruptcy Filing
     12




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##### Table of Contents



Pinnacle Airlines Corp.
Notes to Condensed Consolidated Financial Statements (Unaudited)
(all amounts in thousands, except per share data)
 5. Mesaba Bankruptcy Filing (continued)
   6. Related Party Transactions
 Northwest
   Three Months EndedMarch 31,2007
    
    
    2006Revenue:Regional airline services revenue
    
    $
    141,094
    
    
    $
    205,005Other revenue
    
    
    1,837
    
    
    
    1,341Expenses:Aircraft fuel
    
    
    
    
    
    
    26,538Aircraft rentals
    
    
    31,568
    
    
    
    66,031Other rentals and landing fees
    
    
    3,325
    
    
    
    4,924Ground handling services
    
    
    15,994
    
    
    
    17,046Other
    
    
    6,708
    
    
    
    564Provision for increases (decreases) in losses
associated with bankruptcy filings of Northwest
and Mesaba
    
    
    33
    
    
    
    (1,565
    )
  13




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##### Table of Contents



Pinnacle Airlines Corp.
Notes to Condensed Consolidated Financial Statements (Unaudited)
(all amounts in thousands, except per share data)
 6. Related Party Transactions (continued)
   Other
    7. Debt
  Short-term notes payable
    
    $
    10,303Line of credit
    
    
    8,375Senior convertible notes
    
    
    121,000Total short-term debt
    
    $
    139,678Long-term notes payable:Secured
    
    $
    17,231Unsecured
    
    
    7,547Total long-term debt
    
    
    24,778Less current maturities
    
    
    (13,263
    )Long-term debt, net of current maturities
    
    $
    11,515
 Notes Payable
  14




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##### Table of Contents



Pinnacle Airlines Corp.
Notes to Condensed Consolidated Financial Statements (Unaudited)
(all amounts in thousands, except per share data)
 7. Debt (continued)
 Line of Credit
  Senior Convertible Notes
   8. Leases
 Capital Leases
   CapitalLeasesRemainder of 2007
    
    $
    1,1612008
    
    
    1,5122009
    
    
    1,3052010
    
    
    1,3092011
    
    
    776Thereafter
    
    
    877Total future rental payments
    
    
    6,940Amount representing interest
    
    
    (1,364
    )Present value of future lease payment
    
    
    5,576Less: Current maturities
    
    
    (1,072
    )Capital leases, net of current maturities
    
    $
    4,504
 15




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##### Table of Contents



Pinnacle Airlines Corp.
Notes to Condensed Consolidated Financial Statements (Unaudited)
(all amounts in thousands, except per share data)
 8. Leases (continued)
 Operating Leases
     Operating LeasesAircraft
    
    
    Non-aircraft
    
    
    TotalRemainder of 2007
    
    $
    99,508
    
    
    $
    13,857
    
    
    $
    113,3652008
    
    
    119,770
    
    
    
    17,795
    
    
    
    137,5652009
    
    
    115,293
    
    
    
    17,171
    
    
    
    132,4642010
    
    
    113,367
    
    
    
    16,863
    
    
    
    130,2302011
    
    
    113,088
    
    
    
    16,577
    
    
    
    129,665Thereafter
    
    
    678,528
    
    
    
    48,239
    
    
    
    726,767Total future rental payments
    
    $
    1,239,554
    
    
    $
    130,502
    
    
    $
    1,370,056
 9. Earnings Per Share
   16




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##### Table of Contents



Pinnacle Airlines Corp.
Notes to Condensed Consolidated Financial Statements (Unaudited)
(all amounts in thousands, except per share data)
 9. Earnings Per Share (continued)
  Three Months EndedMarch 31,2007
    
    
    2006Net income
    
    $
    9,365
    
    
    $
    13,296Basic EPS
    
    $
    0.43
    
    
    $
    0.61Diluted EPS
    
    $
    0.38
    
    
    $
    0.61Share computation:Weighted average number of shares out-
standing for basic EPS
    
    
    21,990
    
    
    
