UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


WASHINGTON,
D.C. 20549








FORM
10-Q





x
            Quarterly
      report pursuant to Section 13 or 15(d) of the Securities Exchange Act of
      1934For
      the quarterly period ended March 31, 2009or ̈
            Transition
      report pursuant to Section 13 or 15(d) of the Securities Exchange Act of
      1934For
      the transition period from__________
  to__________





Commission
File Number 001-31898


PINNACLE
AIRLINES CORP.


(Exact
name of registrant as specified in its charter)





Delaware
              (State or other
      jurisdiction
              of
      incorporation or organization)
            03-0376558
              (I.R.S.
      Employer
              Identification
      No.)1689
      Nonconnah Blvd, Suite 111
              Memphis,
      Tennessee
              (Address
      of principal executive offices)
            38132
              (Zip
      Code)








901-348-4100


(Registrant's
telephone number, including area code)





Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.





Yes
      x
            
            No
       ̈





Indicate by check mark whether the
registrant has submitted electronically and posted on its corporate Web site, if
any, every Interactive Data File required to be submitted and posted pursuant to
Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter
period that the registrant was required to submit and post such
files).





Yes
       ̈
            
            No
      x








Indicate
by check mark whether the registrant is a larger accelerated filer, an
accelerated filer, a non-accelerated filer or a smaller reporting
company.  See definition of “accelerated filer”, “large accelerated
filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check
one):





Large
      accelerated filer  ̈
            Accelerated filer xNon-accelerated filer  ̈
            Smaller
      reporting company  ̈





Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).





Yes
       ̈
            
            No
      x





As of May
1, 2009, 18,342,334shares of common stock
were outstanding.





Table
of Contents


Part
      I. Financial InformationItem
      1. Financial StatementsCondensed Consolidated Statements of Operations
      (Unaudited)
              3Condensed Consolidated Balance Sheets
      (Unaudited)
              4Condensed Consolidated Statements of Cash Flows
      (Unaudited)
              5Notes to Condensed Consolidated Financial Statements
      (Unaudited)
              6Item 2.  Management’s Discussion and Analysis of
      Results of Operations and Financial Condition
              18Item 3.  Quantitative and Qualitative Disclosures
      about Market Risk
              30Item 4.  Controls and
    Procedures
              31Part
      II.  Other InformationItem 1.  Legal Proceedings
              31Item 1A.  Risk Factors
              31Item 2.  Unregistered Sales of Equity Securities
      and Use of Proceeds
              31Item 3.  Defaults Upon Senior
      Securities
              31Item 4.  Submission of Matters to a Vote of
      Security Holders
              31Item 5.  Other Information
              31Item 6.  Exhibits
              31




2


Part
1.  Financial Information





Item
1.  Financial Statements





Pinnacle
Airlines Corp.


Condensed Consolidated Statements of Operations
(Unaudited)


(in
thousands, except per share data)





Three
      Months Ended March 31,2009
                                                    
                                                    
                                                    2008(Restated)Operating
      revenuesRegional
      airline services
                                                    
                                                    $
                                                    205,924
                                                    
                                                    
                                                    $
                                                    201,159Other
                                                    
                                                    
                                                    1,937
                                                    
                                                    
                                                    
                                                    3,182Total
      operating revenues
                                                    
                                                    
                                                    207,861
                                                    
                                                    
                                                    
                                                    204,341Operating
      expensesSalaries,
      wages and benefits
                                                    
                                                    
                                                    56,840
                                                    
                                                    
                                                    
                                                    53,443Aircraft
      rentals
                                                    
                                                    
                                                    30,492
                                                    
                                                    
                                                    
                                                    33,521Ground
      handling services
                                                    
                                                    
                                                    26,501
                                                    
                                                    
                                                    
                                                    27,389Aircraft
      maintenance, materials and repairs
                                                    
                                                    
                                                    24,689
                                                    
                                                    
                                                    
                                                    21,874Other
      rentals and landing fees
                                                    
                                                    
                                                    18,403
                                                    
                                                    
                                                    
                                                    15,444Aircraft
      fuel
                                                    
                                                    
                                                    4,517
                                                    
                                                    
                                                    
                                                    11,873Commissions
      and passenger related expense
                                                    
                                                    
                                                    4,827
                                                    
                                                    
                                                    
                                                    6,825Depreciation
      and amortization
                                                    
                                                    
                                                    8,581
                                                    
                                                    
                                                    
                                                    4,371Other
                                                    
                                                    
                                                    15,629
                                                    
                                                    
                                                    
                                                    22,816Aircraft
      lease return costs
                                                    
                                                    
                                                    447
                                                    
                                                    
                                                    
                                                    -Total
      operating expenses
                                                    
                                                    
                                                    190,926
                                                    
                                                    
                                                    
                                                    197,556Operating
      income
                                                    
                                                    
                                                    16,935
                                                    
                                                    
                                                    
                                                    6,785Operating
      income as a percentage of operating revenues
                                                    
                                                    
                                                    8.1
                                                    %
                                                    
                                                    
                                                    3.3
                                                    %Nonoperating
      (expense) incomeInterest
      income
                                                    
                                                    
                                                    906
                                                    
                                                    
                                                    
                                                    2,314Interest
      expense
                                                    
                                                    
                                                    (9,793
                                                    )
                                                    
                                                    
                                                    (7,196
                                                    )Miscellaneous
      income (expense)
                                                    
                                                    
                                                    401
                                                    
                                                    
                                                    
                                                    (174
                                                    )Total
      nonoperating expense
                                                    
                                                    
                                                    (8,486
                                                    )
                                                    
                                                    
                                                    (5,056
                                                    )Income
      before income taxes
                                                    
                                                    
                                                    8,449
                                                    
                                                    
                                                    
                                                    1,729Income
      tax benefit (expense)
                                                    
                                                    
                                                    10,394
                                                    
                                                    
                                                    
                                                    (493
                                                    )Net
      income
                                                    
                                                    $
                                                    18,843
                                                    
                                                    
                                                    $
                                                    1,236Basic
      and diluted earnings per share
                                                    
                                                    $
                                                    1.05
                                                    
                                                    
                                                    $
                                                    0.07Shares
      used in computing basic earnings per share
                                                    
                                                    
                                                    17,970
                                                    
                                                    
                                                    
                                                    17,859Shares
      used in computing diluted earnings per share
                                                    
                                                    
                                                    17,970
                                                    
                                                    
                                                    
                                                    17,939





The
accompanying notes are an integral part of these condensed consolidated
financial statements.


3


Pinnacle
Airlines Corp.


Condensed Consolidated Balance Sheets


(in
thousands, except share data)


March
      31, 2009
                                                
                                                
                                                December
      31, 2008Assets
                                                
                                                (Unaudited)
                                                
                                                
                                                (Restated)Current
      assetsCash
      and cash equivalents
                                                
                                                $
                                                57,623
                                                
                                                
                                                $
                                                69,469Restricted
      cash
                                                
                                                
                                                8,588
                                                
                                                
                                                
                                                5,417Receivables,
      net
                                                
                                                
                                                29,090
                                                
                                                
                                                
                                                31,619Spare
      parts and supplies, net
                                                
                                                
                                                18,022
                                                
                                                
                                                
                                                17,106Prepaid
      expenses and other assets
                                                
                                                
                                                9,118
                                                
                                                
                                                
                                                8,160Assets
      held for sale
                                                
                                                
                                                2,784
                                                
                                                
                                                
                                                2,786Deferred
      income taxes, net of allowance
                                                
                                                
                                                10,959
                                                
                                                
                                                
                                                13,908Income
      taxes receivable
                                                
                                                
                                                39,882
                                                
                                                
                                                
                                                31,117Total
      current assets
                                                
                                                
                                                176,066
                                                
                                                
                                                
                                                179,582Property
      and equipmentFlight
      equipment
                                                
                                                
                                                702,401
                                                
                                                
                                                
                                                721,499Aircraft
      pre-delivery payments
                                                
                                                
                                                15,271
                                                
                                                
                                                
                                                5,721Other
      property and equipment
                                                
                                                
                                                46,636
                                                
                                                
                                                
                                                46,218Less
      accumulated depreciation
                                                
                                                
                                                (61,012
                                                )
                                                
                                                
                                                (53,507
                                                )Net
      property and equipment
                                                
                                                
                                                703,296
                                                
                                                
                                                
                                                719,931Investments
                                                
                                                
                                                114,682
                                                
                                                
                                                
                                                116,900Deferred
      income taxes, net of allowance
                                                
                                                
                                                28,592
                                                
                                                
                                                
                                                40,847Other
      assets
                                                
                                                
                                                332,227
                                                
                                                
                                                
                                                33,724Debt
      issuance costs, net
                                                
                                                
                                                3,485
                                                
                                                
                                                
                                                3,711Goodwill
                                                
                                                
                                                18,422
                                                
                                                
                                                
                                                18,422Intangible
      assets, net
                                                
                                                
                                                14,168
                                                
                                                
                                                
                                                14,585Total
      assets
                                                
                                                $
                                                1,390,938
                                                
                                                
                                                $
                                                1,127,702Liabilities
      and stockholders’ equityCurrent
      liabilitiesCurrent
      maturities of long-term debt
                                                
                                                $
                                                31,746
                                                
                                                
                                                $
                                                32,116Bank
      line of credit
                                                
                                                
                                                4,940
                                                
                                                
                                                
                                                8,275Credit
      facility
                                                
                                                
                                                90,000
                                                
                                                
                                                
                                                -Senior
      convertible notes
                                                
                                                
                                                100,054
                                                
                                                
                                                
                                                10,754Pre-delivery
      payment facility
                                                
                                                
                                                -
                                                
                                                
                                                
                                                4,075Accounts
      payable
                                                
                                                
                                                27,099
                                                
                                                
                                                
                                                30,431Deferred
      revenue
                                                
                                                
                                                24,218
                                                
                                                
                                                
                                                23,851Accrued
      expenses and other current liabilities
                                                
                                                
                                                54,358
                                                
                                                
                                                
                                                74,669Total
      current liabilities
                                                
                                                
                                                332,415
                                                
                                                
                                                
                                                184,171Senior
      convertible notes
                                                
                                                
                                                -
                                                
                                                
                                                
                                                97,683Noncurrent
      pre-delivery payment facility
                                                
                                                
                                                4,910
                                                
                                                
                                                
                                                -Long-term
      debt, less current maturities
                                                
                                                
                                                481,613
                                                
                                                
                                                
                                                502,741Credit
      facility
                                                
                                                
                                                -
                                                
                                                
                                                
                                                90,000Deferred
      revenue, net of current portion
                                                
                                                
                                                188,582
                                                
                                                
                                                
                                                192,191Other
      liabilities
                                                
                                                
                                                306,717
                                                
                                                
                                                
                                                5,182Commitments
      and contingenciesStockholders’
      equityCommon
      stock, $0.01 par value; 40,000,000 shares authorized;
                                                  22,792,426
      and 22,514,782 shares issued, respectively
                                                
                                                
                                                228
                                                
                                                
                                                
                                                225Treasury
      stock, at cost, 4,450,092 shares
                                                
                                                
                                                (68,152
                                                )
                                                
                                                
                                                (68,152
                                                )Additional
      paid-in capital
                                                
                                                
                                                120,295
                                                
                                                
                                                
                                                119,610Accumulated
      other comprehensive loss
                                                
                                                
                                                (15,736
                                                )
                                                
                                                
                                                (17,172
                                                )Retained
      earnings
                                                
                                                
                                                40,066
                                                
                                                
                                                
                                                21,223Total
      stockholders’ equity
                                                
                                                
                                                76,701
                                                
                                                
                                                
                                                55,734Total
      liabilities and stockholders’ equity
                                                
                                                $
                                                1,390,938
                                                
                                                
                                                $
                                                1,127,702




The
accompanying notes are an integral part of these condensed consolidated
financial statements.


4


Pinnacle
Airlines Corp.


Condensed Consolidated Statements of Cash Flows
(Unaudited)


(in
thousands)





Three
      Months Ended March 31,2009
                                        
                                        
                                        2008Operating
      activities
                                        
                                        
                                        
                                        
                                        (Restated)Net
      income
                                        
                                        $
                                        18,843
                                        
                                        
                                        $
                                        1,236Adjustments
      to reconcile net income to cash provided by operating
      activities:Depreciation
      and amortization
                                        
                                        
                                        10,136
                                        
                                        
                                        
                                        4,934Loss
      on ineffective portion of derivative
                                        
                                        
                                        1,424
                                        
                                        
                                        
                                        -Interest
      accretion, net
                                        
                                        
                                        1,935
                                        
                                        
                                        
                                        2,310Gain
      on debt extinguishment
                                        
                                        
                                        (1,861
                                        )
                                        
                                        
                                        -Excess
      of insurance proceeds over cost basis of aircraft
                                        
                                        
                                        (842
                                        )
                                        
                                        
                                        -Deferred
      income taxes
                                        
                                        
                                        14,398
                                        
                                        
                                        
                                        20,126Recognition
      of deferred revenue
                                        
                                        
                                        (5,800
                                        )
                                        
                                        
                                        (6,280
                                        )Other
                                        
                                        
                                        1,568
                                        
                                        
                                        
                                        1,535Changes
      in operating assets and liabilities:Restricted
      cash
                                        
                                        
                                        (3,171
                                        )
                                        
                                        
                                        295Receivables
                                        
                                        
                                        2,529
                                        
                                        
                                        
                                        (2,059
                                        )Prepaid
      expenses and other assets
                                        
                                        
                                        (4,503
                                        )
                                        
                                        
                                        (1,491
                                        )Insurance
      proceeds
                                        
                                        
                                        2,912
                                        
                                        
                                        
                                        1,606Hedge
      related payments
                                        
                                        
                                        -
                                        
                                        
                                        
                                        (23,878
                                        )Spare
      parts and supplies
                                        
                                        
                                        (1,284
                                        )
                                        
                                        
                                        (2,479
                                        )Income
      taxes receivable
                                        
                                        
                                        (8,765
                                        )
                                        
                                        
                                        (21,366
                                        )Accounts
      payable and accrued expenses
                                        
                                        
                                        (4,743
                                        )
                                        
                                        
                                        7,150Change
      in unrecognized tax benefits and related interest
                                        
                                        
                                        (18,889
                                        )
                                        
                                        
                                        87Increase
      in deferred revenue
                                        
                                        
                                        2,558
                                        
                                        
                                        
                                        1,033Cash
      provided by (used in) operating activities
                                        
                                        
                                        6,445
                                        
                                        
                                        
                                        (17,241
                                        )Investing
      activitiesPurchases
      of property and equipment
                                        
                                        
                                        (1,294
                                        )
                                        
                                        
                                        (8,250
                                        )Insurance
      proceeds related to property and equipment
                                        
                                        
                                        3,576
                                        
                                        
                                        
                                        -Proceeds
      from sales of property and equipment
                                        
                                        
                                        -
                                        
                                        
                                        
                                        137Purchases
      of auction rate securities
                                        
                                        
                                        -
                                        
                                        
                                        
                                        (82,200
                                        )Proceeds
      from auction rate securities redemptions and sales
                                        
                                        
                                        2,700
                                        
                                        
                                        
                                        132,950Cash
      provided by investing activities
                                        
                                        
                                        4,982
                                        
                                        
                                        
                                        42,637Financing
      activitiesProceeds
      from debt
                                        
                                        
                                        526
                                        
                                        
                                        
                                        71,810Payments
      on debt and pre-delivery payment facility
                                        
                                        
                                        (23,272
                                        )
                                        
                                        
                                        (25,996
                                        )Purchase
      of Series A Preferred Share
                                        
                                        
                                        -
                                        
                                        
                                        
                                        (20,000
                                        )Other
      financing activities
                                        
                                        
                                        (527
                                        )
                                        
                                        
                                        (1,111
                                        )Cash
      (used in) provided by financing activities
                                        
                                        
                                        (23,273
                                        )
                                        
                                        
                                        24,703Net
      (decrease) increase in cash and cash equivalents
                                        
                                        
                                        (11,846
                                        )
                                        
                                        
                                        50,099Cash
      and cash equivalents at beginning of period
                                        
                                        
                                        69,469
                                        
                                        
                                        
                                        26,785Cash
      and cash equivalents at end of period
                                        
                                        $
                                        57,623
                                        
                                        
                                        $
                                        76,884Noncash
      investing and financing activitiesProperty
      and equipment acquired through the issuance of debt
                                        
                                        $
                                        4,910
                                        
                                        
                                        $
                                        156,313Debt
      retired with insurance proceeds
                                        
                                        
                                        15,424
                                        
                                        
                                        
                                        -Unrealized
      loss on auction rate securities
                                        
                                        
                                        -
                                        
                                        
                                        
                                        9,955Mark-to-market
      adjustment on derivative instruments
                                        
                                        
                                        -
                                        
                                        
                                        
                                        351Other
      noncash investing and financing activities
                                        
                                        
                                        -
                                        
                                        
                                        
                                        2,590





The
accompanying notes are an integral part of these condensed consolidated
financial statements.




