AIRLINE SERVICES AGREEMENT by PINNACLE AIRLINES CORP

EXHIBIT 10-105

 

CERTAIN PORTIONS OF THIS DOCUMENT HAVE BEEN OMITTED.  THE SYMBOL "[***]" HAS BEEN INSERTED IN PLACE OF THE PORTIONS SO OMITTED.

 

 

THIRD AMENDED AND RESTATED

 

AIRLINE SERVICES AGREEMENT

 

by and among

 

PINNACLE AIRLINES CORP.,

 

PINNACLE AIRLINES, INC.

 

and

 

DELTA AIR LINES, INC.

 

 

US 422293v.8

Dated as of April 1, 2012

 

 

THIRD AMENDED AND RESTATED

 

AIRLINE SERVICES AGREEMENT

 

THIS THIRD AMENDED AND RESTATED AIRLINE SERVICES AGREEMENT (together with all exhibits, schedules and attachments hereto, the "Agreement") is entered into as of this 1st day of April, 2012 (the "Effective Date"), by and among PINNACLE AIRLINES CORP., a Delaware corporation ("Pinnacle Corp."), PINNACLE AIRLINES, INC., a Georgia corporation and a wholly-owned subsidiary of Pinnacle Corp. ("Pinnacle"), and DELTA AIR LINES, INC., a Delaware corporation ("Delta" and each of Pinnacle Corp., Pinnacle and Delta, a "Party" and, collectively, the "Parties").

 

WITNESSETH:

 

WHEREAS, Pinnacle and Delta, as successor by merger to Northwest Airlines, Inc. ("Northwest"), entered into an Airline Services Agreement dated as of January 14, 2003, as amended by Amendments No. 1 through No. 5 (collectively, the "2003 ASA"), which agreement was amended and restated pursuant to an Amended and Restated Airline Services Agreement dated as of December 15, 2006 and made effective as of January 1, 2007, as amended by Amendments No. 1 through No. 4 (collectively, the "2007 Restatement"), which agreement was further amended and restated pursuant to a Second Amended and Restated Airline Services Agreement dated and made effective as of July 1, 2010 (the "2010 Restatement");

 

WHEREAS, Mesaba Aviation, Inc., a Minnesota corporation and wholly-owned subsidiary of Pinnacle Corp. ("Mesaba"), which operated certain of the Aircraft commencing on July 1, 2010, became a party to the 2010 Restatement as of the date of the 2010 Restatement, and, effective January 4, 2012 upon transfer of such Aircraft to Pinnacle, assigned to Pinnacle and Pinnacle assumed from Mesaba (with the consent of Delta) all obligations of Mesaba under the 2010 Restatement pursuant to that certain Assignment, Assumption and Consent Agreement

 

dated as of January 4, 2012 by and among Pinnacle, Mesaba and Delta, and, as a result of such agreement, Mesaba ceased to be a party to the 2010 Restatement;

 

WHEREAS, Delta, Pinnacle Corp., Pinnacle and certain other subsidiaries of Pinnacle Corp. (collectively, the "Pinnacle Debtors") have entered into a commitment letter of even date herewith, pursuant to which Delta has agreed to provide the Pinnacle Debtors a $74,285,000 senior secured super-priority debtor-in-possession credit facility (the "DIP Credit Facility"), which may, subject to certain conditions, convert into an exit credit facility (the "Exit Loan"), all on the terms and conditions set forth in the Summary of Terms and Conditions attached to such commitment letter as Annex A (the commitment letter together with such term sheet, the "Commitment Letter") in the event the Pinnacle Debtors elect to file a chapter 11 proceeding (together the "Bankruptcy Cases");

 

WHEREAS, Delta, Pinnacle Corp. and Pinnacle have entered into an Amended and Restated 2010 Delta Connection Agreement of even date herewith (as amended, modified or supplemented from time to time, and together with all exhibits, schedules and attachments thereto, the "2010 CRJ-900 Delta Connection Agreement");

 