    21,945Senior convertible notes
    
    
    2,402
    (1)
    
    
    Share-based compensation
    
    
    280
    
    
    
    30Weighted average number of shares out-
standing for diluted EPS
    
    
    24,672
    
    
    
    21,975
 
 (1)
    
    Dilution is calculated as follows: Increase in Fully
    
    
    
    
    
    
    121,000
    
    
    
    
    
    
    
    121,000Diluted Share Count
    
    
    =
    
    
    $
    13.22
    
    
    
    
    
    
    $
    17.923
   10. Share-Based Compensation
    17




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##### Table of Contents



Pinnacle Airlines Corp.
Notes to Condensed Consolidated Financial Statements (Unaudited)
(all amounts in thousands, except per share data)
 11. Income Taxes
  Three Months Ended March 31,2007
    
    
    2006$
    
    
    %
    
    
    $
    
    
    %Income tax expense at statutory rate
    
    $
    4,842
    
    
    
    35.0
    %
    
    $
    7,196
    
    
    
    35.0
    %State income taxes, net of federal taxes
    
    
    214
    
    
    
    1.6
    %
    
    
    363
    
    
    
    1.8
    %Tax-exempt income
    
    
    (828
    )
    
    
    (6.0
    )%
    
    
    (149
    )
    
    
    (0.7
    )%Valuation allowance
    
    
    
    
    
    
    
    
    
    
    (193
    )
    
    
    (1.0
    )%Other
    
    
    241
    
    
    
    1.7
    %
    
    
    48
    
    
    
    0.2
    %Income tax expense
    
    $
    4,469
    
    
    
    32.3
    %
    
    $
    7,265
    
    
    
    35.3
    %
  Accounting for
Uncertainty in Income Taxes
    18




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##### Table of Contents



Pinnacle Airlines Corp.
Notes to Condensed Consolidated Financial Statements (Unaudited)
(all amounts in thousands, except per share data)
 12. Short-Term Investments
 Accounting for Certain Investments in Debt and Equity Securities
   13. Commitments and Contingencies
 Employees
 Number ofEmployeesRepresented by
    
    
    
    ContractEmployee Group
    
    Union
    
    Representing Union
    
    Amendable DatePilots
    
    
    1,125
    
    
    Air Line Pilots Association
    
    April 30, 2005Flight Attendants
    
    
    651
    
    
    United Steel Workers of America
    
    February 1, 2011Ground Operations
    
    
    1,260
    
    
    United Steel Workers of America
    
    March 19, 2010Flight Dispatchers
    
    
    39
    
    
    Transport Workers Union of
America
    
    Initial contract
currently being
negotiated
   19




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##### Table of Contents



Pinnacle Airlines Corp.
Notes to Condensed Consolidated Financial Statements (Unaudited)
(all amounts in thousands, except per share data)
 13. Commitments and Contingencies (continued)
  Purchase Commitments.
 Firm
    
    
    FirmNoncancelable
    
    
    Cancelable
    
    
    Options
    
    
    TotalQ4002007
    
    
    2
    
    
    
    
    
    
    
    
    
    
    
    22008
    
    
    13
    
    
    
    
    
    
    
    
    
    
    
    132009
    
    
    
    
    
    
    8
    
    
    
    8
    
    
    
    162010
    
    
    
    
    
    
    2
    
    
    
    12
    
    
    
    14Total Q400
    
    
    15
    
    
    
    10
    
    
    
    20
    
    
    
    45CRJ-9002007
    
    
    2
    
    
    
    
    
    
    
    
    
    
    
    22008
    
    
    13
    
    
    
    
    
    
    
    
    
    
    
    132009
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    1Total CRJ-900
    
    
    16
    
    
    
    
    
    
    
    
    
    
    
    16Total
    
    
    31
    
    
    
    10
    
    
    
    20
    
    
    
    61
  Guarantees and Indemnifications
 Other Contingencies
 20




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##### Table of Contents



Pinnacle Airlines Corp.
Notes to Condensed Consolidated Financial Statements (Unaudited)
(all amounts in thousands, except per share data)
 14. Subsequent Events
    21