5
 Pinnacle
Airlines Corp.
 Notes
to Condensed Consolidated Financial Statements
 (all
amounts in thousands, except per share data)





NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
INDEX





1.    Description of Business
            7.    Earnings Per Share2.    Liquidity Discussion
            8.    Share-Based Compensation3.Code-share Agreements with Partners
            9.    Income Taxes4.    Borrowings
            10.  Investments5.Derivatives
            11.  Commitments and Contingencies6.    Comprehensive Income (Loss)
            12.  Segment
Reporting





1.  Description of Business and Basis of
Presentation





Pinnacle
Airlines Corp. and its wholly owned subsidiaries, Pinnacle Airlines, Inc. and
Colgan Air, Inc., are collectively referred to in this report as the “Company,”
except as otherwise noted.  The Company’s subsidiaries will be
referred to as “Pinnacle” for Pinnacle Airlines, Inc. and “Colgan” for Colgan
Air, Inc.





Pinnacle
operates an all-regional jet fleet providing regional airline capacity to Delta
Air Lines, Inc. (“Delta”) at its hub airports in Atlanta, Detroit, Memphis, and
Minneapolis/St. Paul.  At March 31, 2009, Pinnacle operated 124
Canadair Regional Jet (“CRJ”)-200 aircraft under Delta brands with approximately
666 daily departures to 109 cities in 32 states, the District of Columbia and
three Canadian provinces.  Pinnacle also operated a fleet of 16
CRJ-900 aircraft as a Delta Connection carrier with approximately 86 daily
departures to 39 cities in 19 states, the District of Columbia, Belize, Mexico
and the U.S. Virgin Islands.





Colgan
operates an all-turboprop fleet under a regional airline capacity purchase
agreement with Continental Airlines, Inc. (“Continental”), and also under
revenue pro-rate agreements with Continental, United Air Lines, Inc. (“United”)
and US Airways Group, Inc. (“US Airways”).  Colgan’s operations, which
include 14 Q400 and 34 Saab aircraft, are focused primarily in the northeastern
United States and in Texas.  As of March 31, 2009, Colgan offered
within its pro-rate operations 214 daily departures to 40 destinations in ten
states and the District of Columbia. Colgan operated 13 Saab 340 aircraft as
Continental Connection from Continental’s hub airport in Houston, ten Saab 340
aircraft as United Express at Washington/Dulles, and 11 Saab 340 aircraft as US
Airways Express, with hub locations at New York/LaGuardia and Boston, under
revenue pro-rate agreements. Colgan operated 14 Q400 aircraft under a capacity
purchase agreement with Continental, providing 82 daily departures to 20 cities
in 13 states, the District of Columbia and two Canadian provinces at the
Continental global hub at Newark/Liberty International Airport.





These
interim financial statements of the Company have been prepared in accordance
with accounting principles generally accepted in the United States, the
instructions to Quarterly Report on Form 10-Q and Rule 10-01 of Regulation S-X,
and should be read in conjunction with the Company’s Annual Report on Form 10-K
for the year ended December 31, 2008.





In the
opinion of management, the accompanying unaudited condensed consolidated
financial statements reflect all adjustments (including normal recurring
adjustments) necessary to present fairly the Company's financial position, the
results of its operations and its cash flows for the periods
indicated.  Operating results for the periods presented are not
necessarily indicative of the results that may be expected for the year ended
December 31, 2009.





All
amounts contained in the notes to the condensed consolidated financial
statements are presented in thousands, with the exception of years, per share
amounts and number of aircraft.  Certain reclassifications have been
made to conform prior year financial information to the current period
presentation.  In addition, certain prior period amounts have been
restated to conform with the provisions of the newly adopted Financial
Accounting Standards Board Staff Position No. APB 14-1, Accounting for Convertible Debt
Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash
Settlement) (the "FSP").  See Note 4 for further discussion of
the FSP.


6
 Pinnacle
Airlines Corp.
 Notes
to Condensed Consolidated Financial Statements
 (all
amounts in thousands, except per share data)


2.  Liquidity Discussion





As
discussed in greater detail in Note 4, the Company has outstanding $109,000 of
its 3.25% senior convertible notes (“the Notes) with a final maturity date in
February 2025.  However, the holders of the outstanding Notes may
contractually tender them to the Company on February 15, 2010 (the “Put Date”)
for a cash payment equal to the $109,000 par amount.  The Company may
purchase additional Notes during 2009 if market conditions and the Company’s
resources allow.  The Company does not currently believe that it will have
sufficient cash resources to fully repay this obligation in February 2010
without raising additional capital.





The
Company owns $131,000 par amount of auction rate securities
(“ARS”).  Due to unprecedented events in the credit markets during
2008, these investments became illiquid and suffered a decline in fair
value.  In reaction to the failure of the ARS market, the bank that
structured and sold the Company the portfolio of ARS provided a $90,000
short-term credit facility (the “Credit Facility”), which currently expires in
January 2010 and is collateralized by the Company’s ARS portfolio.  The
Company is in discussions with this bank to obtain additional capital.
 Such discussions include potential resolution of the situation by selling
its ARS portfolio to the bank in exchange for a release of potential legal
liability related to the failure of the ARS market, or an increase in the amount
of funds available under the Credit Facility.





In
addition to obtaining additional capital from the bank that structured and sold
the ARS portfolio, the Company is in negotiations with a lender to execute a
term loan secured by its spare parts and rotable aircraft parts.  This
aircraft parts term loan and the potential to obtain additional capital
associated with the ARS portfolio will assist the Company in its efforts to
increase its cash balances prior to the Put Date for the Notes, although no
assurance can be given that the Company will successfully complete either
capital raising initiative.  For additional information regarding the
Company’s liquidity, please refer to Management’s Discussion and Analysis
included in Item 2 of this Form 10-Q.





3.  Code-Share Agreements with Partners





The
Company’s operating contracts fall under two categories: capacity purchase
agreements and revenue pro-rate agreements.  The following is a
summary of the percentage of regional airline services revenue attributable to
each contract type and code-share partner for the three months ended March 31,
2009.





Three
      Months Ended March 31, 2009Percentage
      of Regional Airline Services RevenueSource
      of Revenue
                                                      
                                                      
                                                      Capacity
      Purchase Agreements
                                                      
                                                      
                                                      Pro-Rate
      Agreements
                                                      
                                                      
                                                      TotalDelta
                                                      
                                                      
                                                      
                                                      75
                                                      %
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      75
                                                      %Continental
                                                      
                                                      
                                                      
                                                      9
                                                      %
                                                      
                                                      
                                                      7
                                                      %
                                                      
                                                      
                                                      16
                                                      %US
      Airways
                                                      
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      3
                                                      %
                                                      
                                                      
                                                      3
                                                      %United
                                                      
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      4
                                                      %
                                                      
                                                      
                                                      4
                                                      %Essential
      Air Service
                                                      
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      2
                                                      %
                                                      
                                                      
                                                      2
                                                      %Total
                                                      
                                                      
                                                      
                                                      84
                                                      %
                                                      
                                                      
                                                      16
                                                      %
                                                      
                                                      
                                                      100
                                                      %





Recent
Developments





In
January 2009, the Company amended its capacity purchase agreement with
Continental to operate an additional 15 Q400 aircraft. These additional aircraft
will be placed into service for Continental beginning in September 2010. The
aircraft have scheduled delivery dates from August 2010 through April
2011.


7
 Pinnacle
Airlines Corp.
 Notes
to Condensed Consolidated Financial Statements
 (all
amounts in thousands, except per share data)


4.  Borrowings





Senior
Convertible Notes





In
February 2005, the Company completed the private placement of $121,000 principal
amount of 3.25% senior convertible notes due February 15, 2025 (the
"Notes").  If certain conditions are met, the Notes are convertible
into a combination of cash and common stock equivalent to the value of 75.6475
shares of the Company’s common stock per $1 par amount of Notes, or a conversion
price of $13.22 per share.





Beginning
on February 15, 2010, the Company may redeem the Notes for cash, in whole or in
part at any time or from time to time.  The Company will give not less
than 30 days’ or more than 60 days’ notice of redemption by mail to holders of
the Notes.  If the Company elects to redeem the Notes, it will pay a
redemption price equal to 100% of the principal amount of the Notes to be
redeemed, plus accrued and unpaid interest to the redemption date. The holders
of the Notes may require the Company to purchase all or a portion of their Notes
for cash on February 15, 2010, February 15, 2015 and February 15, 2020 at a
purchase price equal to 100% of their principal amount plus accrued and unpaid
interest, if any.  As a result, the entire obligation is shown as a
current liability in the Company’s condensed consolidated balance sheet as of
March 31, 2009.





New
Accounting Standard





In May
2008, the FASB affirmed Staff Position No. APB 14-1, Accounting for Convertible Debt
Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash
Settlement) (the "FSP"), which became effective for and was adopted by
the Company beginning January 1, 2009.  The FSP changes the accounting
for convertible debt instruments that may be settled in cash (including partial
cash settlement) upon conversion.  The FSP requires issuers to account
separately for the liability and equity components of certain convertible debt
instruments in a manner that reflects the issuer's nonconvertible debt
(unsecured debt) borrowing rate when interest cost is recognized.  The
FSP requires bifurcation of the value of the convertible instrument upon its
issuance into the component that represented debt and the component that
represented the imbedded equity option.  The value of the imbedded
equity option is reclassified to additional paid in capital.  The
resulting discount on the par amount of the debt is recognized as interest
expense in the Company’s consolidated statement of operations over the expected
term of the debt.





The FSP
requires retrospective application to the terms of instruments as they existed
for all periods presented.  The cumulative effect of the changes in
accounting principle on periods prior to those presented is recognized as of the
beginning of the first period presented with an offsetting adjustment made to
the opening balance of retained earnings for that period.  As a
result, the Company recorded a $12,565 reduction to the January 1, 2008 balance
of retained earnings to apply the provisions of the FSP from the February 15,
2005 issuance date of the Notes.





The
Company estimated the fair value of the Notes, as of the date of
issuance.  The difference between the fair value and the principal
amounts of the Notes was $44,046.  This amount was retrospectively
applied to the Company’s financial statements from the issuance date, and was
retrospectively recorded as a debt discount and as an increase to additional
paid-in capital, net of tax.  The discount is being amortized over the
expected five-year life of the Notes resulting in an increase to interest
expense in historical and future periods.


8
 Pinnacle
Airlines Corp.
 Notes
to Condensed Consolidated Financial Statements
 (all
amounts in thousands, except per share data)


4.  Borrowings
(continued)





The
following reconciles the Company’s consolidated statement of operations for the
three months ended March 31, 2008 and its condensed consolidated balance sheet
as of December 31, 2008, as originally reported to the restated statements
contained in these financial statements.





Three
      Months Ended March 31, 2008As
      Reported
                                                          
                                                          
                                                          Adjustments
                                                          
                                                          
                                                          RestatedOperating
      income
                                                          
                                                          $
                                                          6,785
                                                          
                                                          
                                                          $
                                                          -
                                                          
                                                          
                                                          $
                                                          6,785Nonoperating
      (expense) incomeInterest
      income
                                                          
                                                          
                                                          2,314
                                                          
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          2,314Interest
      expense
                                                          
                                                          
                                                          (4,847
                                                          )
                                                          
                                                          
                                                          (2,349
                                                          )
                                                          
                                                          
                                                          (7,196
                                                          )Miscellaneous
      expense
                                                          
                                                          
                                                          (174
                                                          )
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          (174
                                                          )Total
      nonoperating expense
                                                          
                                                          
                                                          (2,707
                                                          )
                                                          
                                                          
                                                          (2,349
                                                          )
                                                          
                                                          
                                                          (5,056
                                                          )Income
      before income taxes
                                                          
                                                          
                                                          4,078
                                                          
                                                          
                                                          
                                                          (2,349
                                                          )
                                                          
                                                          
                                                          1,729Income
      tax expense
                                                          
                                                          
                                                          (1,425
                                                          )
                                                          
                                                          
                                                          932
                                                          
                                                          
                                                          
                                                          (493
                                                          )Net
      income
                                                          
                                                          $
                                                          2,653
                                                          
                                                          
                                                          $
                                                          (1,417
                                                          )
                                                          
                                                          $
                                                          1,236Basic
      and diluted earnings per share
                                                          
                                                          $
                                                          0.15
                                                          
                                                          
                                                          $
                                                          (0.08
                                                          )
                                                          
                                                          $
                                                          0.07





As
      of December 31, 2008As
      Reported
                                  
                                  
                                  Adjustments
                                  
                                  
                                  RestatedCurrent
      deferred tax asset
                                  
                                  $
                                  14,338
                                  
                                  
                                  $
                                  (430
                                  )
                                  
                                  $
                                  13,908Total
      current assets
                                  
                                  
                                  180,012
                                  
                                  
                                  
                                  (430
                                  )
                                  
                                  
                                  179,582Net
      property and equipment
                                  
                                  
                                  717,971
                                  
                                  
                                  
                                  1,959
                                  
                                  
                                  
                                  719,930Noncurrent
      deferred tax asset
                                  
                                  
                                  45,004
                                  
                                  
                                  
                                  (4,157
                                  )
                                  
                                  
                                  40,847Debt
      issuance costs, net
                                  
                                  
                                  6,505
                                  
                                  
                                  
                                  (2,794
                                  )
                                  
                                  
                                  3,711Total
      assets
                                  
                                  
                                  1,133,122
                                  
                                  
                                  
                                  (5,420
                                  )
                                  
                                  
                                  1,127,702Senior
      convertible notes
                                  
                                  
                                  121,000
                                  
                                  
                                  
                                  (12,563
                                  )
                                  
                                  
                                  108,437Additional
      paid-in capital
                                  
                                  
                                  93,812
                                  
                                  
                                  
                                  25,798
                                  
                                  
                                  
                                  119,610Retained
      earnings
                                  
                                  
                                  39,878
                                  
                                  
                                  
                                  (18,655
                                  )
                                  
                                  
                                  21,223Total
      liabilities and stockholders’ equity
                                  
                                  $
                                  1,133,122
                                  
                                  
                                  $
                                  (5,420
                                  )
                                  
                                  $
                                  1,127,702





In
January 2009, the Company repurchased $12,000 par value of the Notes for $8,870
plus accrued and unpaid interest.  The book value of that portion of
the Notes at the time of the repurchase was $10,801.  As a result, the
Company recorded a gain on debt extinguishment of $1,931 during the three months
ended March 31, 2009.