WHEREAS, Delta, Pinnacle Corp. and Pinnacle have entered into Amendment No. Two to Delta Connection Agreement of even date herewith, pursuant to which the parties amended certain provisions of, and agreed to terminate early, that certain Delta Connection Agreement dated as of April 27, 2007 by and among Delta, Pinnacle Corp. and Pinnacle (as amended, modified or supplemented from time to time, and together with all exhibits, schedules and attachments thereto, the "2007 CRJ-900 Delta Connection Agreement");

 

WHEREAS, Delta, Pinnacle Corp, Pinnacle and Mesaba have entered into a Setoff and Mutual Release of even date herewith (the "Mutual Release"), pursuant to which the parties agreed to a setoff of certain amounts in dispute between the parties and to a mutual release of claims related to such disputed amounts; and

 

WHEREAS, the Parties desire to amend and restate the 2010 Restatement and are entering into this Agreement contemporaneously with the execution and delivery of the Commitment Letter, the 2010 CRJ-900 Delta Connection Agreement, the Amendment No. Two to the 2007 CRJ-900 Delta Connection Agreement, and the Mutual Release.

 

NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and intending to be legally bound, the Parties hereby agree as follows:

 

ARTICLE I

 

 

DEFINITIONS

 

Section 1.01  Definitions.  For all purposes of this Agreement, except as otherwise expressly provided or unless the context otherwise requires:

 

(1)           the terms as defined in this Article have the meanings assigned to them in this Article and include the plural as well as the singular;

 

(2)           all accounting terms not otherwise defined herein have the meanings assigned to them in accordance with generally accepted accounting principles; and

 

(3)           the words "herein", "hereof" and "hereunder" and other words of similar import refer to this Agreement as a whole and not to any particular Article, or other subdivision.

 

"2003 ASA" shall have the meaning ascribed to such term in the recitals.

 

"2007 CRJ-900 Delta Connection Agreement" shall have the meaning ascribed to such term in the recitals.

 

"2007 Restatement" shall have the meaning ascribed to such term in the recitals.

 

"2010 CRJ-900 Delta Connection Agreement" shall have the meaning ascribed to such term in the recitals.

 

"2010 Restatement" shall have the meaning ascribed to such term in the recitals.

 

"AAR Agreement" means (i) that certain Aircraft Maintenance Agreement effective as of August 8, 2011 among AAR Aircraft Services, Inc., Delta and Pinnacle, and (ii) that certain Aircraft Maintenance Agreement effective as of August 8, 2011 among AAR Aircraft Services, Inc., Delta and Mesaba, each such agreement as may be amended, modified or extended in accordance with the terms of such agreement.

 

"Accident" means [***].

 

"ACARS" means the Aircraft Communications Addressing and Reporting System which provides communications between the Aircraft and Pinnacle with respect to operational matters.

 

"ACD Rate" shall have the meaning ascribed to such term in Section 5.04.

 

"Affiliate" means, as applied to a Person, any other Person directly or indirectly controlling, controlled by, or under common control with, that Person.  For purposes of this definition "control" (including, with correlative meanings, the terms "controlling", "controlled by" and "under common control with"), as applied to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of that Person, whether through the ownership of voting securities, by contract or otherwise.

 

"Air Cargo" means air freight, United States mail and small package services appropriate for the Aircraft.

 

"Air Cargo Handling Services" means the Air Cargo handling services to be performed pursuant to Section 4.09.

 

"Aircraft" means, (i) the one hundred forty (140) CRJ-200 Canadair Regional Jet aircraft in Pinnacle's fleet as of the Effective Date, (ii) up to one hundred sixty-three (163)

 

additional CRJ-200 Canadair Regional Jet aircraft when, as and if such aircraft are added to Pinnacle's fleet pursuant to the second sentence of Section 3.02(a)(i).  Any Aircraft removed from the fleet of Pinnacle will cease to be "Aircraft" hereunder upon the date of such removal.

 

"Aircraft Months" means, with respect to any calendar month during the Term, the number of Aircraft (including non-scheduled Aircraft) in service during such month for the provision by Pinnacle of Regional Airline Services pursuant to this Agreement.  For the avoidance of doubt, an Aircraft placed in service by Pinnacle by the 15th of a month is deemed to have been in service for the entirety of such month.

 

"Aircraft Removal Dates" shall have the meaning ascribed to such term in Section 10.01.