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Item 2. Managements Discussion and Analysis of Results of Operations and Financial Condition
 General
  www.pncl.com
 Overview
  Amended ASA with Northwest
     22




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##### Table of Contents



Item 2. Managements Discussion and Analysis of Results of Operations and Financial Condition
 Acquisition of Colgan Air, Inc.
    First Quarter Operations
  Outlook
  23




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##### Table of Contents



Item 2. Managements Discussion and Analysis of Results of Operations and Financial Condition
       24




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Item 2. Managements Discussion and Analysis of Results of Operations and Financial Condition
   25




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Item 2. Managements Discussion and Analysis of Results of Operations and Financial Condition
 Results of Operations
 Three Months Ended March 31,2007
    
    
    2006PinnacleAirlines,
    
    
    Colgan Air,
    
    
    Pinnacle Corp.
    
    
    Pinnacle Corp.Inc./Corp.
    
    
    Inc.
    
    
    Consolidated
    
    
    Consolidated(in thousands)Operating revenuesRegional airline services
    
    $
    141,094
    
    
    $
    33,405
    
    
    $
    174,499
    
    
    $
    205,005Other
    
    
    2,560
    
    
    
    2,491
    
    
    
    5,051
    
    
    
    2,084Total operating revenues
    
    
    143,654
    
    
    
    35,896
    
    
    
    179,550
    
    
    
    207,089Operating expensesSalaries, wages and benefits
    
    
    38,776
    
    
    
    8,525
    
    
    
    47,301
    
    
    
    34,427Aircraft maintenance,
materials and repairs
    
    
    11,020
    
    
    
    6,528
    
    
    
    17,548
    
    
    
    10,262Aircraft rentals
    
    
    31,853
    
    
    
    1,866
    
    
    
    33,719
    
    
    
    66,031Aircraft fuel
    
    
    16
    
    
    
    6,421
    
    
    
    6,437
    
    
    
    26,701Other rentals and landing fees
    
    
    11,977
    
    
    
    1,937
    
    
    
    13,914
    
    
    
    11,251Ground handling services
    
    
    21,701
    
    
    
    2,721
    
    
    
    24,422
    
    
    
    22,359Commissions and passenger
related expense
    
    
    901
    
    
    
    3,594
    
    
    
    4,495
    
    
    
    875Depreciation
    
    
    1,081
    
    
    
    973
    
    
    
    2,054
    
    
    
    962Other
    
    
    14,866
    
    
    
    3,421
    
    
    
    18,287
    
    
    
    12,675Provision for (decreases)
increases in losses
associated with bankruptcy
filings of Northwest and
Mesaba
    
    
    (1,452
    )
    
    
    
    
    
    
    (1,452
    )
    
    
    17Total operating expenses
    
    
    130,739
    
    
    
    35,986
    
    
    
    166,725
    
    
    
    185,560Operating income
    
    $
    12,915
    
    
    $
    (90
    )
    
    $
    12,825
    
    
    $
    21,529
  Comparison of Three Months Ended March 31, 2007 to Three Months Ended March 31, 2006
 Revenues
 Three Months Ended March 31,$
    
    
    %2007
    
    
    2006
    
    
    Variance
    
    
    Variance(in thousands)Operating revenuesRegional airline services
    
    $
    174,499
    
    
    $
    205,005
    
    
    $
    (30,506
    )
    
    
    (15
    )%Other
    
    
    5,051
    
    
    
    2,084
    
    
    
    2,967
    
    
    
    142
    %Total operating revenues
    
    $
    179,550
    
    
    $
    207,089
    
    
    $
    (27,539
    )
    
    
    (13
    )%
 Regional Airline Services
  26




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##### Table of Contents



Item 2. Managements Discussion and Analysis of Results of Operations and Financial Condition
  Other Revenue
  Operating Expenses
 Three Months Ended March 31,$
    
    
    %2007
    
    
    2006
    
    
    Variance
    
    
    Variance(in thousands)Operating expenses:Salaries, wages and benefits
    
    $
    47,301
    
    
    $
    34,427
    
    
    $
    12,874
    
    
    
    37
    %Aircraft maintenance,
materials and repairs
    
    
    17,548
    
    
    
    10,262
    
    
    
    7,286
    
    
    
    71
    %Aircraft rentals
    
    
    33,719
    
    
    
    66,031
    
    
    
    (32,312
    )
    
    
    (49
    )%Aircraft fuel
    
    
    6,437
    
    
    
    26,701
    
    
    
    (20,264
    )
    
    
    (76
    )%Other rentals and landing fees
    
    
    13,914
    
    
    
    11,251
    
    
    
    2,663
    
    
    
    24
    %Ground handling services
    
    
    24,422
    
    
    
    22,359
    
    
    
    2,063
    
    
    
    9
    %Commissions and passenger
related expense
    
    
    4,495
    
    
    
    875
    
    
    
    3,620
    
    
    
    414
    %Depreciation
    
    
    2,054
    
    
    
    962
    
    
    
    1,092
    
    
    
    114
    %Other
    
    
    18,287
    
    
    
    12,675
    
    
    
    5,612
    
    
    
    44
    %Provision for (decreases)
increases in losses
associated with bankruptcy
filings of Northwest and
Mesaba
    
    
    (1,452
    )
    
    
    17
    
    
    
    (1,469
    )
    
    
    (8641
    )%Total operating expenses
    
    $
    166,725
    
    
    $
    185,560
    
    
    $
    (18,835
    )
    
    
    (10
    )%
   27




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Item 2. Managements Discussion and Analysis of Results of Operations and Financial Condition
          Nonoperating Income
  28




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##### Table of Contents



Item 2. Managements Discussion and Analysis of Results of Operations and Financial Condition
 Income Tax Expense
  Certain Statistical Information
  CRJ
    
    
    TurbopropThree MonthsEndedThree Months Ended March 31,
    
    
    March 31,2007
    
    
    2006
    
    
    Change
    
    
    2007 (3)Other Data:Revenue passengers (in thousands)
    
    
    2,197
    
    
    
    2,015
    
    
    
    9
    %
    
    
    271Revenue passenger miles (in thousands) (1)
    
    
    1,007,165
    
    
    
    971,806
    
    
    
    4
    %
    
    
    50,436Available seat miles (in thousands)
    
    
    1,433,048
    
    
    
    1,341,668
    
    
    
    7
    %
    
    
    118,178Passenger load factor (2)
    
    
    70.3
    %
    
    
    72.4
    %
    
    (2.1) pts
    
    
    42.7
    %Operating revenue per available seat mile (in
cents)
    
    
    10.02
    
    
    
    15.44
    
    
    
    (35
    )%
    
    
    30.37Operating costs per available seat mile (in cents)
    
    
    9.11
    
    
    
    13.83
    
    
    
    (34
    )%
    
    
    30.65Operating revenue per block hour
    
    $
    1,342
    
    
    $
    2,018
    
    
    
    (33
    )%
    
    $
    1,431Operating costs per block hour
    
    $
    1,220
    
    
    $
    1,808
    
    
    
    (33
    )%
    
    $
    1,443Block hours
    
    
    107,013
    
    
    
    102,597
    
    
    
    4
    %
    
    
    25,090Cycles
    
    
    63,963
    
    
    
    61,265
    
    
    
    4
    %
    
    
    20,890Average daily utilization (block hours)
    
    
    8.93
    
    
    
    9.19
    
    
    
    (3
    )%
    
    
    6.80Average stage length (miles)
    
    
    457
    
    
    
    473
    
    
    
    (3
    )%
    
    
    183Number of operating aircraft (end of period)
    
    
    139
    
    
    
    124
    
    
    
    12
    %
    
    
    51
 
 (1)
    
    Revenue passenger miles represents the number of miles flown by revenue passengers.(2)
    
    Passenger load factor equals revenue passenger miles divided by available seat miles.(3)
    
    The Company purchased Colgan on January 18, 2007, as discussed in Note 2 to our condensed consolidated
financial statements. The three months ended for turboprops implies the period from the date of purchase of
Colgan through March 31, 2007. We did not operate turboprops during 2006.  Liquidity and Capital Resources
    29




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##### Table of Contents



Item 2. Managements Discussion and Analysis of Results of Operations and Financial Condition
  Contractual obligations
 Payments Due by Period2007 (1)
    
    
    2008
    
    
    2009
    
    
    2010
    
    
    2011
    
    
    Thereafter
    
    
    TotalContractual obligations:Debt (2)
    
    $
    133,220
    
    
    $
    14,050
    
    
    $
    5,193
    
    
    $
    2,335
    
    
    $
    951
    
    
    $
    28
    
    
    $
    155,777Interest
payments on long-term debt
    
    
    1,967
    
    
    
    3,933
    
    
    
    3,933
    
    
    
    3,933
    
    
    
    3,933
    
    
    
    55,053
    
    
    
    72,752Aircraft
purchase commitments
    
    
    148,089
    
    
    
    469,682
    
    
    
    22,036
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    639,807Capital leases
    
    
    1,161
    
    
    
    1,512
    
    
    
    1,305
    
    
    
    1,309
    
    
    
    776
    
    
    
    877
    
    
    
    6,940Operating leases
    
    
    113,365
    
    
    
    137,565
    
    
    
    132,464
    
    
    
    130,230
    
    
    
    129,665
    
    
    
    726,767
    
    
    
    1,370,056Purchase obligations (3)
    
    
    7,587
    
    
    
    21,369
    
    
    
    1,105
    
    
    
    564
    
    
    
    430
    
    
    
    121
    
    
    
    31,176Total contractual cash
obligations
    
    $
    405,389
    
    
    $
    648,111
    
    
    $
    166,036
    
    
    $
    138,371
    
    
    $
    135,755
    
    
    $
    782,846
    
    
    $
    2,276,508
 
 (1)
    
    Contractual obligations for the remainder of 2007.(2)
    
    Amount for 2007 includes the par amount of the Notes, which are convertible into a
combination of cash and common stock. See below and Note 7 to our condensed consolidated
financial statements for further discussion. Amount for 2008 includes $10.0 million
for short-term notes payable for the purchase of Colgan (see Note 2 to our condensed
consolidated financial statements for further discussion).(3)
    
    Amounts represent $6.4 million for the purchase of the aircraft hangars (see Note 2 to our
condensed consolidated financial statements for further discussion) in 2007, purchase of
Series A Preferred Share of $20.0 million (see Note 4 to our condensed consolidated financial
statements for further discussion) for 2008, and noncancelable commitments to purchase goods
and services, including certain aircraft parts and information technology software and
equipment.   30




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Item 2. Managements Discussion and Analysis of Results of Operations and Financial Condition
        Operating activities. th
  Investing activities
 31




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##### Table of Contents



Item 2. Managements Discussion and Analysis of Results of Operations and Financial Condition
   Financing activities
 Deferred tax asset.
 Forward Looking Statements
  32




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##### Table of Contents



Item 3. Quantitative and Qualitative Disclosure about Market Risk
  Commodity Price Risk
  Interest Rate Risk
 Aircraft financing.
  Investment income.
  Senior Convertible Notes.
 33




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##### Table of Contents



Item 4. Controls and Procedures
   34




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##### Table of Contents



Part II. Other Information
 
 Item 1. Legal Proceedings
  
 Item 1A. Risk Factors.
  