As a
result of the adoption of the FSP, interest expense increased by $2,512 for the
three months ended March 31, 2009.  Income before income taxes, net
income and EPS decreased by $2,512, $1,519, and $0.08, respectively, for the
three months ended March 31, 2009.





The
unamortized discount of the liability component was $8,946 and $12,563 at March
31, 2009 and December 31, 2008, respectively.  This discount will be
amortized through February 15, 2010.





The
following table provides additional information about the Company’s
Notes:





Three
      Months Ended March 31,2009
                            
                            
                            2008Effective
      interest rate on liability component
                            
                            
                            13.5
                            %
                            
                            
                            13.5
                            %Interest
      cost recognized as amortization of the discount of liability
      component
                            
                            
                            2,418
                            
                            
                            
                            2,310Cash
      interest cost recognized (coupon interest)
                            
                            
                            892
                            
                            
                            
                            983


9
 Pinnacle
Airlines Corp.
 Notes
to Condensed Consolidated Financial Statements
 (all
amounts in thousands, except per share data)


4.  Borrowings
(continued)





Credit
Facility





In March
2008, the Company entered into a revolving term loan (the “Credit Facility”)
with Citigroup Global Markets, Inc. (“Citigroup”).  The Credit
Facility provided for advances up to $60,000 and is collateralized by the par
value of the Company’s ARS. The Company amended the Credit Facility in June
2008, with the primary purpose of increasing the eligible amount for borrowing
from $60,000 to $80,000, and again in November 2008 to increase the eligible
amount for borrowing from $80,000 to $90,000.  The agreement allowed
up to $80,000 of the proceeds to be used to support the Company’s aircraft
purchases and for general working capital purposes.  The remaining
$10,000 was restricted for use to retire other outstanding debt, which the
Company used to repurchase $12,000 par value of the Notes in January 2009 and to
repay a portion of its pre-delivery deposit financing facility debt as aircraft
delivered in December.  The Credit Facility is pre-payable at any time
prior to maturity in January 2010.  The first $80,000 of the Credit
Facility carries an interest rate indexed to LIBOR, which was 2.5% as of March
31, 2009.  The additional $10,000 carries an interest rate that is
indexed to the Federal Funds Rate and was 2.7% at March 31, 2009.  As
of March 31, 2009, the balance outstanding was $90,000. The Credit Facility
includes both covenant and margin requirements, including a loan-to-par value
ratio, a loan-to-fair value ratio, and a net worth
test.  Additionally, the Credit Facility includes a cross-default
provision related to other indebtedness of the Company in excess of
$5,000.  The Company is in compliance with these
covenants.





Line
of Credit





The
Company maintained a revolving line of credit with an institutional lender for a
principal amount not to exceed $8,500 or 75% of the net unpaid balance of
Colgan’s eligible accounts receivable.  This instrument had an
interest rate of Prime plus 0.25%, which was 3.50% as of March 31,
2009.  Amounts outstanding under the line of credit were $4,940 at
March 31, 2009.  The line of credit expired on April 15, 2009, and the
outstanding balance was paid in full.





Long-Term
Notes Payable





Included
in long-term notes payable are borrowings from Export Development Canada (“EDC”)
for owned aircraft.  The borrowings are collateralized by the Company’s
fleet of CRJ-900 and Q400 aircraft and bear interest rates ranging between 3.5%
and 8.6% with maturities through the fourth quarter of 2023.  As of
March 31, 2009, amounts outstanding were $492,262.





As
discussed in Note 11, one of the Company’s Q400 aircraft was destroyed in an
accident on February 12, 2009.  The insurance proceeds were used to
retire the related debt of approximately $15,400 during the three months ended
March 31, 2009.





As
previously discussed, on January 13, 2009, the Company amended its Continental
CPA to operate an additional 15 Q400 aircraft.  The aircraft have
scheduled delivery dates from August 2010 through April
2011.  Immediately thereafter, the Company executed a new pre-delivery
payment financing facility with EDC for up to $35,600 on substantially similar
terms to its other pre-delivery payment facilities.  This instrument
has an interest rate indexed to LIBOR, which was 4.13% as of March 31,
2009.   As of March 31, 2009, amounts outstanding under this
facility were $4,910, and were classified as long-term.


10
 Pinnacle
Airlines Corp.
 Notes
to Condensed Consolidated Financial Statements
 (all
amounts in thousands, except per share data)


5.  Derivatives





As of
March 31, 2009 and December 31, 2008, the Company had no outstanding interest
rate derivatives that were designated as cash flow hedges of interest rate
risk.  The tables below present the effect of the Company’s derivative
financial instruments on the condensed consolidated statements of operations for
the three months ended March 31:





For
      the Three
                                          Months
      Ended
                                          March
      31,
                                        
                                        Amount
      of Loss Reclassified
                                          from
      OCI into Income
                                          (Effective Portion)(2)
                                        
                                        
                                        Amount
      of Loss Recognized
                                          in
      Income on Derivative (Ineffective Portion and Amount Excluded from
      Effectiveness Testing)2009
                                        
                                        $
                                        (816
                                        )
                                        
                                        $
                                        (1,424
                                        )(1)2008
                                        
                                        $
                                        (198
                                        )
                                        
                                        $
                                        -


(1)
                              This
      charge is related to the debt that financed the Q400 aircraft that was
      destroyed in an accident during the three months ended March 31,
      2009.  The associated debt was repaid during the first quarter
      of 2009.  This loss is included in miscellaneous nonoperating
      expense in the Company’s condensed consolidated statement of operations
      for the three months ended March 31, 2009.(2)
                              Derivatives
      classified as cash flow hedges include interest rate
      swaps.  Amounts reclassified from OCI into income are recorded
      in interest expense within the Company’s condensed consolidated statements
      of
operations.





The
losses from settled interest rates swaps recorded in other comprehensive income
(“OCI”), net of tax and amortization, within the condensed consolidated balance
sheets were $16,309 and $17,752 as of March 31, 2009 and December 31, 2008,
respectively.  Included in the above total net realized losses from
interest rate swaps as of March 31, 2009, are $3,079 in net unrealized losses
that are expected to be amortized into earnings during the 12 months following
March 31, 2009.





6.  Comprehensive Income (Loss)





The
components of comprehensive income (loss), net of related taxes, for the three
months ended March 31, 2009 and 2008 are as follows:




Three
      Months Ended March 31,2009
                                      
                                      
                                      2008(Restated)Net
      income
                                      
                                      $
                                      18,843
                                      
                                      
                                      $
                                      1,236Adjustments:Retired
      Pilots’ Insurance Benefit Plan unrealized actuarial gain
                                      
                                      
                                      (6
                                      )
                                      
                                      
                                      (7
                                      )Change
      in cash flow hedge unrealized loss
                                      
                                      
                                      1,442
                                      
                                      
                                      
                                      (10,267
                                      )Unrealized
      loss on investments
                                      
                                      
                                      -
                                      
                                      
                                      
                                      (6,002
                                      )Total
      comprehensive income (loss)
                                      
                                      $
                                      20,279
                                      
                                      
                                      $
                                      (15,040
                                      )




11
 Pinnacle
Airlines Corp.
 Notes
to Condensed Consolidated Financial Statements
 (all
amounts in thousands, except per share data)


7.  Earnings Per Share





The
following table sets forth the computation of basic and diluted earnings per
share:





Three
      Months Ended March 31,2009
                            
                            
                            2008(Restated)Net
      income
                            
                            $
                            18,843
                            
                            
                            $
                            1,236Basic
      earnings per share
                            
                            $
                            1.05
                            
                            
                            $
                            0.07Diluted
      earnings per share
                            
                            $
                            1.05
                            
                            
                            $
                            0.07Share
      computation:Weighted
      average number of shares outstanding for basic earnings per
      share
                            
                            
                            17,970
                            
                            
                            
                            17,859Senior
      convertible notes
                            
                            
                            -
                            
                            
                            
                            -Share-based
      compensation (1)
                            
                            
                            -
                            
                            
                            
                            80Weighted
      average number of shares outstanding for diluted earnings per
      share
                            
                            
                            17,970
                            
                            
                            
                            17,939





(1)
              Options
      to purchase 1,631 and 918 shares of common stock were excluded from the
      diluted EPS calculation atMarch
      31, 2009 and 2008, respectively, because their effect would be
      anti-dilutive.





8.  Share-Based Compensation





In
January 2009, the Company granted 626 stock options with an exercise price of
$2.65 per share to members of its Board of Directors, its officers and certain
other employees.  These grants will vest ratably over three
years.  Total expense to be recognized over the vesting period, net of
expected annual forfeitures of 4%, is $834. The following table presents the
assumptions used and fair value for the 2009 equity grant:





2009Expected
      price volatility
                        
                        
                        58.3
                        %Risk-free
      interest rate
                        
                        
                        1.4
                        %Expected
      lives (years)
                        
                        
                        5.0Dividend
      yield
                        
                        
                        0.0
                        %Expected
      annual forfeiture rate
                        
                        
                        4.0
                        %Exercise
      price of option grants
                        
                        $
                        2.65Fair
      value of option grants
                        
                        $
                        1.33





In
January 2009, the Company awarded 278 shares of restricted stock to certain
officers and members of the Board of Directors.  Using the
straight-line method, the fair value of $738 is being expensed ratably over the
three-year vesting period.  The grant date fair value of these shares
was $2.65 per share, which was the closing stock price on the date of
grant.





During
the three months ended March 31, 2009 and 2008, the Company recognized $778 and
$756 of share-based compensation expense, respectively.


12
 Pinnacle
Airlines Corp.
 Notes
to Condensed Consolidated Financial Statements
 (all
amounts in thousands, except per share data)


8.  Share-Based
Compensation (continued)





The
following table provides certain information with respect to the Company’s stock
options:





Stock
      OptionsShares
                            
                            
                            Weighted
      Average Exercise Price
                            
                            
                            Fair Value
                            
                            Weighted
      Average
                              Remaining
      Life
                            
                            Aggregate
      Intrinsic ValueOutstanding
      at January 1, 2009
                            
                            
                            1,106
                            
                            
                            $
                            13.09
                            
                            
                            $
                            7,944Granted
                            
                            
                            626
                            
                            
                            
                            2.65
                            
                            
                            
                            834Exercised
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -Expired
                            
                            
                            (5
                            )
                            
                            
                            11.59
                            
                            
                            
                            (32
                            )Forfeited
                            
                            
                            (1
                            )
                            
                            
                            15.17
                            
                            
                            
                            (7
                            )Outstanding
      at March 31, 2009
                            
                            
                            1,726
                            
                            
                            $
                            9.31
                            
                            
                            $
                            8,739
                            
                            7.7
      years
                            
                            $
                            -Options
      exercisable at March 31, 2009
                            
                            
                            860
                            
                            
                            $
                            12.58
                            
                            
                            $
                            6,175
                            
                            6.0
      years
                            
                            $
                            -





The
following table provides certain information with respect to the Company’s
restricted stock:





Restricted
      StockShares
                              
                              
                              Fair ValueUnvested
      at January 1, 2009
                              
                              
                              197
                              
                              
                              $
                              2,599Granted
                              
                              
                              278
                              
                              
                              
                              738Vested
                              
                              
                              (102
                              )
                              
                              
                              (679
                              )Forfeited
                              
                              
                              -
                              
                              
                              
                              -Unvested
      at March 31, 2009
                              
                              
                              373
                              
                              
                              $
                              2,658





9. Income Taxes





During
the three months ended March 31, 2009, the Company reached agreement with the
Internal Revenue Service (the “Service”) to resolve certain matters related to
the Service’s examination of the Company’s federal income tax returns for
calendar years 2003, 2004 and 2005.  Previously, the Service had proposed a
number of adjustments to the Company’s returns totaling approximately $35,000 of
additional tax, plus accrued interest and penalties on these proposed
adjustments.





The
Company and the Service have agreed for the Company to pay approximately $3,000
of additional income tax and accrued interest in settlement of all open tax
matters for these years.  With this agreement, the Service has completed
its examination of the Company’s federal tax filings for 2003, 2004 and
2005.  As a result of the completion of this examination, the Company
recorded during the three months ended March 31, 2009 a reduction to income tax
expense of $13,552 and a pre-tax reduction to interest expense of
$2,926.





The
following summarizes the significant components of the Company’s income tax
expense for the periods indicated:




Three
      Months Ended March 31,2009
                                                      
                                                      
                                                      2008
      (Restated)Dollars
                                                      
                                                      
                                                      Percent
                                                      
                                                      
                                                      Dollars
                                                      
                                                      
                                                      PercentIncome
      tax expense at statutory rate
                                                      
                                                      $
                                                      2,957
                                                      
                                                      
                                                      
                                                      35.0
                                                      %
                                                      
                                                      $
                                                      605
                                                      
                                                      
                                                      
                                                      35.0
                                                      %State
      income taxes, net of federal taxes
                                                      
                                                      
                                                      101
                                                      
                                                      
                                                      
                                                      1.2
                                                      %
                                                      
                                                      
                                                      9
                                                      
                                                      
                                                      
                                                      0.5
                                                      %Settlements
                                                      
                                                      
                                                      (13,552
                                                      )
                                                      
                                                      
                                                      (160.4
                                                      )%
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      -Tax-exempt
      income
                                                      
                                                      
                                                      (152
                                                      )
                                                      
                                                      
                                                      (1.8
                                                      )%
                                                      
                                                      
                                                      (198
                                                      )
                                                      
                                                      
                                                      (11.5
                                                      )%Meals
      and entertainment
                                                      
                                                      
                                                      152
                                                      
                                                      
                                                      
                                                      1.8
                                                      %
                                                      
                                                      
                                                      62
                                                      
                                                      
                                                      
                                                      3.6
                                                      %Other
                                                      
                                                      
                                                      100
                                                      
                                                      
                                                      
                                                      1.2
                                                      %
                                                      
                                                      
                                                      15
                                                      
                                                      
                                                      
                                                      0.9
                                                      %Income
      tax (benefit) expense
                                                      
                                                      $
                                                      (10,394
                                                      )
                                                      
                                                      
                                                      (123.0
                                                      )%
                                                      
                                                      $
                                                      493
                                                      
                                                      
                                                      
                                                      28.5
                                                      %


13
 Pinnacle
Airlines Corp.
 Notes
to Condensed Consolidated Financial Statements
 (all
amounts in thousands, except per share data)


9.
Income Taxes (continued)





The
Company provides for interest and penalties accrued related to unrecognized tax
benefits in nonoperating expenses.  As of March 31, 2009 and December
31, 2008, the Company had $766 and $3,692 of accrued interest and penalties,
respectively.