 

"Aircraft Rental Expense" means the Basic Rent charged in the Leases between Delta and Pinnacle, which shall be [***] per Aircraft per month for the CRJ-200 Canadair Regional Jet Aircraft.

 

"Airline Assets" means those assets used, as of the date of determination, in the relevant Person's operation as an air carrier.

 

"Annual Operating Plan" shall have the meaning ascribed to such term in Section 2.12.

 

 "Available CRJ Day" or "ACD" means an Aircraft each day after such Aircraft has been placed in service by Pinnacle and remains in service pursuant to this Agreement (including non-scheduled Aircraft (if any)).  A CRJ aircraft placed in service by Pinnacle on January 1st would have 31 Available CRJ Days in January.

 

"Available CRJ Days Report" means the report of Available CRJ Days to be prepared by Pinnacle pursuant to Section 5.02(a).

 

"Baggage Handling Services" shall have the meaning ascribed to such term in Section 4.08.

 

"Bankruptcy Cases" shall have the meaning ascribed to such term in the recitals.

 

"Basic Rent" shall have the meaning ascribed to such term in the Leases.

 

"Beneficial Ownership" has the meaning given such term as defined as of the date hereof in Rules 13d-3 and 13d-5 under the Securities Exchange Act of 1934, as amended.

 

"Block Hour" means the period of time (in minutes) beginning when an Aircraft first moves from the ramp blocks in connection with a Scheduled Flight, a Non-Scheduled Flight or a Charter Flight and ending when the Aircraft next comes to a stop at the ramp at any station or other point of termination as recorded by ACARS or another mutually agreed system, divided by sixty (60).

 

"Block Hour Payment" means the payment for Block Hours to be made pursuant to Section 5.02(b).

 

"Block Hour Rate" shall have the meaning ascribed to such term in Section 5.03.

 

"Block Hour Report" means the report to be prepared by Pinnacle pursuant to Section 5.02(a).

 

"Bombardier Agreement" means the Aircraft Heavy Maintenance Service Agreement dated as of February 1, 2007 between Bombardier Services Corporation and Delta (as successor by merger to Northwest), as such agreement may be amended, modified or extended in accordance with its terms and for so long as such agreement remains in effect.

 

 "Capital Stock" of any Person means any and all shares, interests, rights to purchase, options, warrants, participation or other equivalents of or interests in (however designated) the equity of such Person, including any preferred stock.

 

"Charter Flights" means revenue passenger flights using the Aircraft (other than Scheduled Flights); provided, however, that the operational arrangements and the compensation to be received by Pinnacle in respect of such Charter Flights are subject to the same procedures and remuneration as a Scheduled Flight hereunder, unless otherwise mutually agreed by Delta and Pinnacle.  To the extent that inflight catering (food and beverage) exceeds that normally provided for on a Scheduled Flight, the incremental cost and coordination of the catering will be the sole responsibility of Delta.

 

"Colgan" means Colgan Air, Inc., a Virginia corporation and wholly-owned subsidiary of Pinacle Corp.

 

"Comair" means Comair, Inc., an Ohio corporation, which as of the Effective Date, is an Affiliate of Delta.

 

"COMAT" means company material, including but not limited to priority aircraft maintenance parts.

 

"Commitment Letter" shall have the meaning ascribed to such term in the recitals.

 

"Comparable Agreement" shall have the meaning ascribed to such term in Section 5.09.

 

 "CPPI" means the percent increase, if any, in the PPI for finished goods published by the United States Department of Labor, Bureau of Labor Statistics, which increase occurred during the immediately preceding calendar year, defined as (PPI at end of prior calendar year/PPI at end of two years prior) - 1, but in no event in excess of five percent (5%) and in no event less than zero.  For example, when calculating the block hour rate for 2007 in Section 5.10(b), CPPI is calculated as follows:  (December 2006 PPI / December 2005 PPI) - 1.

 

"CPPIB" means the percent increase, if any, in the PPI for finished goods published by the United States Department of Labor, Bureau of Labor Statistics, defined as (PPI at end of prior calendar year/PPI at end of 2002)-1, but in no event will the compound annual growth rate be in excess of five percent (5%) or less than zero.  For example, when calculating the block hour rate for 2005 in Section 5.03(a), CPPIB is calculated as follows:  (December 2004 PPI / December 2002 PPI) - 1.