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
  
 Item 3. Defaults Upon Senior Securities
  
 Item 4. Submission of Matters to a Vote of Security Holders
  
 Item 5. Other Information
  35




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##### Table of Contents



Item 6. Exhibits
  ExhibitNumber
    
    Description3.1
    
    Amended and Restated Certificate of Incorporation of the registrant (Incorporated by
reference to the Companys Registration Statement Form S-1 (Registration No. 333-83359), as
amended (the S-1) initially filed on February 25, 2002)3.1.1
    
    Second Amended and Restated Certificate of Incorporation of the registrant (Incorporated by
reference to the S-1)3.2
    
    Certificate of Designations for Series A preferred stock of the registrant (Incorporated by
reference to the S-1)3.3
    
    Bylaws of the registrant (Incorporated by reference to the S-1)3.3.1
    
    Amended and Restated Bylaws, dated January 14, 2003, of the registrant (Incorporated by
reference to the S-1)4.1
    
    Specimen Stock Certificate (Incorporated by reference to the S-1)4.2
    
    Rights Agreement between the registrant and EquiServe Trust Company, N.A., as Rights Agent
(Incorporated by reference to the S-1)4.3
    
    Indenture, 3.25% Senior Convertible Notes due 2025, dated as of February 8, 2005, by and
between Pinnacle Airlines Corp. and Deutsche Bank Trust Company (Incorporated by reference
to Exhibits 99.2 and 99.3 to the Registrants Current Report on Form 8-K filed on
February 8, 2005)4.4
    
    Registration Rights Agreement made pursuant to the Purchase Agreement dated February 3,
2005, dated as of February 8, 2005, by and among Pinnacle Airlines Corp., Merrill Lynch,
Pierce, Fenner & Smith Incorporated and Raymond James & Associates, Inc. (Incorporated by
reference to Exhibits 99.2 and 99.3 to the Registrants Current Report on Form 8-K filed on
February 8, 2005)10.1
    
    Loan Agreement dated as of June 16, 2005 between Pinnacle Airlines, Inc. and First Tennessee
Bank National Association (Incorporated by reference to the Registrants Current Report on
Form 8-K filed on June 23, 2005)10.2
    
    Sublease Agreement between Pinnacle Airlines, Inc. and Northwest Airlines, Inc.
(Incorporated by reference to the S-1)10.2.1
    
    First Amendment to Sublease Agreement between Pinnacle Airlines, Inc. and Northwest
Airlines, Inc. (Incorporated by reference to the S-1)10.2#
    
    Guaranty Agreement between Pinnacle Airlines, Inc. and First Tennessee Bank National
Association (Incorporated by reference to the Registrants Current Report on Form 8-K filed
on June 23, 2005)10.3
    
    Engine Lease Agreement between Pinnacle Airlines, Inc. and Northwest Airlines, Inc.
(Incorporated by reference to the S-1)10.3.1
    
    First Amendment to Engine Lease Agreement between Pinnacle Airlines, Inc. and Northwest
Airlines, Inc. (Incorporated by reference to the S-1)10.3#
    
    Revolving Credit Note dated as of June 16, 2005 between Pinnacle Airlines, Inc. and First
Tennessee Bank National Association (Incorporated by reference to the Registrants Current
Report on Form 8-K filed on June 23, 2005)10.4#
    
    Security Agreement dated as of June 16, 2005 between Pinnacle Airlines, Inc. and First
Tennessee Bank National Association (Incorporated by reference to the Registrants Current
Report on Form 8-K filed on June 23, 2005)10.5#
    
    Negative Pledge Agreement dated as of June 16, 2005 between Pinnacle Airlines, Inc. and
First Tennessee Bank National Association (Incorporated by reference to the Registrants
Current Report on Form 8-K filed on June 23, 2005)
 36




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##### Table of Contents



ExhibitNumber
    
    Description10.6#
    
    Negative Pledge Agreement dated as of June 16, 2005 between Pinnacle Airlines Corp. and
First Tennessee Bank National Association (Incorporated by reference to the Registrants
Current Report on Form 8-K filed on June 23, 2005)10.8
    
    Pinnacle Airlines Corp. 2003 Stock Incentive Plan (Incorporated by reference to the S-1)10.9
    
    Non-Qualified Stock Option Agreement for options granted under the Pinnacle Airlines Corp.
2003 Stock Incentive Plan (Incorporated by reference to the S-1)10.10
    
