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UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K

Commission File Number 001-31898

PINNACLE AIRLINES CORP.

(Exact name of registrant as specified in its charter)

Registrant’s telephone number, including area code:

901-348-4100

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12 (g) of the Act:

None

          Indicate by check mark whether 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 þ          No o

          Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrants knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.     þ

          Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act).     Yes þ          No o

          The aggregate market value of the voting and non-voting common equity stock held by non-affiliates of the registrant was $219 million as of June 30, 2004.

          As of March 1, 2005, 21,950,260 shares of common stock were outstanding.

Documents Incorporated by Reference

      Certain information called for by Part III of Form 10-K is incorporated by reference to the Proxy Statement for our 2005 Annual Meeting of Stockholders to be filed with the Commission within 120 days after December 31, 2004.

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TABLE OF CONTENTS

PART I

      Pinnacle Airlines Corp. and its wholly owned subsidiary, Pinnacle Airlines, Inc. (which operates as “Northwest Airlink”), are collectively referred to in this report as the “Company,” “we” and “us” except as otherwise noted. Northwest Airlines Corporation and its subsidiaries are collectively referred to as “Northwest.”

Our Company

      We operate an all-regional jet fleet providing regional airline capacity to Northwest in 2004 and we were one of the fastest growing regional airlines in the United States based on year-over-year growth in available seat miles flown. In the year ended December 31, 2004, we had a 54% increase in block hours over the same period in 2003. We provide Northwest with regional airline capacity as a Northwest Airlink carrier at its domestic hub airports in Detroit, Minneapolis/ St. Paul and Memphis, and in the focus cities of Milwaukee and Indianapolis. At December 31, 2004, we operated a jet fleet of 117 Canadair Regional Jet (“CRJ”) aircraft and offered regional airline services with approximately 660 daily departures to 103 cities in 35 states and four Canadian provinces. We offered service with 76 CRJ aircraft with approximately 490 daily departures to 81 cities in 29 states and two Canadian provinces as of December 31, 2003.

      Pinnacle Airlines Corp. was incorporated in Delaware on January 10, 2002 to be the holding company of Pinnacle Airlines, Inc., which was incorporated in Georgia in 1985. Northwest acquired Pinnacle Airlines, Inc. in April 1997. Since the acquisition, we have provided regional airline service exclusively to Northwest. During the time that Northwest was our sole owner, we were operated as a business unit of Northwest without regard to our stand-alone profitability. Our operations were designed to increase overall Northwest system revenues rather than to maximize our stand-alone profitability.

      During 2003, Northwest transferred 19,400,000 shares, or 89% of our outstanding common stock, to the Northwest Airlines Pension Plan for Contract Employees, the Northwest Airlines Pension Plan for Pilot Employees and the Northwest Airlines Pension Plan for Salaried Employees (collectively, the “Northwest Airlines Pension Plans”). Northwest retained the remaining outstanding shares of our common stock and one share of our Series A preferred stock.

      On November 25, 2003, we completed an initial public offering (the “Offering”) of our common stock, par value $.01 per share. In the Offering, the Northwest Airlines Pension Plans sold all of our shares that it received during 2003. We did not receive any proceeds from the Offering.

Our Airline Services Agreement with Northwest

      We provide regional airline services to Northwest under an Airline Services Agreement (“ASA”), which we entered into with Northwest effective March 1, 2002. The terms of the ASA are materially different from the terms of our historical arrangement with Northwest. The initial agreement provided for a term from March 1, 2002, through February 29, 2012 and would have increased our fleet to 95 regional jets by December 31, 2004. During 2003, we entered into certain amendments to the ASA with Northwest that, among other things, extended the term of the agreement through December 31, 2017, increased the number of CRJ aircraft under the ASA to 129, eliminated incentive payments based on certain performance criteria and lowered our target operating margin from 14% to 10% effective December 1, 2003. During 2004, we amended our ASA with Northwest to, among other things, increase from 129 to 139 the number of CRJ aircraft that will be operated by Pinnacle Airlines, Inc. under the ASA. As consideration for these contractual rights, we agreed to pay $15.1 million to Northwest. Concurrently with this amendment to the ASA, we amended the revolving credit agreement (“Revolver”) between Pinnacle Airlines, Inc. and Northwest. Among other things, the amendment to the Revolver provided that in our role as guarantor, we may obtain up to $5 million in advances from Pinnacle Airlines, Inc. to secure, or do business utilizing, a second airline operating certificate. Additionally, the amendment decreased borrowings available to Pinnacle Airlines, Inc. under the Revolver from $50 million to $25 million.

Our Airline Services Agreement with Northwest (continued)

      At the end of its term in 2017, the ASA automatically extends for additional five-year periods unless Northwest provides notice to us two years prior to the termination date that it does not plan to extend the term.

      Our ASA with Northwest provides for the following payments:

      Reimbursement payments: We receive monthly reimbursements for all expenses relating to: passenger aircraft fuel; basic aircraft and engine rentals; aviation liability, war risk and hull insurance; third-party deicing services; CRJ third-party engine and airframe maintenance; hub and maintenance facility rentals; passenger security costs; ground handling in cities where Northwest has ground handling operations; Detroit landing fees and property taxes. We have no financial risk associated with cost fluctuations because we are reimbursed by Northwest for the actual expenses incurred for these items.

      Payments based on pre-set rates: We are entitled to receive semi-monthly payments for each block hour and cycle we operate and a monthly fixed cost payment based on the size of our fleet. The term “block hours” refers to the elapsed time between an aircraft leaving a gate and arriving at a gate, and the term “cycles” refers to an aircraft’s departure and corresponding arrival. These payments are designed to cover all of our expenses incurred with respect to the ASA that are not covered by the reimbursement payments. The substantial majority of these expenses relate to labor costs, ground handling costs in cities where Northwest does not have ground handling operations, landing fees in cities other than Detroit, overhead and depreciation.

      Margin payments: We receive a monthly margin payment based on the revenues described above calculated to achieve a target operating margin. The target operating margin for the ten months ended December 31, 2002, and the eleven months ended November 30, 2003 was 14%. In conjunction with the Offering, we amended the ASA to lower our target operating margin to 10%, effective December 1, 2003. Under the amended ASA, our target operating margin will be reset to a market-based percentage in 2008, but the reset target operating margin will be no lower than 8% and no higher than 12%.

      Under the ASA, we operate flights on behalf of Northwest. Northwest controls our scheduling, pricing, reservations, ticketing and seat inventories and is entitled to all revenues associated with the operation of our aircraft.

      Through 2007, if our actual costs that are intended to be covered by the revenues we receive based on pre-set rates deviate from the expected costs used in developing those pre-set rates, and as a result our annual operating margin is below the 9% floor or above the 11% ceiling for each year through 2005, or below the 8% floor or above the 12% ceiling for 2006 and 2007, a year-end adjustment in the form of a payment by Northwest to the Company or by the Company to Northwest will be made to adjust our operating margin to the floor or ceiling. Specified items are excluded when determining whether our annual operating margin is below the floor or above the ceiling. Beginning in 2008, Northwest will not guarantee our minimum operating margin, although we will still be subject to a margin ceiling above the revised target-operating margin.

      If our actual operating margin for any year beginning with 2008 exceeds the revised target operating margin by up to five percentage points, we will make a year-end adjustment payment to Northwest in an amount equal to half of the excess. In addition, should our actual operating margin exceed the targeted operating margin by more than five percentage points, we will pay Northwest all of the excess above five percent. For the years ended December 31, 2004, 2003, and 2002 no margin adjustment payments were required pursuant to the terms of the ASA.

      The ASA and the other agreements we have entered into with Northwest to provide us with various ongoing services were made in the context of our being a subsidiary of Northwest and were negotiated in the overall context of the initial contribution of shares to the Northwest Airlines Pension Plans. As a result of Northwest’s control of us when these agreements were negotiated, the prices and other terms under these agreements may be different from the terms we might have obtained in arm’s-length negotiations with

Our Airline Services Agreement with Northwest (continued)

unaffiliated third parties for similar services. Some of these terms may be more favorable to us than those we would have been able to obtain otherwise. When we need to replace these agreements, we will be negotiating with Northwest or third parties on an arm’s-length basis, and we may not be able to do so on as favorable terms.

      These agreements generally contain cross-termination provisions such that termination of the ASA will trigger a termination under the relevant agreement. In addition, these agreements generally provide that they will terminate upon a change of control of our company or our affiliates. Note 4, “Other Agreements with Northwest” in the notes to our consolidated financial statements in Item 8 of this Form 10-K, includes a summary of the terms contained in our other agreements with Northwest.