 

 "Cycle" means an actual takeoff at an origin city and landing at a destination city of an Aircraft in connection with a Scheduled Flight, a Non-Scheduled Flight or a Charter Flight.

 

 "Data Communication Equipment" shall have the meaning ascribed to such term in Section 4.04.

 

"Default" means the occurrence of an event set forth in Section 10.02 or Section 10.03, and the expiration of any cure period provided therein without cure or other remedial action having occurred, permitting termination of this Agreement.

 

"Delta" shall have the meaning ascribed to such term in the preamble of this Agreement.

 

"Delta Connection Carrier" means an airline operating regional jet and/or turboprop air transportation services as a Delta Connection Carrier pursuant to an airline services agreement or Delta connection carrier agreement between such airline and Delta.

 

"Delta Connection Safety Standards" shall have the meaning ascribed to such term in Section 2.09.

 

"Delta Schedule Period" means the planned duration of various time periods for which Delta's flight schedule is for sale in computer reservation systems.

 

 "Delta Tickets" shall have the meaning ascribed to such term in Section 4.07(a).

 

"Designator" means "DL" or such other designator code selected by Delta from time to time in its sole discretion to identify Delta's own flights.

 

"DIP Credit Facility" shall have the meaning ascribed to such term in the recitals.

 

"Direct Costs" means the actual cost for goods and services associated with the provision of Regional Airline Services pursuant to this Agreement incurred by Pinnacle or Pinnacle Corp. (with respect to costs appropriately allocated to the operation of Regional Airline Services hereunder), without any surcharge for administrative or general overhead expenses.

 

"DL Identification" means any Identification specifically selected by Delta from time to time in its sole discretion for use by Pinnacle in connection with the Regional Airline Services (including without limitation "Delta Connection" or any similar name).

 

"DOT" means the United States Department of Transportation or any successor to its functions with respect to the regulation of air transportation.

 

"DOT Certification" means any and all certifications and approvals by the DOT, the FAA and other regulatory agencies required for Pinnacle to operate the Aircraft and to perform pursuant to the terms of this Agreement and all Governmental Regulations.

 

"EAS" shall have the meaning ascribed to such term in Section 4.01(b).

 

"Effective Date" shall have the meaning ascribed to such term in the preamble of this Agreement.

 

"Equipment" means the Aircraft, Spare Engines and QECs.

 

"Equipment Rental Expense" means the Aircraft Rental Expense, the Spare Engine Rental Expense and the QEC Rental Expense.

 

"Exit Loan" shall have the meaning ascribed to such term in the recitals.

 

 "FAA" means the Federal Aviation Administration or any successor organization.

 

"Facility Leases" shall have the meaning ascribed to such term in Section 4.03(g).

 

"FBO" shall have the meaning ascribed to such term in Section 5.05(b).

 

"Fixed Cost Payment" means the payment for fixed costs to be made pursuant to Section 5.02(b).

 

"Fleet Value" means the total value of the Aircraft used in calculating the premium for Pinnacle's hull insurance (including war risk).

 

"Fuel Burn Penalty Payment" shall have the meaning ascribed to such term in Section 5.05(e).

 

"Fuel Price" shall have the meaning ascribed to such term in Section 5.05(b).

 

"GAAP" means generally accepted accounting practice and principles at the time prevailing in the United States for companies engaged in businesses similar to that of Pinnacle, consistently applied.

 

"Governmental Regulations" means the rules and regulations prescribed by an airport authority at a Service City or by any local, state or federal unit of government having authority and jurisdiction to regulate the business and affairs of an air carrier having DOT Certification, including without limitation, the DOT and the FAA.

 

"Ground Handling Functions" shall have the meaning ascribed to such term in Section 4.02.

 

"Holding Company" means, as applied to a Person, any other Person of whom such person is, directly or indirectly, a Subsidiary.

 

"Hub Cities" means Memphis, Tennessee ("MEM"), Minneapolis/St. Paul, Minnesota ("MSP") and Detroit, Michigan ("DTW").

 

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