The
following table reconciles the Company’s beginning and ending unrecognized tax
benefits balances:





2009Unrecognized
      tax benefits balance at January 1
                        
                        $
                        16,518Increases/(decreases)
      for prior period positions
                        
                        
                        (1,525
                        )Increases/(decreases)
      for current period positions
                        
                        
                        -Settlements
                        
                        
                        (14,438
                        )Lapses
      of statutes
                        
                        
                        -Unrecognized
      tax benefits balance at March 31
                        
                        $
                        555





The
amount of unrecognized tax benefits that would affect the Company’s effective
tax rate if recognized was $555 as of March 31, 2009.   The tax years
2006 through 2008 remain open to examination by major taxing jurisdictions to
which the Company is subject.





10. Investments





The
Company invests excess cash balances primarily in short-term money market
instruments, short-term marketable debt securities and highly liquid equity
securities.  Investments in marketable securities are classified as
available-for-sale and presented at their estimated fair values based on quoted
market prices for those securities, in accordance with SFAS No. 115, Accounting for Certain Investments
in Debt and Equity Securities.





At March
31, 2009, the Company’s investment portfolio included ARS with fair values of
$114,682, net of recognized losses of $16,318.  The majority of ARS are
issued by U.S. states and political subdivisions of the states and typically
have contractual maturities of more then ten years.  Due to their
current illiquid state and management’s intent to hold the investments until
their fair values recover, the Company classified investments in ARS as
noncurrent assets on the Company’s consolidated balance sheet at March 31,
2009.  All income generated from these securities is earned from
interest and dividends.





Fair
Value Measurements




The
Company’s ARS holdings are required to be measured at fair value on a recurring
basis, in accordance with Statement of Financial Accounting Standard No. 157,
Fair Value
Measurements(“SFAS
157”).  The Company adopted the majority of the provisions of SFAS 157
on January 1, 2008 and fully adopted the standard on January 1,
2009.




Due to events in the credit markets
that predominantly began during the first quarter of 2008, there is no longer an
active trading market for the Company’s ARS holdings.  Therefore, the
fair values of these ARS are estimated utilizing a discounted cash flow analysis
model.  This analysis considers, among other items, the
collateralization underlying the investments, the creditworthiness of the
counterparty, the timing of expected future cash flows, and an estimate of when
the security is expected to have a successful auction or be called by the
issuer.  These securities were also compared, when possible, to other
observable market data with similar characteristics to the securities held by
the Company. Accordingly, since the Company’s initial adoption of SFAS
157 at January 1, 2008, these securities changed from Level 1 to Level 3 within
SFAS 157’s hierarchy.




The
tables below presents the Company’s assets and liabilities measured at fair
value as of March 31, 2009, aggregated by the level in the fair value hierarchy
within which those measurements fall.




Level
      1
                                  
                                  
                                  Level 2
                                  
                                  
                                  Level 3
                                  
                                  
                                  Balance
      at
                                    March
      31, 2009AssetsInvestments
      in ARS
                                  
                                  $
                                  -
                                  
                                  
                                  $
                                  -
                                  
                                  
                                  $
                                  114,682
                                  
                                  
                                  $
                                  114,682


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


10.
Investments (continued)




The
following table presents the Company’s assets and liabilities measured at fair
value on a recurring basis using significant unobservable inputs (Level
3):




AssetAuction
      Rate SecuritiesBalance
      at January 1, 2009
                                        
                                        $
                                        116,900Transfers
      to Level 3
                                        
                                        
                                        -Total
      unrealized gains (losses)Included
      in nonoperating income
                                        
                                        
                                        482Included
      in other comprehensive income (“OCI”)
                                        
                                        
                                        -Redemptions
      (1)
                                        
                                        
                                        (2,700
                                        )Balance
      at March 31, 2009
                                        
                                        $
                                        114,682(1)Partial redemption of securities
      at par by the issuer





11. Commitments and Contingencies





Employees. The Company
operates under several collective bargaining agreements with groups of its
employees.  The collective bargaining agreement between Pinnacle and
the Air Line Pilots Association (“ALPA”) became amendable in April 2005.
Pinnacle has been actively negotiating with ALPA since that time.  In
August 2006, Pinnacle filed for mediation with the National Mediation
Board.  Since then, Pinnacle has met with the federal mediator
assigned to its case and with ALPA, but Pinnacle has not reached resolution on
an amended collective bargaining agreement.  In late 2008, Colgan’s
pilot group elected representation by ALPA.  The Company and ALPA have
not begun discussions or set a time table for discussions on a new collective
bargaining agreement to cover Colgan’s pilot group.





Guarantees and
Indemnifications.  In the Company’s aircraft lease and
financing agreements, including sublease agreements with Delta, the Company
typically indemnifies the prime lessor or lender, financing parties, trustees
acting on their behalf and other related parties against liabilities that arise
from the manufacture, design, ownership, financing, use, operation and
maintenance of the aircraft and for tort liability, whether or not these
liabilities arise out of or relate to the negligence of these indemnified
parties, except for their gross negligence or willful misconduct.





The
Company is party to numerous contracts and real estate leases in which it is
common for it to agree to indemnify third parties for tort liabilities that
arise out of or relate to the subject matter of the contract or occupancy of the
leased premises. In some cases, this indemnity extends to related liabilities
arising from the negligence of the indemnified parties, but usually excludes any
liabilities caused by their gross negligence or willful misconduct.
Additionally, the Company typically indemnifies the lessors and related third
parties for any environmental liability that arises out of or relates to its use
of the leased premises.





The
Company expects that its levels of insurance coverage (subject to deductibles)
would be adequate to cover most tort liabilities and related indemnities
described above with respect to real estate it leases and aircraft it
operates.  The Company does not expect the potential amount of future
payments under the foregoing indemnities and agreements to be
material.





Litigation
Contingencies.Colgan is a defendant in a lawsuit related to
the September 11, 2001 terrorist attacks.  The Company expects that
any adverse outcome from this litigation will be covered by insurance, and
therefore, will have no material adverse effect on the Company’s financial
statements as a whole.


15
 Pinnacle
Airlines Corp.
 Notes
to Condensed Consolidated Financial Statements
 (all
amounts in thousands, except per share data)


11.
Commitments and Contingencies (continued)





On
February 12, 2009, Colgan Flight 3407, operated for Continental under the
Company’s Continental CPA, crashed in a neighborhood near the Buffalo Niagara
International Airport in Buffalo, New York. All 49 people aboard, including 45
passengers and four members of the flight crew, died in the accident.
Additionally, one individual died inside the home destroyed by the aircraft’s
impact, increasing the total fatality count to 50
individuals.  Several lawsuits related to this accident have been
filed against the Company, and additional litigation is
anticipated.  The Company carries aviation risk liability insurance
and believes that this insurance is sufficient to cover any liability arising
from this accident.





The
Company has recorded a related liability of approximately $300,000 in other
non-current liabilities on its condensed consolidated balance sheet at March 31,
2009 related to potential claims associated with this accident.  This
liability is offset in its entirety by a corresponding long-term receivable,
recorded in other assets on the condensed consolidated balance sheet that the
Company expects to receive from insurance carriers as claims are
resolved.  These estimates may be revised as additional information
becomes available.





Disputes with Codeshare
Partners.  The Company is currently engaged in discussions with
Delta involving the interpretation of various components of the CRJ-200
ASA.  If the parties are unable to reach a mutually agreeable
resolution related to these matters, the parties may elect to resolve the issues
through arbitration.  The potential outcome of these disputed matters
ranges from an annual increase in the payments received from Delta of
approximately $2,800 to a decrease in payments received from Delta of as much as
$4,000.  Adverse determinations in these matters could result in a
loss to the Company of up to $12,000 for disputed amounts accruing through March
31, 2009.





12.  Segment Reporting





SFAS No.
131, Disclosures about
Segments of an Enterprise and Related Information, requires disclosures
related to components of a company for which separate financial information is
available to and regularly evaluated by the company’s chief operating decision
maker (“CODM”) when deciding how to allocate resources and in assessing
performance.





The
Company’s two operating segments consist of its two subsidiaries, Pinnacle
Airlines, Inc. (“Pinnacle”) and Colgan Air, Inc.
(“Colgan”).   Corporate overhead costs incurred by Pinnacle
Airlines Corp. are allocated to the operating costs of each
subsidiary.





The
following represents the Company’s segment data for the periods
indicated:





Three
      Months Ended March 31,2009
                                              
                                              
                                              2008(Restated)Operating
      revenues:Pinnacle
                                              
                                              $
                                              155,413
                                              
                                              
                                              $
                                              154,397Colgan
                                              
                                              
                                              52,448
                                              
                                              
                                              
                                              49,944Consolidated
                                              
                                              $
                                              207,861
                                              
                                              
                                              $
                                              204,341Operating
      income (loss):Pinnacle
                                              
                                              $
                                              13,901
                                              
                                              
                                              $
                                              12,331Colgan
                                              
                                              
                                              3,034
                                              
                                              
                                              
                                              (5,546
                                              )Consolidated
                                              
                                              $
                                              16,935
                                              
                                              
                                              $
                                              6,785





16
 Pinnacle
Airlines Corp.
 Notes
to Condensed Consolidated Financial Statements
 (all
amounts in thousands, except per share data)


12.  Segment
Reporting (continued)





The
following represents the Company’s segment assets:





March
      31, 2009
                          
                          
                          December
      31, 2008(Restated)Total
      assets:Pinnacle
                          
                          $
                          579,614
                          
                          
                          $
                          582,176Colgan
                          
                          
                          672,317
                          
                          
                          
                          388,990Unallocated
                          
                          
                          139,007
                          
                          
                          
                          156,536Consolidated
                          
                          $
                          1,390,938
                          
                          
                          $
                          1,127,702





17
 Item
2.  Management’s Discussion and Analysis of Financial Condition and
Results of Operations


Forward-Looking Statements





Certain
statements in this Current Report on Form 10-Q (or otherwise made by or on the
behalf of Pinnacle Airlines Corp.) contain various forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange
Act”) and the Private Securities Litigation Reform Act of 1995.  Such
statements represent management's beliefs and assumptions concerning future
events. When used in this document and in documents incorporated by reference,
forward-looking statements include, without limitation, statements regarding
financial forecasts or projections, our expectations, beliefs, intentions or
future strategies that are signified by the words "expects," "anticipates,"
"intends," "believes" or similar language. These forward-looking statements are
subject to risks, uncertainties and assumptions that could cause our actual
results and the timing of certain events to differ materially from those
expressed in the forward-looking statements. All forward-looking statements
included in this Report are based on information available to us on the date of
this Report. It is routine for our internal projections and expectations to
change as the year or each quarter in the year progress, and therefore it should
be clearly understood that the internal projections, beliefs and assumptions
upon which we base our expectations may change prior to the end of each quarter
or the year. Although these expectations may change, we may not inform you if
they do. Our policy is generally to provide our expectations only once per
quarter, and not to update that information until the next quarter.





Many
important factors, in addition to those discussed in this Report, could cause
our results to differ materially from those expressed in the forward-looking
statements. Some of the potential factors that could affect our results are
described in “Overview and Outlook.”  In light of these risks and
uncertainties, and others not described in this Report, the forward-looking
events discussed in this Report might not occur, might occur at a different
time, or might cause effects of a different magnitude or direction than
presently anticipated.





General





The
following management’s discussion and analysis describes the principal factors
affecting the Company’s results of operations, liquidity, capital resources and
contractual cash obligations.  This discussion should be read in
conjunction with the accompanying unaudited condensed consolidated financial
statements and our Annual Report on Form 10-K for the year ended December 31,
2008 (“Annual Report”), which include additional information about our business
practices, significant accounting policies, risk factors, and the transactions
that underlie our financial results.





Our
website address is www.pncl.com. 
All of our filings with the SEC are available free of charge through our website
as soon as reasonably practicable after we file them with, or furnish them to,
the SEC.





Overview
and Outlook





During
2009, we intend to focus on controlling costs, maintaining our strong
operational reliability at both of our operating subsidiaries, and strengthening
our balance sheet.  The regional airline industry is facing a period
of slower growth and pressure from major airline partners to reduce costs and
potentially reduce some regional airline capacity.  While we do not
expect significant adjustments in our fleet size in 2009, we do expect
significant cost pressure during this period of low
growth.  Specifically, we anticipate higher costs in 2009 resulting
from an expected new collective bargaining agreement with our pilots at
Pinnacle, reduced employee attrition resulting in higher levels of flight crew
staffing, higher health care costs, increased landing fees and facility rental
expense at the airports that we serve, and general inflationary pressure within
the rest of our cost structure.





Further
magnifying the effect of these anticipated cost pressures, we did not receive an
increase in the rates for 2009 that Delta pays us under our CRJ-200
ASA.  The CRJ-200 ASA contains a provision to adjust rates annually
(subject to a cap on the increase and a floor of zero) based on the change in
the Producers Price Index (“PPI”), as published by the United States Department
of Labor, Bureau of Labor Statistics.  The PPI declined from December
2007 to December 2008, resulting in no change to our rates for 2009 under our
CRJ-200 ASA.


18
 Item
2.  Management’s Discussion and Analysis of Financial Condition and
Results of Operations


In
addition, our pro-rate operations are susceptible to changes in passenger demand
and fuel price volatility.  We took a number of steps during 2008 to
eliminate unprofitable markets, reduce costs, and increase revenue in our
remaining pro-rate markets.  These steps and lower fuel prices have
significantly reduced the operating losses of our pro-rate operations, although
our pro-rate operations remained unprofitable during the seasonally weak first
quarter of 2009.  Additionally, the airline industry is experiencing
the effects of the current recessionary environment in the United
States.  Industry passenger revenue declined dramatically during the
first quarter of 2009, and our pro-rate operations were negatively affected by
this drop.  We cannot predict how severely the recessionary
environment will affect us in 2009, but we do expect continued year-over-year
declines in the unit revenue of our pro-rate operations.





To offset
these anticipated negative financial trends during 2009, we have undertaken an
internal initiative to generate a mix of cost savings and additional revenue
opportunities of at least $10.0 million.  We expect to achieve this
objective through a combination of reducing our operating costs, adjusting
capacity in our pro-rate operations to match the demand environment, and
increasing ancillary third-party business such as ground handling.  We
have not yet fully identified the components of this initiative, and there can
be no assurance that we will attain our target of at least $10.0 million in
improvements.  We believe it is critical to reduce our costs not only
to increase our current profitability and improve our liquidity, but to also
remain competitive long term in the regional airline industry.