      The ASA covers all of our existing fleet, as well as the 22 additional regional jets currently scheduled to become part of our fleet during 2005. Northwest is entitled to change the timing of the deliveries of the remaining 22 aircraft by either delaying or accelerating the delivery of any aircraft but has agreed to deliver a total of 139 CRJs by December 31, 2005, subject to Northwest receiving the aircraft from Bombardier, the manufacturer of the CRJ, by that time. Of the 22 planned deliveries of CRJ aircraft in 2005, we are planning to accept delivery of six aircraft in the first quarter (three received as of March 1, 2005), thirteen aircraft in the second quarter and three aircraft in the third quarter. In addition to those 22 regional jets, at its option Northwest may also add up to 165 additional regional jets to our fleet to be operated by us under the terms of the ASA. If Northwest chooses to expand our CRJ fleet to more than 139 aircraft, Northwest retains the option under the ASA to subsequently reduce the number of jets covered by the ASA to a minimum of 139 aircraft. Northwest also has certain rights to terminate the ASA or reduce the number of aircraft covered by the ASA to fewer than 139 aircraft. A more detailed discussion of these rights can be found below under “Term and Termination of Agreement; Remedies for Breach.” Northwest is also responsible for scheduling all aircraft covered by the ASA.

      Our ASA with Northwest requires us to use its two-letter flight designator code (NW) to identify our flights in the computerized reservation systems, to paint our aircraft with its colors and/or logos and to market and advertise our status as being a part of the Northwest route system. The agreement also gives us a non-exclusive license to fly under the Northwest Airlink name. Under the ASA, passengers on our aircraft participate in WorldPerks, Northwest’s frequent flyer program. We do not pay fees with respect to these services.

      We lease all of our regional jets from Northwest at a fixed monthly rate under the ASA. We also sublease our spare engines from Northwest. The fixed monthly rental rates on our regional jets include certain fleet management costs of Northwest and are not representative of the rates paid by Northwest to third-party lessors. Under the ASA, our aircraft rental expenses are reimbursed in full by Northwest.

      Northwest has obtained long-term financing commitments from Bombardier for all of the additional regional jets that it has agreed to provide to us under the ASA, eliminating the need for us to obtain financing with respect to these aircraft.

      Northwest grants us the right to use facilities that it leases from authorities at various airports. In addition, at a number of airports where Northwest operates, we do not maintain our own ground support equipment and personnel and instead obtain ground handling services from third parties, primarily Northwest

Our Airline Services Agreement with Northwest (continued)

and Mesaba Airlines. These services include gate access, aircraft loading and unloading and passenger enplaning and deplaning services. Under the ASA and our facilities agreements with Northwest, we will be entitled to use Northwest’s facilities and obtain ground handling services to fulfill our obligations under the ASA, but not to service other carriers or operate flights under our own flight designator code without the approval of Northwest. Northwest will be responsible for all capital and start-up costs at its hub airports and at any other facilities where it elects to provide ground handling services to us. We will be responsible for any capital and start-up costs, excluding jetbridge expenses, associated with any facilities at other airports at which we perform our own ground handling functions.

      At any airport at which we provide our own ground handling services, subject to some exceptions, Northwest can require us at any time, including upon cessation of operating scheduled flights on behalf of Northwest, to use our best efforts to assign or sublease the ground handling facilities to Northwest or its designee.

      Furthermore, Northwest can require us, at any time, to transfer, subject to applicable laws, to Northwest or its designee at no charge any of our airport takeoff or landing slots, route authorities or other regulatory authorizations used for our scheduled flights under the ASA.

      The ASA provides that we cannot use any of our officers, employees, facilities, equipment or aircraft that are used to provide regional airline services to Northwest in any new operations without the prior written consent of Northwest except as follows: (1) our officers may engage in planning and coordinating such activities, and (2) the following operational and corporate functions of Pinnacle Airlines, Inc. may also be used to support new operations: (a) information services personnel, equipment and other infrastructure; (b) systems operation control management, personnel (excluding dispatchers) and infrastructure, including but not limited to, facilities and computer systems; and (c) corporate functions specifically defined as those traditionally performed by the tax, treasury, internal audit, purchasing, and corporate education (excluding pilot training performed via simulators) departments. As a result, in order to provide regional airline services to another airline, Pinnacle Airlines Corp. would have to establish new operations that would be largely independent of Pinnacle Airlines, Inc.’s operations and could incur significant incremental costs in the process. Additionally, Pinnacle Airlines Corp. or a subsidiary other than Pinnacle Airlines, Inc. may only provide airline services to other major airlines using aircraft certificated as having (1) less than 60 seats and (2) a maximum gross takeoff weight of less than 70,000 pounds (or such greater seat or weight limits as may be established under Northwest’s collective bargaining agreement with its pilots).

      Further, in the event we provide airline services to other airlines, we have agreed to negotiate in good faith with Northwest an adjustment to our fixed cost reimbursements under the ASA to account for resulting efficiencies. During the term of our ASA, our arrangement with Northwest restricts us and our affiliates from flying under our or another carrier’s flight designator code to or from Northwest’s domestic hub airports without Northwest’s prior written consent. Hub airports are defined as airports to which Northwest, together with its subsidiaries and Northwest Airlink carriers operating under Northwest’s designator code, operate an average of more than 50 departures per day during any Northwest schedule period.

