Key commercial terms of the agreement include the following:
• Continental will purchase all Q400 capacity at predetermined rates and industry standard pass-through costs. Fuel will be purchased directly by Continental and provided to Colgan at no cost.
• The aircraft will be delivered to Colgan from December 2007 through June 2008 and placed into service in early 2008.
• The capacity purchase agreement will be for a term of ten years from the date of the last Q400 delivery, extending to June 2018.
With the capacity pre-purchased, Pinnacle appears to have limited risk in this transaction.
PNCL 1-yr chart: