A disagreement over whether a cut in pilot pay scales should be permanent or temporary is one of several unresolved issues confronting Pinnacle Airlines management as the regional carrier tries to avoid filing for Chapter 11 bankruptcy protection, CEO Sean Menke says in a restructuring update he sent to employees.

In the message, sent Feb. 24 and disclosed in a Securities and Exchange Commission filing the same day, Menke says the airline is making progress with Air Line Pilots Association (ALPA) leadership on resolving seniority list integration issues. But Menke adds that “we aren’t in agreement on pay concessions right now. As I’ve mentioned previously, for our business plan to work we need the pay cuts to be permanent.”

The ALPA unit at Pinnacle says the airline wants the pilots to agree to a permanent 5% wage reduction. But in a Feb. 22 message to its members, the union insists that idea will not fly.

“ALPA does not believe there is a need for a permanent wage reduction, and we are apart on that issue,” the union said in the message, which followed negotiations on Feb. 21 and 22. “We believe that a case can be made for a targeted wage cut with snapbacks to our current pay scales. In addition, there are potential contract amendments that could save the company money and also benefit the pilots, and we are willing to entertain those changes in lieu of a greater wage cut.”

ALPA says other “key prices” of a restructuring agreement would include profit-sharing, as well as “bankruptcy protection language” that would prevent the carrier from seeking additional cuts under the Chapter 11 process and call for “equitable contribution[s] from all other labor groups.”

“On the bankruptcy protection front, we have not yet received any meaningful proposals from the company,” the union said in its Feb. 22 message.

Another potential problem for Pinnacle is that it still is working with United Continental to try to negotiate a long-term change in the agreement under which Pinnacle’s Colgan Air subsidiary operates Bombardier Q400s and Saab 340s for United. Pinnacle recently reached a two-month accord with the carrier, effective until April 2 (Aviation Daily, Feb. 10).

“If we aren’t able to permanently improve the economics of those contracts we won’t be able to justify continuing those operations,” Menke says in his Feb. 24 message.

“We still have work to do to reduce our costs and we still have work to do to make our partner agreements profitable,” he adds. “Unless we have long-term agreements in place, the best way for us to improve our financial performance and ensure a viable future for our company may still be the court-supervised Chapter 11 process.”