    Pinnacle Airlines, Inc. Annual Management Bonus Plan (Incorporated by reference to the S-1)10.11
    
    Amended and Restated Sublease Agreement dated as of January 14, 2003 between Pinnacle
Airlines, Inc. and Northwest Airlines, Inc. (SBN Facilities) (Incorporated by reference to
the S-1)10.12
    
    Sublease Agreement dated as of August 1, 2002 between Pinnacle Airlines, Inc. and Northwest
Airlines, Inc. (TYS Facilities) (Incorporated by reference to the S-1)10.13
    
    Amended and Restated Facilities Use Agreement between Pinnacle Airlines, Inc. and Northwest
Airlines, Inc. (DTW Facilities) (Incorporated by reference to the S-1)10.14
    
    Amended and Restated Facilities Use Agreement between Pinnacle Airlines, Inc. and Northwest
Airlines, Inc. (MEM Facilities) (Incorporated by reference to the S-1)10.15
    
    Amended and Restated Facilities Use Agreement between Pinnacle Airlines, Inc. and Northwest
Airlines, Inc. (MSP Facilities) (Incorporated by reference to the S-1)10.16
    
    Intentionally omitted10.17
    
    Intentionally omitted10.18
    
    Lease Guaranty issued by the registrant to Northwest Airlines, Inc. (Incorporated by
reference to the S-1)10.19
    
    Sublease Guaranty issued by the registrant to Northwest Airlines, Inc. (Incorporated by
reference to the S-1)10.20
    
    Airline Services Agreement dated as of March 1, 2002 among the registrant, Pinnacle
Airlines, Inc. and Northwest Airlines, Inc. (Incorporated by reference to the S-1)10.21
    
    Airline Services Agreement dated as of January 14, 2003 among the registrant, Pinnacle
Airlines, Inc. and Northwest Airlines, Inc. (Incorporated by reference to the S-1)10.21.1
    
    Amendment No. 1 dated as of September 11, 2003 to the Airline Services Agreement dated as of
January 14, 2003 among the registrant, Pinnacle Airlines, Inc. and Northwest Airlines, Inc.
(Incorporated by reference to the S-1)10.21.2
    
    Amendment No. 2 dated as of November 26, 2003 to the Airline Services Agreement dated as of
January 14, 2003 among the registrant, Pinnacle Airlines, Inc. and Northwest Airlines, Inc.
(Incorporated by reference to the S-1)10.22
    
    Amended and Restated Ground Handling Agreement between Pinnacle Airlines, Inc. and Northwest
Airlines, Inc. (Incorporated by reference to the S-1)10.23
    
    Amended and Restated Information Technology Services Agreement between Pinnacle Airlines,
Inc. and Northwest Airlines, Inc. (Incorporated by reference to the S-1)10.24
    
    Amended and Restated Family Assistance Services Agreement between Pinnacle Airlines, Inc.
and Northwest Airlines, Inc. (Incorporated by reference to the S-1)10.25
    
    Amended and Restated Manufacturer Benefits Agreement between Pinnacle Airlines, Inc. and
Northwest Airlines, Inc. (Incorporated by reference to the S-1)10.26
    
    Form of Amended and Restated Preferential Hiring Agreement between Pinnacle Airlines, Inc.
and Northwest Airlines, Inc. (Incorporated by reference to the S-1)10.27
    
    Purchase Agreement, Senior Convertible Notes due 2025, dated as of February 3, 2005, by and
among, Pinnacle Airlines Corp., Merrill Lynch, Pierce, Fenner & Smith Incorporated and
Raymond James & Associates, Inc. (Incorporated by reference to the Registrants Current
Report on Form 8-K filed on February 8, 2005)10.28
    
    Amended and Restated Management Compensation Agreement between Pinnacle Airlines, Inc. and
Philip H. Trenary (Incorporated by reference to the Registrants Current Report on Form 8-K
filed on August 12, 2005)
 37




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##### Table of Contents



ExhibitNumber
    
    Description10.29
    
    Amended and Restated Management Compensation Agreement between Pinnacle Airlines, Inc. and
Peter D. Hunt (Incorporated by reference to the Registrants Current Report on Form 8-K
filed on August 12, 2005)10.30
    