The
collective bargaining agreement between Pinnacle and the Air Line Pilots
Association (“ALPA”), the union representing Pinnacle’s pilots, has been
amendable since April 2005.  We believe it is of utmost importance to
reach an agreement with ALPA that is consistent with our company-wide philosophy
of industry-average pay and benefits, along with enhanced employee
productivity.  Wage rates for Pinnacle’s pilot group are currently
below industry average, and a new collective bargaining agreement is expected to
contain an increase in pay for Pinnacle’s pilots.  Such increase could
be substantial, and may also include a considerable one-time signing
bonus.  The increase in pay for Pinnacle’s pilots will likely reduce
our profitability in 2009 and in future periods.  In addition,
Colgan’s pilots recently elected representation by ALPA.  We have not
begun discussions or set a timeline with ALPA to commence negotiations of a
collective bargaining agreement covering Colgan’s pilots. While we intend to
vigorously pursue obtaining a fair contract with ALPA at both of our operating
subsidiaries, the timing of the resolution of these matters cannot be
predicted.





Although
we expect 2009 to be a challenging year, we are positioning ourselves for
success in 2010 and beyond.  We recently agreed with Continental to
expand our Continental CPA by adding 15 Q400 aircraft from August 2010 through
April 2011.  We also acquired an additional 15 Q400 options from the
aircraft manufacturer, thereby increasing the total number of our Q400 options
to 30.  These options, if exercised, provide for the delivery of 15
Q400s in 2011 and the remaining 15 in 2013.  The Q400 aircraft has
become a very competitive product within the regional airline
industry.  The purchase price of the Q400 is significantly less than
that of comparably sized regional jets, and the Q400 uses up to 30% less
fuel.  As a result, we can offer our airline partners a large,
passenger-friendly regional aircraft with a lower operating cost than that of
similar regional jets.





In
addition to growing Colgan with the Q400 aircraft, we are positioning ourselves
to capitalize on long-term opportunities to increase the number of regional jets
that we operate at Pinnacle.  Capacity purchase agreements for over
400 50-seat regional jet aircraft at our competitors are set to expire between
2009 and 2015.  While many of these regional jets will likely no
longer operate within the networks of the major U.S. airlines, we believe some
of these contracts will be renewed or offered to other regional airlines and
some will be replaced with larger regional jets.  We intend to
actively compete to obtain profitable regional jet flying during this period of
transition within the industry, and we believe our history of strong operating
performance with a competitive cost structure will position us to
succeed.  Our capacity purchase contracts do not begin to expire until
December 2017.





We own
$131.0 million par amount of auction rate securities (“ARS”).  Due to
unprecedented events in the credit markets during 2008, these investments became
illiquid and suffered a decline in fair value.  In reaction to the
failure of the ARS market, the bank that structured and sold to us our portfolio
of ARS provided us with a $90.0 million short-term credit facility
collateralized by our ARS.  We are in discussions with this bank to
obtain additional capital.  Such discussions include potential
resolution of the situation by selling our ARS portfolio to the bank in exchange
for a release of potential legal liability related to the failure of the ARS
market, or an increase in the amount of funds available under the Credit
Facility.  In the event a resolution is not achieved in the near
future, we may be forced to pursue our legal remedies against the
bank.


19
 Item
2.  Management’s Discussion and Analysis of Financial Condition and
Results of Operations


In
addition to actions noted above to improve our operating income longer term, we
are focused on building our cash balance throughout 2009 in advance of the first
date that holders of our remaining outstanding $109.0 million par amount 3.25%
senior convertible notes (the “Notes”) may contractually require us to repay the
Notes.  Although the Notes have a final maturity date in 2025, holders
of the Notes may tender them to us on February 15, 2010 (the “Put Date”) for a
cash payment equal to the $109.0 million par amount.  We repurchased
$12.0 million par amount of the Notes for approximately $8.9 million in January
2009, resulting in the currently outstanding par amount of $109.0
million.  We may purchase additional Notes during 2009 to the extent
that Notes are offered for sale below par and to the extent that our resources
allow.





While we
anticipate positive cash flow from our operations during 2009, we do not believe
that we will have sufficient cash resources to fully repay this obligation in
February 2010 without raising additional capital.  In addition to
obtaining additional capital from the bank that structured and sold to us our
ARS portfolio, we are in negotiations with a lender to execute a term loan
secured by our expendable and rotable aircraft parts.  We anticipate
executing this transaction during the second quarter of 2009.  This
aircraft parts term loan and the potential to obtain additional capital
associated with our ARS portfolio will assist us in our efforts to increase our
cash balances prior to the Put Date for our Notes, although no assurance can be
given that we will successfully complete either capital raising
initiative.  To the extent that we are not successful in achieving the
cash balance necessary to repay any Notes that are tendered on the Put Date and
maintain our operating liquidity, we may attempt to negotiate with holders of
the Notes to extend the Put Date or otherwise modify the terms of the
Notes.





Results
of Operations





The following represents our results of
operations, by segment and consolidated, for the three months ended March 31,
2009.  A discussion of our results of operations as compared to the
same period in 2008 follows.


Three
      Months Ended March 31, 2009Pinnacle
                          
                          
                          Colgan
                          
                          
                          Consolidated(in
      thousands)Operating
      revenuesRegional
      airline services
                          
                          $
                          153,531
                          
                          
                          $
                          52,393
                          
                          
                          
                          205,924Other
                          
                          
                          1,882
                          
                          
                          
                          55
                          
                          
                          
                          1,937Total
      operating revenues
                          
                          
                          155,413
                          
                          
                          
                          52,448
                          
                          
                          
                          207,861Operating
      expensesSalaries,
      wages and benefits
                          
                          
                          42,937
                          
                          
                          
                          13,903
                          
                          
                          
                          56,840Aircraft
      rentals
                          
                          
                          29,157
                          
                          
                          
                          1,335
                          
                          
                          
                          30,492Ground
      handling services
                          
                          
                          23,153
                          
                          
                          
                          3,348
                          
                          
                          
                          26,501Aircraft
      maintenance, materials and repairs
                          
                          
                          14,390
                          
                          
                          
                          10,299
                          
                          
                          
                          24,689Other
      rentals and landing fees
                          
                          
                          13,556
                          
                          
                          
                          4,847
                          
                          
                          
                          18,403Aircraft
      fuel
                          
                          
                          -
                          
                          
                          
                          4,517
                          
                          
                          
                          4,517Commissions
      and passenger related expense
                          
                          
                          1,212
                          
                          
                          
                          3,615
                          
                          
                          
                          4,827Depreciation
      and amortization
                          
                          
                          4,815
                          
                          
                          
                          3,766
                          
                          
                          
                          8,581Other
                          
                          
                          12,292
                          
                          
                          
                          3,337
                          
                          
                          
                          15,629Aircraft
      lease return costs
                          
                          
                          -
                          
                          
                          
                          447
                          
                          
                          
                          447Total
      operating expenses
                          
                          
                          141,512
                          
                          
                          
                          49,414
                          
                          
                          
                          190,926Operating
      income
                          
                          
                          13,901
                          
                          
                          
                          3,034
                          
                          
                          
                          16,935Operating
      margin
                          
                          
                          8.9
                          %
                          
                          
                          5.8
                          %
                          
                          
                          8.1
                          %Nonoperating
      income (expense)Interest
      income
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          906Interest
      expense
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          (9,793
                          )Miscellaneous
      income, net
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          401Total
      nonoperating expense
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          (8,486
                          )Income
      before income taxes
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          8,449Income
      tax benefit
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          10,394Net
      income
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          $
                          18,843


20
 Item
2.  Management’s Discussion and Analysis of Financial Condition and
Results of Operations





The
following discussion provides an analysis of our results of operations and
reasons for material changes therein for the three months ended March 31, 2009
compared to the same period in 2008.  As discussed in Note 4 in Item 1
of this Form 10-Q, certain prior year amounts have been restated to comply with
the provisions of the newly adopted Financial Accounting Standards Board Staff
Position No. APB 14-1, Accounting for Convertible Debt
Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash
Settlement) (the "FSP").





Consolidated and Segmented
Results of Operations





Consolidated


Three
      Months Ended March 31,2009
                                    
                                    
                                    2008
                                    
                                    
                                    $
      Change
                                    
                                    
                                    %
      Change(Restated)(in
      thousands)Total
      operating revenue
                                    
                                    $
                                    207,861
                                    
                                    
                                    $
                                    204,341
                                    
                                    
                                    $
                                    3,520
                                    
                                    
                                    
                                    2
                                    %Total
      operating expenses
                                    
                                    
                                    190,926
                                    
                                    
                                    
                                    197,556
                                    
                                    
                                    
                                    (6,630
                                    )
                                    
                                    
                                    (3
                                    )%Operating
      income
                                    
                                    
                                    16,935
                                    
                                    
                                    
                                    6,785
                                    
                                    
                                    
                                    10,150
                                    
                                    
                                    
                                    150
                                    %Operating
      margin
                                    
                                    
                                    8.1
                                    %
                                    
                                    
                                    3.3
                                    %
                                    
                                    4.8
                                    pts.Total
      nonoperating expense
                                    
                                    
                                    (8,486
                                    )
                                    
                                    
                                    (5,056
                                    )
                                    
                                    
                                    (3,430
                                    )
                                    
                                    
                                    68
                                    %Income
      before income taxes
                                    
                                    
                                    8,449
                                    
                                    
                                    
                                    1,729
                                    
                                    
                                    
                                    6,720
                                    
                                    
                                    
                                    389
                                    %Income
      tax benefit (expense)
                                    
                                    
                                    10,394
                                    
                                    
                                    
                                    (493
                                    )
                                    
                                    
                                    10,887
                                    
                                    
                                    
                                    (2,208
                                    )%Net
      income
                                    
                                    
                                    18,843
                                    
                                    
                                    
                                    1,236
                                    
                                    
                                    
                                    17,607
                                    
                                    
                                    
                                    1,425
                                    %





Several
nonrecurring items affected our results for the three months ended March 31,
2009.  During March 2009, we reached settlement with the IRS regarding
our examination for tax years 2003 through 2005.  As a result, we
recorded a reduction to income tax expense of $13.6 million and a reduction to
interest expense of $2.9 million ($1.8 million net of tax) to reverse the
related reserves previously recorded.  In addition, we recorded a gain
of $1.9 million ($1.1 million net of tax) on the extinguishment of $12.0 million
par amount of our senior convertible notes and a reduction of operating expenses
of $0.8 million ($0.5 million net of tax) related to the excess of property
insurance proceeds received over the cost basis of the aircraft destroyed in
Flight 3407.  These were offset by a $1.4 million ($0.9 million net of
tax) charge to interest expense for the previously unrecognized hedge related
loss for the debt related to the aircraft destroyed in Flight 3407.





Operating
Revenues





Operating
revenue of $207.9 million for the three months ended March 31, 2009 increased
$3.5 million, or 2%, from operating revenues of $204.3 million for the same
period in 2008.  Changes in our capacity purchase related operating
revenue are primarily caused by changes in our operating fleet size and aircraft
utilization.  Changes in our pro-rate related operating revenue are
primarily caused by the average load factor, average passenger fare, and average
incentive payments we receive from our partners and under our Essential Air
Service agreements.  These changes are discussed in greater detail
within our segmented results of operations.





Operating
Expenses





Operating
expenses decreased by $6.6 million and 3% during the three months ended March
31, 2009, primarily due to the decrease in fuel expense and gallons consumed at
our Colgan subsidiary.  This change and others are discussed in
greater detail within our segmented results of operations.





Nonoperating
Expense





Net
nonoperating expense of $8.5 million for the three months ended March 31, 2009
increased by approximately $3.4 million over net nonoperating expense of $5.1
million during the same period in 2008.  The increase is attributable
to a $5.9 million increase in interest expense, primarily related to the
addition of CRJ-900 and Q400 aircraft to our fleet throughout
2008.  In addition, interest income decreased $1.4 million due to the
decrease in interest rates on our auction rate securities
portfolio.


21
 Item
2.  Management’s Discussion and Analysis of Financial Condition and
Results of Operations


Several
nonrecurring items also affected nonoperating expense.  As previously
discussed, we reached settlement with the IRS regarding our examination for tax
years 2003 through 2005.  As a result, we recorded a reduction of $2.9
million in interest expense to reverse the related reserves previously
recorded.  In addition, we recorded a $1.9 million gain in
miscellaneous income related to the repurchase of $12 million par value of our
senior convertible notes at a discount.  This gain was offset by a
$1.4 million hedge-related loss on the debt associated with our Q400 aircraft
that was destroyed in an accident in February.  The related debt was
retired following the accident and the remaining unamortized loss for the
interest rate swap was subsequently recognized in earnings in the first quarter
of 2009.





Income
Tax Expense




For the
three months ended March 31, 2009, we recorded an income tax benefit of $10.4
million.  As previously discussed, we reached settlement with the IRS
regarding our examination for tax years 2003 through 2005. The IRS had proposed
a number of adjustments to our returns totaling approximately $35.0 million of
additional tax, plus accrued interest and penalties on these proposed
adjustments.  The Company agreed to pay approximately $3 million of
additional income tax and accrued interest in settlement of all open tax matters
for the years examined.  As a result, we recorded a reduction to
income tax expense of $13.6 million for the three months ended March 31, 2009 to
reduce our accrued income tax reserves pursuant to the settlement.




Pinnacle
Operating Statistics





Three
      Months Ended March 31,2009
                              
                              
                              2008
                              
                              
                              ChangeOther
      Data:Revenue
      passengers (in thousands)
                              
                              
                              2,385
                              
                              
                              
                              2,425
                              
                              
                              
                              (2
                              )%Revenue
      passenger miles (“RPMs”)(in thousands)
                              
                              
                              1,090,355
                              
                              
                              
                              1,099,280
                              
                              
                              
                              (1
                              )%Available
      seat miles (“ASMs”) (in thousands)
                              
                              
                              1,580,511
                              
                              
                              
                              1,493,861
                              
                              
                              
                              6
                              %Passenger
      load factor
                              
                              
                              69.0
                              %
                              
                              
                              73.6
                              %
                              
                              (4.6)
                              pts.Operating
      revenue per ASM (in cents)
                              
                              
                              9.83
                              
                              
                              
                              10.34
                              
                              
                              
                              (5
                              )%Operating
      cost per ASM (in cents)
                              
                              
                              8.95
                              
                              
                              
                              9.51
                              
                              
                              
                              (6
                              )%Operating
      revenue per block hour
                              
                              $
                              1,423
                              
                              
                              $
                              1,378
                              
                              
                              
                              3
                              %Operating
      cost per block hour
                              
                              $
                              1,295
                              
                              
                              $
                              1,268
                              
                              
                              
                              2
                              %Block
      hours
                              
                              
                              109,241
                              
                              
                              
                              112,061
                              
                              
                              
                              (3
                              )%Departures
                              
                              
                              66,630
                              
                              
                              
                              65,979
                              
                              
                              
                              1
                              %Average
      daily utilization (block hours)
                              
                              
                              8.56
                              
                              
                              
                              8.86
                              
                              
                              
                              (3
                              )%Average
      stage length (miles)
                              
                              
                              452
                              
                              
                              
                              453
                              
                              
                              
                              (0
                              )%Number
      of operating aircraft (end of period)CRJ-200
                              
                              
                              124
                              
                              
                              
                              132
                              
                              
                              
                              (6
                              )%CRJ-900
                              
                              
                              16
                              
                              
                              
                              6
                              
                              
                              
                              167
                              %Employees
      (end of period)
                              
                              
                              4,045
                              
                              
                              
                              4,061
                              
                              
                              
                              (0
                              )%





22
 Item
2.  Management’s Discussion and Analysis of Financial Condition and
Results of Operations


Pinnacle
Operating Revenues





Three
      Months Ended March 31,2009
                            
                            
                            2008
                            
                            
                            $
      Change
                            
                            
                            %
      Change(in
      thousands)Operating
      revenuesRegional
      airline servicesCRJ-200
                            
                            $
                            137,628
                            
                            
                            $
                            147,441
                            
                            
                            $
                            (9,813
                            )
                            
                            
                            (7
                            )%CRJ-900
                            
                            
                            15,903
                            
                            
                            
                            3,811
                            
                            
                            
                            12,092
                            
                            
                            
                            317
                            %Other
                            
                            
                            1,882
                            
                            
                            
                            3,145
                            
                            
                            
                            (1,263
                            )
                            
                            
                            (40
                            )%Total
      operating revenues
                            
                            $
                            155,413
                            
                            
                            $
                            154,397
                            
                            
                            $
                            1,016
                            
                            
                            
                            1
                            %





Regional
Airline Services





For the
three months ended March 31, 2009, revenue earned under our CRJ-200 ASA of
$137.6 million decreased by $9.8 million, or 7%, from revenue of $147.4 million
for the same period in 2008.  Revenue earned under our CRJ-200 ASA was
adversely affected by the return of eight CRJ-200 aircraft pursuant to the terms
of our CRJ-200 ASA.  During the three months ended March 31, 2009, we
operated 8% fewer average CRJ-200 aircraft from the same period in
2008.  Revenue earned under the DCA was approximately $16.0 million
for the three months ended March 31, 2009.  As of March 31, 2009, we
operated 16 CRJ-900 aircraft under our DCA, two of which were the Temporary
Aircraft, as compared to the six CRJ-900 aircraft we operated under the DCA at
March 31, 2008.  We are scheduled to take delivery of the last two
remaining CRJ-900 aircraft during the second quarter of 2009.  Until
these aircraft are placed into service, we will continue to operate the two
Temporary Aircraft.





Other
Revenue





Other
revenue decreased $1.3 million, or 40%, for the three months ended March 31,
2009, from other revenue of $3.1 million for the same period in
2008.  These decreases were primarily related to a decline in revenue
earned from providing certain ground handling services to third parties and
baggage handling services to Delta at its Memphis hub.





Pinnacle
Operating Expenses


Three
      Months Ended March 31,2009
                                    
                                    
                                    2008
                                    
                                    
                                    $
      Change
                                    
                                    
                                    %
      Change(restated)(in
      thousands)Operating
      expensesSalaries,
      wages and benefits
                                    
                                    $
                                    42,937
                                    
                                    
                                    $
                                    40,564
                                    
                                    
                                    $
                                    2,373
                                    
                                    
                                    
                                    6
                                    %Aircraft
      rentals
                                    
                                    
                                    29,157
                                    
                                    
                                    
                                    31,590
                                    
                                    
                                    
                                    (2,433
                                    )
                                    
                                    
                                    (8
                                    )%Ground
      handling services
                                    
                                    
                                    23,153
                                    
                                    
                                    
                                    23,509
                                    
                                    
                                    
                                    (356
                                    )
                                    
                                    
                                    (2
                                    )%Aircraft
      maintenance, materials and repairs
                                    
                                    
                                    14,390
                                    
                                    
                                    
                                    11,901
                                    
                                    
                                    
                                    2,489
                                    
                                    
                                    
                                    21
                                    %Other
      rentals and landing fees
                                    
                                    
                                    13,556
                                    
                                    
                                    
                                    12,492
                                    
                                    
                                    
                                    1,064
                                    
                                    
                                    
                                    9
                                    %Commissions
      and passenger related expense
                                    
                                    
                                    1,212
                                    
                                    
                                    
                                    1,932
                                    
                                    
                                    
                                    (720
                                    )
                                    
                                    
                                    (37
                                    )%Depreciation
      and amortization
                                    
                                    
                                    4,815
                                    
                                    
                                    
                                    2,380
                                    
                                    
                                    
                                    2,435
                                    
                                    
                                    
                                    102
                                    %Other
                                    
                                    
                                    12,292
                                    
                                    
                                    
                                    17,698
                                    
                                    
                                    
                                    (5,406
                                    )
                                    
                                    
                                    (31
                                    )%Total
      operating expenses
                                    
                                    
                                    141,512
                                    
                                    
                                    
                                    142,066
                                    
                                    
                                    
                                    (554
                                    )
                                    
                                    
                                    (0
                                    )%Operating
      income
                                    
                                    $
                                    13,901
                                    
                                    
                                    $
                                    12,331
                                    
                                    
                                    $
                                    1,570
                                    
                                    
                                    
                                    13
                                    %Operating
      margin
                                    
                                    
                                    8.9
                                    %
                                    
                                    
                                    8.0
                                    %
                                    
                                    0.9
                                    pts.





23
 Item
2.  Management’s Discussion and Analysis of Financial Condition and
Results of Operations


Salaries,
wages and benefits increased by $2.4 million and 6% for the three months ended
March 31, 2009, as compared to the same period in 2008.  These
increases were due to the increase in wage rates and benefits for existing
employees.  We are currently experiencing a decline in employee
productivity, primarily related to a decrease in flight crew
attrition.  In addition, we experienced an increase in health care and
insurance costs as compared to the same period in 2008.





Aircraft
rental expense decreased $2.4 million, or 8%, during the three months ended
March 31, 2009 as compared to the same period in 2008.  This decrease
relates to the 8% fewer average number of CRJ-200 aircraft, which are leased
from Delta, during 2009 as compared to 2008.  As previously discussed,
aircraft rentals are reimbursable expenses under our CRJ-200 ASA, and as a
result of the fewer average number of CRJ-200 aircraft in our fleet, revenue
under our CRJ-200 ASA decreased by $2.5 million for the three months ended March
31, 2009.





Aircraft
maintenance, materials and repairs expenses increased by $2.5 million and 21%
for the three months ended March 31, 2009 compared to the same period in
2008.  These increases are attributable to additional maintenance due
to the aging of our CRJ-200 fleet as the majority of our CRJ-200 aircraft are no
longer covered under warranty.  We are also incurring additional
maintenance expense on our CRJ-200 fleet for specific maintenance programs and
upgrades recommended by the manufacturer associated with engine fan blade
replacement and adjustments to the motor controlling deployment of the wing
flaps.  We expect additional maintenance costs associated with these
programs throughout 2009.





Other
rentals and landing fees increased $1.1 million and 9% during the three months
ended March 31, 2009 as compared to the same period in 2008.  This
increase is primarily related to the increase in our CRJ-900
operations.  Pursuant to the CRJ-900 DCA, all landing fees are
reimbursable costs.  Reimbursable landing fees increased by $1.3
million, which caused an increase in revenue of $1.4 million for the three
months ended March 31, 2009.  Landing fees that are not reimbursed,
which includes all operations under the CRJ-200 ASA with the exception of
Detroit, decreased by $0.4 million.  This decrease is related to the
8% decrease in CRJ-200 departures as compared to the same period in 2008, net of
increases at the airports we serve.





Depreciation
and amortization expense increased by $2.4 million for the three months ended
March 31, 2009.  This is primarily related to depreciation on our
fleet of CRJ-900 aircraft, the majority of which were added to our fleet in
2008.





Other
expense decreased by $5.4 million and 31% for the three months ended March 31,
2009 as compared to the same period in 2008.  This decrease is
primarily related to decreases in costs related to crew training.  As
previously discussed, we are experiencing low levels of attrition within our
flight crews and are not currently hiring or training new crew members and as a
result, flight crew related costs decreased by $1.2 million.  In
addition, property tax expense decreased by $2.3 million as a result of a
settlement received in 2009.  Pursuant to the CRJ-200 ASA, property
tax is a reimbursable expense.   Therefore, this decrease in
property tax expense resulted in a reduction to revenue of $2.5
million.  The remainder of the decrease is attributable to the fleet
expansion expenses we incurred in the first half of 2008 as we were bringing the
CRJ-900 operations online.





Colgan
Operating Statistics





Three
      Months Ended March 31,2009
                        
                        
                        2008
                        
                        
                        ChangePro-Rate
      Agreements:Revenue
      passengers (in thousands)
                        
                        
                        248
                        
                        
                        
                        349
                        
                        
                        
                        (29
                        )%RPMs
      (in thousands)
                        
                        
                        42,604
                        
                        
                        
                        64,103
                        
                        
                        
                        (34
                        )%ASMs
      (in thousands)
                        
                        
                        111,023
                        
                        
                        
                        146,628
                        
                        
                        
                        (24
                        )%Passenger
      load factor
                        
                        
                        38.4
                        %
                        
                        
                        43.7
                        %
                        
                        (5.3)
                        pts.Passenger
      yield (in cents)
                        
                        
                        79.77
                        
                        
                        
                        72.94
                        
                        
                        
                        9
                        %Operating
      revenue per ASM (in cents)
                        
                        
                        30.61
                        
                        
                        
                        31.89
                        
                        
                        
                        (4
                        )%Operating
      revenue per block hour
                        
                        $
                        1,532
                        
                        
                        $
                        1,534
                        
                        
                        
                        (0
                        )
      %Block
      hours
                        
                        
                        22,176
                        
                        
                        
                        30,487
                        
                        
                        
                        (27
                        )%Departures
                        
                        
                        19,620
                        
                        
                        
                        25,086
                        
                        
                        
                        (22
                        )%Fuel
      consumption (in thousands of gallons)
                        
                        
                        2,633
                        
                        
                        
                        3,687
                        
                        
                        
                        (29
                        )%Average
      price per gallon
                        
                        $
                        1.71
                        
                        
                        $
                        3.32
                        
                        
                        
                        (48
                        )%Average
      fare
                        
                        $
                        137
                        
                        
                        $
                        134
                        
                        
                        
                        2
                        %


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





Three
      Months Ended March 31,2009
                          
                          
                          2008
                          
                          
                          ChangeCapacity
      Purchase Agreement:Revenue
      passengers (in thousands)
                          
                          
                          329
                          
                          
                          
                          89
                          
                          
                          
                          270
                          %RPMs
      (in thousands)
                          
                          
                          89,705
                          
                          
                          
                          24,617
                          
                          
                          
                          264
                          %ASMs
      (in thousands)
                          
                          
                          149,464
                          
                          
                          
                          33,967
                          
                          
                          
                          340
                          %Passenger
      load factor
                          
                          
                          60.0
                          %
                          
                          
                          72.5
                          %
                          
                          (12.5)
                          pts.Operating
      revenue per ASM (in cents)
                          
                          
                          12.32
                          
                          
                          
                          9.28
                          
                          
                          
                          33
                          %Operating
      revenue per block hour
                          
                          $
                          1,569
                          
                          
                          $
                          1,191
                          
                          
                          
                          32
                          %Block
      hours
                          
                          
                          11,735
                          
                          
                          
                          2,647
                          
                          
                          
                          343
                          %Departures
                          
                          
                          7,468
                          
                          
                          
                          1,714
                          
                          
                          
                          336
                          %





Total
      Colgan:Block
      hours
                                    
                                    
                                    33,911
                                    
                                    
                                    
                                    33,134
                                    
                                    
                                    
                                    2
                                    %Departures
                                    
                                    
                                    27,088
                                    
                                    
                                    
                                    26,800
                                    
                                    
                                    
                                    1
                                    %ASMs
      (in thousands)
                                    
                                    
                                    260,487
                                    
                                    
                                    
                                    180,595
                                    
                                    
                                    
                                    44
                                    %Total
      operating cost per ASM (in cents)
                                    
                                    
                                    18.97
                                    
                                    
                                    
                                    30.73
                                    
                                    
                                    
                                    (38
                                    )%Total
      operating cost per block hour
                                    
                                    $
                                    1,457
                                    
                                    
                                    $
                                    1,675
                                    
                                    
                                    
                                    (13
                                    )%Average
      daily utilization (block hours)
                                    
                                    
                                    7.64
                                    
                                    
                                    
                                    7.24
                                    
                                    
                                    
                                    6
                                    %Average
      stage length (miles)
                                    
                                    
                                    217
                                    
                                    
                                    
                                    208
                                    
                                    
                                    
                                    4
                                    %Number
      of operating aircraft (end of period)Saab
      340
                                    
                                    
                                    34
                                    
                                    
                                    
                                    41
                                    
                                    
                                    
                                    (17
                                    )%Beech
      1900
                                    
                                    
                                    -
                                    
                                    
                                    
                                    4
                                    
                                    
                                    
                                    (100
                                    )%Q400
                                    
                                    
                                    14
                                    
                                    
                                    
                                    6
                                    
                                    
                                    
                                    133
                                    %Employees
                                    
                                    
                                    1,321
                                    
                                    
                                    
                                    1,333
                                    
                                    
                                    
                                    (1
                                    )%





Colgan
Operating Revenue





Three
      Months Ended March 31,2009
                  
                  
                  2008
                  
                  
                  $
      Change
                  
                  
                  %
      Change(in
      thousands)Operating
      revenuesRegional
      airline services:Pro-rate
      and EAS
                  
                  $
                  33,986
                  
                  
                  $
                  46,755
                  
                  
                  $
                  (12,769
                  )
                  
                  
                  (27
                  )%Capacity
      purchase agreement
                  
                  
                  18,407
                  
                  
                  
                  3,152
                  
                  
                  
                  15,255
                  
                  
                  
                  484
                  %Other
                  
                  
                  55
                  
                  
                  
                  37
                  
                  
                  
                  18
                  
                  
                  
                  49
                  %Total
      operating revenues
                  
                  $
                  52,448
                  
                  
                  $
                  49,944
                  
                  
                  $
                  2,504
                  
                  
                  
                  5
                  %





Total
operating revenue for the three months ended March 31, 2009 of $52.4 million
increased by $2.5 million, or 5%, from the same period in 2008.  The
primary reason for this increase is revenue earned under our Continental CPA,
offset by the decrease in our pro-rate operations.





Revenue
under our Continental CPA increased by $15.3 million due to the increase in Q400
aircraft under the agreement.  As of March 31, 2009, we operated 14
Q400 aircraft, as compared to six Q400 aircraft as of March 31,
2008.  We began operations under the Continental CPA in February
2008.





Revenue
earned under our pro-rate and Essential Air Service (“EAS”) agreements decreased
by $12.8 million and 27% during the three months ended March 31,
2009.  This decrease is related to the retirement of 11 of our Saab
and Beech aircraft in conjunction with eliminating certain markets under our
pro-rate agreements, coupled with a 4% decrease in revenue per available seat
mile in our remaining markets.


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


Colgan
Operating Expenses





Three
      Months Ended March 31,2009
                                  
                                  
                                  2008
                                  
                                  
                                  $
      Change
                                  
                                  
                                  %
      Change(Restated)(in
      thousands)Operating
      expensesSalaries,
      wages and benefits
                                  
                                  $
                                  13,903
                                  
                                  
                                  $
                                  12,879
                                  
                                  
                                  $
                                  1,024
                                  
                                  
                                  
                                  8
                                  %Aircraft
      rentals
                                  
                                  
                                  1,335
                                  
                                  
                                  
                                  1,931
                                  
                                  
                                  
                                  (596
                                  )
                                  
                                  
                                  (31
                                  )%Ground
      handling services
                                  
                                  
                                  3,348
                                  
                                  
                                  
                                  3,880
                                  
                                  
                                  
                                  (532
                                  )
                                  
                                  
                                  (14
                                  )%Aircraft
      maintenance, materials and repairs
                                  
                                  
                                  10,299
                                  
                                  
                                  
                                  9,973
                                  
                                  
                                  
                                  326
                                  
                                  
                                  
                                  3
                                  %Other
      rentals and landing fees
                                  
                                  
                                  4,847
                                  
                                  
                                  
                                  2,952
                                  
                                  
                                  
                                  1,895
                                  
                                  
                                  
                                  64
                                  %Aircraft
      fuel
                                  
                                  
                                  4,517
                                  
                                  
                                  
                                  11,873
                                  
                                  
                                  
                                  (7,356
                                  )
                                  
                                  
                                  (62
                                  )%Commissions
      and passenger related expense
                                  
                                  
                                  3,615
                                  
                                  
                                  
                                  4,893
                                  
                                  
                                  
                                  (1,278
                                  )
                                  
                                  
                                  (26
                                  )%Depreciation
      and amortization
                                  
                                  
                                  3,766
                                  
                                  
                                  
                                  1,991
                                  
                                  
                                  
                                  1,775
                                  
                                  
                                  
                                  89
                                  %Other
                                  
                                  
                                  3,337
                                  
                                  
                                  
                                  5,118
                                  
                                  
                                  
                                  (1,781
                                  )
                                  
                                  
                                  (35
                                  )%Aircraft
      lease return costs
                                  
                                  
                                  447
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  447
                                  
                                  
                                  
                                  100
                                  %Total
      operating expenses
                                  
                                  
                                  49,414
                                  
                                  
                                  
                                  55,490
                                  
                                  
                                  
                                  (6,076
                                  )
                                  
                                  
                                  (11
                                  )%Operating
      income (loss)
                                  
                                  $
                                  3,034
                                  
                                  
                                  $
                                  (5,546
                                  )
                                  
                                  $
                                  8,580
                                  
                                  
                                  
                                  155
                                  %Operating
      margin
                                  
                                  
                                  5.8
                                  %
                                  
                                  
                                  (11.1
                                  )%
                                  
                                  16.9
                                  pts.





Salaries,
wages and benefits increased by $1.0 million, or 8%, during the three months
ended March 31, 2009.  This expense increased primarily due to wage
rate and benefit increases for existing employees. Specifically, we experienced
an increase in health care and insurance costs as compared to the same period in
2008.   Additionally, we are currently experiencing a decline in
employee productivity, primarily related to a decrease in flight crew
attrition.





Aircraft
rentals decreased by $0.6 million, or 31%, for the three months ended March 31,
2009.  This decrease is attributable to the return of eight leased
aircraft.





Ground
handling services decreased $0.5 million, or 14%, during the three months ended
March 31, 2009 as compared to the same period in 2008.  This was
primarily attributable to the decrease in our pro-rate
operations.  Ground handling services associated with our Q400
operations are provided at no cost under the Continental CPA.





Other
rentals and landing fees increased $1.9 million, or 64%, for the three months
ended March 31, 2009.  Landing fees increased as a result of operating
the larger Q400 aircraft.  In addition, we are now serving markets
with significantly higher landing fee rates, such as Newark/Liberty
International Airport.  Most airports in our network have also
increased their rates as a result of an overall reduction in industry-wide
capacity.





Aircraft
fuel expense decreased $7.4 million, or 62%, for the three months ended March
31, 2009.  This decline is primarily related to the decrease in the
average price of fuel.  Colgan’s average price paid per gallon
decreased 48% during the three months ended March 31, 2009, as compared to the
same periods in 2008.  In addition, gallons consumed decreased by 29%
for the three months ended March 31, 2009, due to the retirement of several of
our Saab and Beech aircraft.  Aircraft fuel associated with our Q400
operations is provided at no cost under the Continental CPA.





Commissions
and passenger related expenses decreased by $1.3 million, or 26%, for the three
months ended March 31, 2009.  This is attributable to the 28% decrease
in passengers carried by our pro-rate operations.





Depreciation
and amortization expense increased by $1.8 million for the three ended March 31,
2009.  This is primarily related to depreciation expense related to
the Q400 aircraft, which were added to our in fleet throughout
2008.


26
 Item
2.  Management’s Discussion and Analysis of Financial Condition and
Results of Operations


Other
expenses decreased by $1.8 million, or 35%, during the three months ended March
31, 2009, as compared to the same period in 2008.  During the three months
ended March 31, 2009, we recorded a reduction to expense of $0.8 million related
to the excess of property insurance proceeds received over the cost basis of the
Q400 aircraft that was destroyed in Flight 3407.  In addition, crew
overnight accommodations expense and pilot training expense decreased by $0.8
million, primarily as a result of reduced levels of training in
2009.





Aircraft
lease return costs of $0.4 million for the three months ended March 31, 2009
related to certain maintenance costs necessary to restore certain Saab and Beech
aircraft to a condition suitable for return to the lessor.





Liquidity
and Capital Resources





We
generate cash primarily by providing regional airline and related services to
our code-share partners and passengers.  As of March 31, 2009, we had
cash and cash equivalents of $57.6 million.  Net cash provided by
operations was $6.4 million for the three months ended March 31,
2009.  Additionally, we received a 2008 federal income tax refund of
approximately $32.0 million on April 1, 2009. We do not anticipate making
federal income tax payments in 2009 and 2010 due to the accelerated depreciation
recognized for tax purposes related to our newly acquired CRJ-900 and Q400
aircraft, and we anticipate a similar approximately $30 million federal tax
refund in 2010 related to the 2009 tax year.





As of
March 31, 2009, we had $131.0 million par amount of Auction Rate Securities
instruments (“ARS”), which are currently illiquid.  In response to the
failure of the ARS market, the bank that structured and sold to us our ARS
portfolio provided us with a margin loan facility (the “Credit
Facility”).  The Credit Facility had an initial maximum borrowing
amount of $60.0 million but was subsequently amended twice to increase the
borrowing amount up to $90.0 million.  The Credit Facility is
pre-payable at any time prior to maturity.  The interest rate on $80.0
million under the Credit Facility is indexed to LIBOR and was 2.5% at March 31,
2009.  The interest rate on the remaining $10.0 million under the
Credit Facility is indexed to the Federal Funds Rate and was 2.7% at March 31,
2009.  In February 2009, we amended the Credit Facility to, among
other items, extend the maturity date to January 31, 2010.  The Credit
Facility includes both financial covenant and margin requirements, with which we
remain fully compliant, as discussed in Note 4, Borrowings, in Item 1 of this
Form 10-Q.  Amounts outstanding under the Credit Facility as of March
31, 2009 were $90.0 million.





In
February 2005, we issued $121.0 million principal amount of our 3.25% senior
convertible notes due 2025 (the “Notes”).  The Notes bear interest at
the rate of 3.25% per year, payable in cash semiannually in arrears on February
15 and August 15 of each year.  The Notes are convertible into a
combination of cash and common stock at a conversion price of approximately
$13.22.  The Notes are convertible in any quarter subsequent to a
quarter in which the closing price of our common stock exceeds $15.86 for 20 of
the last 30 trading days.  This condition was not met during the first
quarter of 2009, and consequently the Notes are not convertible at this
time.  Holders of the Notes have the right on February 15, 2010 (the
“Put Date”) to require us to repurchase the Notes at the current outstanding par
value of $109.0 million plus accrued and unpaid interest.  As a
result, the entire $100.1 million carrying amount of the Notes is classified as
a current liability on our condensed consolidated balance sheet as of March 31,
2009.





In
January 2009, we repurchased $12.0 million par amount of the Notes for
approximately $8.9 million plus accrued interest, resulting in the current
outstanding par amount of $109.0 million.  While we anticipate
positive cash flow from our operations during 2009, we do not believe that we
will have sufficient cash resources to fully repay this obligation in February
2010 without raising additional capital.  We are actively pursuing
various capital raising efforts discussed below.  We may purchase
additional Notes during 2009 to the extent that Notes are offered for sale below
par and to the extent that our resources allow.





We are in
discussions with the bank that structured and sold to us our ARS portfolio to
obtain additional capital.  Such discussions include potential
resolution of the situation by selling our ARS portfolio to the bank in exchange
for a release of potential legal liability related to the failure of the ARS
market, or an increase in the amount of funds available under the Credit
Facility.  In the event a resolution is not achieved in the near
future, we may be forced to pursue our legal remedies against the
bank.  We cannot predict the timing of concluding these discussions or
that the discussions will result in an outcome that is satisfactory to
us.


27
 Item
2.  Management’s Discussion and Analysis of Financial Condition and
Results of Operations


We
are also in negotiations with a party to execute a term loan secured by our
spare parts.  We currently anticipate executing this transaction
during the second quarter of 2009.  This spare parts term loan and the
potential to obtain additional capital associated with our ARS portfolio will
assist us in our efforts to increase our cash balances prior to the Put Date,
although no assurance can be given that we will successfully complete either
capital raising initiative.  To the extent that we are not successful
in achieving the cash balance necessary to repay any Notes that are tendered in
2010 and maintain our operating liquidity, then we may attempt to negotiate with
holders of the Notes to extend the Put Date or otherwise modify the terms of the
Notes.





In
February 2007 we entered into a purchase agreement for up to 25 firm and 20
option Q400 aircraft with Bombardier, Inc.  Under the agreement, we
were obligated to purchase a minimum of 15 Q400 regional aircraft, which we
satisfied during 2008.  In January 2009, we modified the purchase
agreement to exercise our right to purchase the remaining ten firm Q400 aircraft
and five of the option Q400 aircraft, which will be delivered between August
2010 and April 2011.  The contractual obligations table in our 2008
Form 10-K included amounts related to this purchase commitment.  We
also secured additional options to acquire 15 Q400 option aircraft that would be
delivered in 2013.  Upon completion of this amendment, we now have
optional rights to acquire a total of 30 Q400 aircraft, 15 of which would
deliver in 2011 and 15 of which would deliver in 2013.





In April
2007, Delta assigned to us its rights to purchase 16 CRJ-900 aircraft from
Bombardier, Inc.  As of March 31, 2009, we had accepted delivery of 14
of these aircraft.  We will take delivery of the remaining two
aircraft during the second quarter of 2009.  Under the DCA, Delta has
the right to require us to purchase and operate an additional seven CRJ-900
aircraft.





We are
required to make pre-delivery payments to Bombardier for the 15 firm Q400
aircraft that we have on order, which will be made from January 2009 to October
2010.  Approximately 85% of the remaining pre-delivery payments to be
made in 2009 and 2010 will be financed under a pre-delivery payment financing
facility provided by Export Development Canada (“EDC”).  The remaining
amount of approximately $5 million will be funded through our internal capital
resources.  This unfinanced portion of our pre-delivery payment
requirements is not scheduled to be paid until the second quarter of 2010 after
the Put Date related to our senior convertible notes previously
discussed.   The interest rate associated with this pre-delivery
payment facility is indexed to LIBOR, and was 4.1% as of March 31,
2009.  The outstanding balance of these borrowings as of March 31,
2009 was $4.9 million.  As each aircraft is delivered to us, we repay
the associated borrowings.





Upon
delivery of our CRJ-900 and Q400 aircraft, we obtained long-term financing,
ranging from 10 to 15 years, for 85% of the aircraft purchase price, the balance
of which was $492.3 million at March 31, 2009.  We have also obtained
a commitment from EDC to finance 85% of the purchase price of the remaining
aircraft on order from the delivery date of each aircraft.  In
addition to utilizing EDC’s offer for debt financing, we expect to seek
operating lease financing for some of our remaining Q400 deliveries to reduce
the amount of initial capital required to obtain the aircraft and to potentially
more favorably utilize certain income tax benefits.





We
maintained a revolving line of credit with an institutional lender for a
principal amount not to exceed $8.5 million or 75% of the net unpaid balance of
our Colgan subsidiary’s eligible accounts receivable.  This instrument
had an interest rate of Prime plus 0.25%, which was 3.5% as of March 31,
2009.  Amounts outstanding under the line of credit were $4.9 million
at March 31, 2009.  This facility matured on April 15, 2009 and all
amounts outstanding were repaid.





We
reached a settlement agreement with the Internal Revenue Service (the “Service”)
concerning their examination of our federal income tax returns for 2003, 2004,
and 2005.  The Service had initially proposed a number of adjustments
to the Company’s returns totaling approximately $35 million of additional tax,
plus accrued interest and penalties on these proposed adjustments.  We
agreed to pay approximately $3 million of additional income tax and accrued
interest in settlement of all open tax matters for these years.  With
this agreement, the Service has completed its examination of our federal tax
filings for 2003, 2004 and 2005.  We anticipate paying this settlement
amount to the Service during the next few months.





Operating activities.Net
cash provided by operating activities was $6.4 million during the three months
ended March 31, 2009.  Net cash used in operating activities was $17.2
million during the three months ended March 31, 2008.  This was due
primarily to the $23.9 million in hedge related payments.  This
decrease in cash was offset by various changes in our operating assets and
liabilities.


28
 Item
2.  Management’s Discussion and Analysis of Financial Condition and
Results of Operations


Investing activities. 
Net cash provided by investing activities for the three months ended March 31,
2009 was $5.0 million.  This was primarily attributable to insurance
proceeds of $3.6 million and proceeds from redemptions of ARS of $2.7 million,
offset by $1.3 million in cash purchases of property and equipment.





Net cash
provided by investing activities for the three months ended March 31, 2008 was
$42.6 million.  This was primarily attributable to net proceeds of
investments in ARS of $50.8 million, offset by $8.3 million in cash purchases of
property and equipment, primarily consisting of flight equipment.





We expect
non-aircraft cash capital expenditures for the remainder of 2009 to be
approximately $5 to $7 million. We expect to fund the non-aircraft capital
expenditures with existing cash resources and cash flows generated from our
operations.





Financing activities. Net
cash used in financing activities for the three months ended March 31, 2009
totaled $23.3 million.  This was primarily related to $8.9 million used to
repurchase a portion of the Company’s Notes, $4.1 million for the early
repayment of pre-delivery payment financing facilities for the last two CRJ-900
aircraft that the Company has on order, and $10.3 million in principal
repayments on other debt obligations.





Net cash
provided by financing activities for the three months ended March 31, 2008
totaled $24.7 million.  During the quarter, we received $71.8 million in
debt proceeds, primarily related to the Credit Facility.  This was offset
by $26.0 million of principal payments on debt obligations, primarily related to
our pre-delivery payment facilities, and the $20.0 million purchase of our
Series A Preferred Share from Northwest on January 4, 2008.





Deferred tax
asset.  We have recorded a deferred tax asset of $39.6
millionrelated to
future tax benefits.  This primarily relates to future tax benefits we
will receive for our deferred CRJ-200 ASA revenue.  We are recognizing
the deferred CRJ-200 ASA revenue over the 11-year term of the CRJ-200
ASA.





Guarantees and
indemnifications.  We maintain certain standby letter of credit
facilities for various vendors.  As of March 31, 2009 and December 31,
2008, we had $3.0 million outstanding under these facilities, which are
collateralized by $3.0 million that we have invested in certificates of deposit
or similar instruments.  Total amounts invested in certificates of
deposit and other similar instruments were $8.6 million and $5.4 million at
March 31, 2009 and December 31, 2008, respectively.