    Amended and Restated Management Compensation Agreement between Pinnacle Airlines, Inc. and
Douglas W. Shockey (Incorporated by reference to the Registrants Current Report on Form 8-K
filed on August 12, 2005)10.31
    
    Form of Indemnity Agreement between Pinnacle Airlines Corp. and its directors and officers
(Incorporated by reference to the Registrants Current Report on Form 8-K filed on January
26, 2006)10.32
    
    Assignment of Claim Agreement between Pinnacle Airlines, Inc. and Goldman Sachs Credit
Partners, L.P., dated as of October 5, 2006.10.40
    
    Assumption and Claim Resolution Agreement between Pinnacle Airlines Corp. and Northwest
Airlines, Inc., dated as of December 20, 2006 (Incorporated by reference to the Registrants
Current Report on Form 8-K filed on January 3, 2007)10.41
    
    Amended and Restated Airline Services Agreement by and among Pinnacle Airlines, Inc.,
Pinnacle Airlines Corp. and Northwest Airlines, Inc., dated December 15, 2006, effective as
of January 1, 200710.50
    
    Stock Purchase Agreement, dated as of January 18, 2007, by and among Colgan Air, Inc. and
Pinnacle Airlines Corp. (Incorporated by reference to the Registrants Current Report on
Form 8-K filed on January 24, 2007)10.99.1#
    
    Promissory Note issued by Pinnacle Airlines, Inc. to Northwest Airlines, Inc. (Incorporated
by reference to the S-1)10.99.2#
    
    Guarantee of Promissory Note issued by registrant to Northwest Airlines, Inc. (Incorporated
by reference to the S-1)10.99.3#
    
    Revolving Credit Facility dated as of January 14, 2003 between Pinnacle Airlines, Inc. and
Northwest Airlines, Inc. (Incorporated by reference to the S-1)10.99.4#
    
    First Amendment dated as of February 5, 2003 to Revolving Credit Facility dated as of
January 14, 2003 between Pinnacle Airlines, Inc. and Northwest Airlines, Inc. (Incorporated
by reference to the S-1)10.99.5#
    
    Second Amendment dated as of November 28, 2003 to Revolving Credit Facility dated as of
January 14, 2003 between Pinnacle Airlines, Inc. and Northwest Airlines, Inc. (Incorporated
by reference to the S-1)10.99.6#
    
    Third Amendment dated as of December 13, 2004 to Revolving Credit Facility dated as of
January 14, 2003 between Pinnacle Airlines, Inc. and Northwest Airlines, Inc. (Incorporated
by reference to the Registrants Current Report on Form 8-K filed on February 8, 2005)10.99.7#
    
    Fourth Amendment dated as of February 8, 2005 to Revolving Credit Facility dated as of
January 14, 2003 between Pinnacle Airlines, Inc. and Northwest Airlines, Inc. (Incorporated
by reference to the Registrants Current Report on Form 8-K filed on February 8, 2005)10.99.8#
    
    Guaranty dated as of January 14, 2003 issued by registrant to Northwest Airlines, Inc.
(Incorporated by reference to the S-1)21.1
    
    List of Subsidiaries (Incorporated by reference to the S-1)23.1
    
    Consent of Independent Registered Public Accounting Firm31.1*
    
    Certification of Chief Executive Officer31.2*
    
    Certification of Chief Financial Officer32*
    
    Certifications of CEO and CFO
 
 *
    
    Filed herewith
    
    Management contract or compensatory plan or arrangement#
    
    Cancelled agreement referenced in this Form 10-Q
 38




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##### Table of Contents



SIGNATURES
  By:
    /s/ Philip H. TrenaryPhilip H. TrenaryDate:  May 9, 2007
    
    President and Chief Executive Officer By:
    /s/ Peter D. HuntPeter D. HuntDate:  May 9, 2007
    
    Vice President and Chief Financial Officer 39