We are
party to numerous contracts and real estate leases in which it is common for us
to agree to indemnify third parties for tort liabilities that arise out of or
relate to the subject matter of the contract or occupancy of the leased
premises. In some cases, this indemnity extends to related liabilities arising
from the negligence of the indemnified parties, but usually excludes any
liabilities caused by their gross negligence or willful misconduct.
Additionally, we typically indemnify the lessors and related third parties for
any environmental liability that arises out of or relates to our leased
premises.





In our
aircraft lease agreements, we typically indemnify the prime lessor, financing
parties, trustees acting on their behalf and other related parties against
liabilities that arise from the manufacture, design, ownership, financing, use,
operation and maintenance of the aircraft and for tort liability, whether or not
these liabilities arise out of or relate to the negligence of these indemnified
parties, except for their gross negligence or willful misconduct.





We expect
that we would be covered by insurance (subject to deductibles) for most tort
liabilities and related indemnities described above with respect to real estate
we lease and aircraft we operate.





We do not
expect the potential amount of future payments under the foregoing indemnities
and agreements to be material.





Off-Balance Sheet
Arrangements.  None of our operating lease obligations are
reflected on our consolidated balance sheets. We are responsible for all
maintenance, insurance and other costs associated with these leased assets;
however, the lease agreements do not include a residual value guarantee, fixed
price purchase option or other similar guarantees.  We have no other
off-balance sheet arrangements.




29


Item 3. Quantitative and Qualitative Disclosures About Market
Risk





Because
the majority of our contracts are capacity purchase agreements, our exposure to
market risks such as commodity price risk (e.g., aircraft fuel prices) is
primarily limited to our pro-rate operations, which comprise 16% of our
consolidated revenues.  With our 2007 acquisition of Colgan and our
contracts with Delta and Continental that include the purchase of aircraft, we
are exposed to commodity price and interest rate risks as discussed
below.





Commodity
Price Risk





Our
pro-rate operations include exposure to certain market risks primarily related
to aircraft fuel, which recently has been extremely volatile.  Aviation
fuel expense is a significant expense for any air carrier, and even marginal
changes in the cost of fuel greatly affect a carrier’s profitability. 
Standard industry contracts do not generally provide protection against fuel
price increases, nor do they ensure availability of supply.  While our
capacity purchase agreements require that fuel be provided to us at no cost,
thereby reducing our overall exposure to fuel price fluctuations, our pro-rate
code-share agreements with Continental, US Airways, and United expose us to fuel
price risk.  Slightly offsetting our fuel risk, our agreement with
Continental provides for an adjustment to the pro-rate revenue we receive from
Continental based on projected changes in fuel prices.  For the projected
annualized fuel consumption related to these agreements, each ten percent change
in the price of jet fuel amounts to an approximate $1.8 million change in annual
fuel costs.





Interest
Rate Risk





Aircraft financing. We are
exposed to interest rate risk from the time of entering into purchase
commitments until the delivery of aircraft, at which time we receive permanent,
fixed-rate financing for each aircraft.  As of March 31, 2009, we
accepted delivery of 14 of 16 CRJ-900 aircraft and the remaining two delivered
in the second quarter of 2009. In January 2009, we entered into a purchase
agreement for 15 firm Q400 aircraft with Bombardier, which will be delivered
between August 2010 and April 2011.  Should interest rate changes by
100 basis points before we take delivery, and assuming that we do not hedge the
anticipated debt on the remaining CRJ-900 and Q400 aircraft, aggregate interest
expense in the first year of financing would change by approximately $3.4
million.





Credit Facility. We are also
exposed to interest rate risk on our revolving term loan with Citigroup (the
“Credit Facility”), the balance of which was $90.0 million as of March 31,
2009.  Should interest rates change by 100 basis points, aggregate
interest expense related to the Credit Facility over the next twelve months
would change by approximately $0.7 million.





Investment
income.  Our earnings are affected by fluctuations in interest
rates due to the impact those changes have on the amount of interest income we
earn from our investments, which primarily consists of ARS and taxable money
market securities.  We do not purchase or hold any derivative
financial instruments to protect against the effects of changes in interest
rates on our interest income.  Based on our current ARS balance and
other taxable money market securities, a 100 basis point change in interest
rates would result in an increase or decrease in annual investment income of
approximately $1.9 million.  See Note 10 in Item 1 of this Form 10-Q
for additional information about ARS.





Senior convertible notes.
While we pay interest on the Notes at a fixed rate of 3.25%, the fair value of
the Notes is sensitive to changes in interest rates and to changes in the market
price of our common stock.  Interest rate changes may result in
increases or decreases in the fair value of the Notes due to differences between
market interest rates and rates in effect at the inception of the
obligation.  The fair value of the Notes may also increase or decrease
with differences between the current market price of our common stock and the
market price on the original issuance date of the Notes.  Unless we
elect to repurchase additional Notes in the open market, changes in their fair
value have no impact on our consolidated financial statements as a whole. The
estimated fair value of the Notes on May 1, 2009 was approximately $87.5
million, based on quoted market prices.


30


Item 4. Controls and Procedures





The
Company, under the supervision and participation of its management, including
the Chief Executive Officer and the Chief Financial Officer, evaluated the
effectiveness of the design and operation of our disclosure controls and
procedures pursuant to Exchange Act Rules 13a-15 and 15d-15.   Based
upon that evaluation, our Chief Executive Officer and Chief Financial Officer
concluded that our disclosure controls and procedures are effective. 
Disclosure controls and procedures are controls and procedures that are designed
to ensure that information required to be disclosed in our reports filed or
submitted under the Exchange Act is recorded, processed, summarized and
completely and accurately reported within the time periods specified in the
Securities and Exchange Commission’s rules and forms.  There has been no
change in our internal control over financial reporting during the three months
ended March 31, 2009 that has materially affected, or is reasonably likely to
materially affect our internal control over financial reporting.





Part
II.  Other Information





Item 1.  Legal Proceedings





Pinnacle
and Colgan are defendants in various ordinary and routine lawsuits incidental to
our business. While the outcome of these lawsuits and proceedings cannot be
predicted with certainty, it is the opinion of our management, based on current
information and legal advice, that the ultimate disposition of these suits will
not have a material adverse effect on our financial statements as a
whole.





September 11, 2001
Litigation.Colgan is a defendant in litigation resulting from
the September 11, 2001 terrorist attacks.  The Company believes it
will prevail in this litigation; however, any adverse outcome from this
litigation would be covered by insurance and would therefore have no material
adverse effect on the Company’s financial position, results of operations and
cash flows.





ColganFlight 3407.  On
February 12, 2009, Colgan Flight 3407, operated for Continental under the
Company’s Continental CPA, crashed in a neighborhood near the Buffalo Niagara
International Airport in Buffalo, New York. All 49 people aboard, including 45
passengers and four members of the flight crew, died in the accident.
Additionally, one individual died inside the home destroyed by the aircraft’s
impact, increasing the total fatality count to 50
individuals.  Several lawsuits related to this accident have been
filed against the Company, and additional litigation is
anticipated.  We carry aviation risk liability insurance and believe
that this insurance is sufficient to cover any liability arising from this
accident.





Item 1A. Risk Factors.




There are no
material changes to the risk factors described under the title “Risk Factors” in
our Annual Report on Form 10-K for the fiscal year ended December 31,
2008.





Item 2.  Unregistered Sales of Equity Securities and Use
of Proceeds





None.





Item 3.  Defaults Upon Senior
Securities





None.





Item 4.  Submission of Matters to a Vote of Security
Holders





None.





Item 5.  Other Information





None.





Item 6.  Exhibits


31


Index
of Exhibits





Certain
portions of the exhibits described below have been omitted. The Company has
filed and requested confidential treatment for non-public information with the
Securities and Exchange Commission.





The
following exhibits are filed as part of this Form 10-Q.





ExhibitNumber
              Description3.1
              Second
      Amended and Restated Certificate of Incorporation of Pinnacle Airlines
      Corp. (the “Registrant”) (Incorporated by reference to the Registrant’s
      Registration Statement Form S-1 (Registration No. 333-83359), as amended
      (the “S-1”) initially filed on February 25,
  2002)


3.2
            Certificate
      of Correction Filed to Correct a Certain Error in the Second Amended and
      Restated Certificate of Incorporation of the Registrant (Incorporated by
      reference to the S-1)


3.3
            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 the Registrant and Deutsche Bank National Trust Company
      (Incorporated by reference 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 the Registrant, 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)


10.1#
            Loan
      Agreement dated as of June 16, 2005 between Pinnacle Airlines, Inc, the
      Registrant, 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
            Form
      of 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., the Registrant, and
      Northwest Airlines, Inc. (Incorporated by reference to the
      S-1)


10.3.1
            Form
      of First Amendment to Engine Lease Agreement between Pinnacle Airlines,
      Inc. and Northwest Airlines, Inc. (Incorporated by reference to the
      S-1)


10.4#
            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)


10.5#
            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)


10.6#
            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)


10.7#
            Negative
      Pledge Agreement dated as of June 16, 2005 between the Registrant 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
            Form
      of Incentive 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)


32


ExhibitNumber
              Description





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
            Form
      of 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
            Form
      of 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
            Form
      of 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
      omitted


10.17
            Intentionally
      omitted


10.18
            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
            Form
      of 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
            Form
      of Amended and Restated Ground Handling Agreement between Pinnacle
      Airlines, Inc. and Northwest Airlines, Inc. (Incorporated by reference to
      the S-1)


10.23
            Form
      of Amended and Restated Information Technology Services Agreement between
      Pinnacle Airlines, Inc. and Northwest Airlines, Inc. (Incorporated by
      reference to the S-1)


10.24
            Form
      of Amended and Restated Family Assistance Services Agreement between
      Pinnacle Airlines, Inc. and Northwest Airlines, Inc. (Incorporated by
      reference to the S-1)


10.25
            Form
      of 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, the Registrant., 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†
            Second
      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 December 16,
      2008)


10.29†
            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 December 16,
  2008)


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 December 16,
  2008)


10.31†
            Form
      of Indemnity Agreement between the Registrant and its directors and
      officers (Incorporated by reference to the Registrant’s Current Report on
      Form 8-K filed on February 1, 2006)


10.32
            Assignment
      of Claim Agreement between Pinnacle Airlines, Inc. and Goldman Sachs
      Credit Partners, L.P., dated as of October 5, 2006 (Incorporated by
      reference to the Registrant’s Form 10-K filed on March 8,
      2007)


33


ExhibitNumber
              Description





10.40
            Assumption
      and Claim Resolution Agreement between Pinnacle Airlines, Inc., the
      Registrant, 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., the Registrant, and Northwest Airlines, Inc., dated December 15,
      2006, effective as of January 1, 2007 (Incorporated by reference to the
      Registrant’s Form 10-K filed on March 8,
2007)


10.42
            Amendment
      No. 1 dated as of November 21, 2007 to the Amended and Restated Airline
      Services Agreement by and among Pinnacle Airlines, Inc., the Registrant,
      and Northwest Airlines, Inc., dated December 15,
  2006


10.43
            CF34-3B1
      Engine Hourly Rate Program Repair and Services Agreement between Northwest
      Airlines, Inc. and Standard Aero Ltd., dated as of September 1, 2007
      (Incorporated by reference to the Registrant’s Form 10-K filed on March
      17, 2008)


10.50
            Stock
      Purchase Agreement, dated as of January 18, 2007, by and among Colgan Air,
      Inc. and the Registrant (Incorporated by reference to the Registrant’s
      Current Report on Form 8-K filed on January 24,
  2007)


10.60
            Capacity
      Purchase Agreement between Continental Airlines, Inc., the Registrant, and
      Colgan Air, Inc., dated as of February 2, 2007 (Incorporated by reference
      to the Registrant’s Form 10-Q filed on November 2,
  2007)


10.61
            Purchase
      Agreement between Bombardier Inc. and the Registrant, relating to the
      purchase of twenty-five (25) Bombardier Q400 series aircraft, dated as of
      February 17, 2007 (Incorporated by reference to the Registrant’s Form 10-K
      filed on March 17, 2008)


10.62
            Form
      of Loan Agreement, between the Registrant and Export Development Canada,
      for the financing of Q400 and CRJ-900 aircraft (Incorporated by reference
      to the Registrant’s Form 10-K filed on March 17,
  2008)


10.65
            Delta
      Connection Agreement among Delta Air Lines, Inc., the Registrant, and
      Pinnacle Airlines, Inc., dated as of April 27, 2007 (Incorporated by
      reference to the Registrant’s Form 10-Q filed on November 2,
      2007)


10.66
            Purchase
      Agreement between Bombardier Inc. and Pinnacle Airlines, Inc, relating to
      the purchase of sixteen (16) Bombardier CRJ-900 series aircraft, dated as
      of April 26, 2007 (Incorporated by reference to the Registrant’s Form 10-K
      filed on March 17, 2008)


10.70
            Credit
      Facility Agreement between Citigroup Global Markets, Inc. and the
      Registrant, dated as of March 11, 2008 (Incorporated by reference to the
      Registrant’s Form 10-Q filed on May 8,
2008)


10.71
            Amendment
      No. 1, dated as of June 18, 2008, to the Credit Facility Agreement between
      the Registrant, and Citigroup Global Markets, Inc., dated as of March 11,
      2008 (Incorporated by reference to the Registrant’s Current Report on Form
      8-K filed on June 20, 2008)


10.72
            Amendment
      No. 1, dated as of March 2, 2009, to the Amended and Restated Loan
      Agreement between the Registrant and Citigroup Global Markets, Inc., dated
      as of November 5, 2008 (Incorporated by reference to the Registrant’s
      Current Report on Form 8-K filed on March 5,
  2009)


10.73
            Third
      Amendment, dated as of January 13, 2009, to the Capacity Purchase
      Agreement between Continental Airlines, Inc., the Registrant, and Colgan
      Air, Inc., dated as of February 2,
2007


10.74
            Loan
      Agreement, dated as of January 30, 2009, between Colgan Air, Inc., and
      Export Development Canada


10.75
            Change
      Order No. 16, dated as of January 13, 2009, and Change Order No. 18, dated
      as of February 6, 2009, to the Purchase Agreement between Bombardier Inc.
      and the Registrant, relating to the purchase of Bombardier Q400 series
      aircraft, dated as of February 17,
2007


10.76
            United
      Express Agreement, dated as of November 1, 2008, between United Air Lines,
      Inc. and Colgan Air, Inc.


10.99.1#
            Form
      of Promissory Note issued by Pinnacle Airlines, Inc. to Northwest
      Airlines, Inc. (Incorporated by reference to the
  S-1)


10.99.2#
            Form
      of Guaranty 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)


34


Exhibit


Number                  Description


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 December 16,
2004)


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


35











SIGNATURES











Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.




















PINNACLE
      AIRLINES CORP.By:
            /s/ Philip H. TrenaryPhilip
      H. TrenaryDate:  May
      7, 2009
            President
      and Chief Executive OfficerBy:
            /s/ Peter D. HuntPeter
      D. HuntDate:  May
      7, 2009
            Vice
      President and Chief Financial Officer











36