      The ASA does not prohibit Northwest from competing, or from entering into agreements with other airlines that would compete with routes we serve. Because our license from Northwest to use the Northwest Airlink name and other trademarks is non-exclusive, Northwest is not prohibited from permitting any other regional airline to operate under the Northwest Airlink name, as Mesaba Airlines does currently.

Our Airline Services Agreement with Northwest (continued)

      If, as a result of a strike affecting our employees, we do not operate more than 50% of our aircraft for more than seven consecutive days or we do not operate more than 25% of our aircraft for more than 21 consecutive days, other than as a result of (1) a Federal Aviation Administration (“FAA”) order grounding all commercial flights or all air carriers or grounding a specific aircraft type of all carriers, (2) a scheduling action by Northwest or (3) Northwest’s inability to perform its obligations under the ASA as a result of a strike by Northwest employees, the ASA provides that Northwest will have the right to:

      The initial term of the agreement expires on December 31, 2017, subject to renewal automatically for successive five-year renewal periods, unless Northwest gives us at least two years’ advance notice of non-renewal prior to the end of any term. Northwest may terminate the agreement at any time for cause, which is defined as:

Our Airline Services Agreement with Northwest (continued)

      Northwest may also terminate the agreement at any time upon our bankruptcy or for any breach of the agreement by us that continues uncured for more than 30 days after we receive notice of the breach; provided that in the case of a non-monetary default, Northwest may not terminate the agreement if the default would take more than 30 days to cure and we are diligently attempting to cure the default. In addition, Northwest and we are both entitled to seek an injunction and specific performance for a breach of the agreement.

      If Northwest terminates the ASA for cause, it will have the right to terminate our leases or subleases for aircraft covered by the agreement at the time of termination and to take possession of these aircraft. We currently sublease all of our regional jets from Northwest. We currently lease all of our turboprops from third parties and sublease them to Mesaba Airlines. Note 4, “Other Agreements with Northwest” in the notes to our consolidated financial statements in Item 8 of this Form 10-K includes a summary of the terms of our turboprop lease agreements. If the ASA is terminated by Northwest for cause, we would lose access to all of our regional jets and, as a result, our business, operations and ability to generate future revenue would be materially adversely affected.

      In addition, in the case of any other termination of the ASA, Northwest will have the right to require us (1) to terminate all leases, subleases and agreements it has with us, (2) to assign, or use our best efforts to assign to it, subject to some exceptions, any leases with third parties for facilities at airports to which we fly scheduled flights on its behalf and (3) to sell or assign to it facilities and inventory then owned or leased by us in connection with the services we provide to Northwest for an amount equal to the lesser of fair market value or depreciated book value of those assets.

      In general, we have agreed to indemnify Northwest and Northwest has agreed to indemnify us for any damages caused by any breaches of our respective obligations under the agreement or caused by our respective actions or inaction under the ASA.

Our Employees

      As of March 1, 2005, we had approximately 3,260 active employees, including 1,000 pilots, 625 flight attendants (of whom 270 are part-time), 890 customer service personnel (of whom 735 are part-time), 320 mechanics and other maintenance personnel, 90 dispatchers/crew resource personnel and 335 management and support personnel. The part-time employees work varying amounts of time, but typically are half-time or less employees. As is customary in the airline industry, we also use third parties to provide ground handling personnel in some stations. Currently, Northwest and Mesaba Airlines provide a majority of these ground handling services.

      Labor costs are a significant component of airline expenses and can substantially impact our results. We believe we have generally good labor relations and high labor productivity. Approximately 77% of our employees are represented by unions.

Our Employees (continued)

      The following table reflects our principal collective bargaining agreements and their respective amendable dates as of March 1, 2005:

Maintenance of Aircraft

      Using a combination of FAA-certified maintenance vendors and our own personnel and facilities, we maintain our aircraft on a scheduled and “as-needed” basis. We perform preventive maintenance and inspect our engines and airframes in accordance with our FAA-approved preventive maintenance policies and procedures.

      The maintenance performed on our aircraft can be divided into three general categories: line maintenance, heavy maintenance checks, and engine and component overhaul and repair. Line maintenance consists of routine daily and weekly scheduled maintenance checks on our aircraft, including pre-flight, daily, weekly and overnight checks and any diagnostic and routine repairs. Our technicians and third-party vendors perform all of our line maintenance on the CRJs.

      We contract with an affiliate of Bombardier, the CRJ manufacturer, to perform certain routine maintenance checks on our CRJs. These maintenance checks are regularly performed on a scheduled basis that is approved by the manufacturer and the FAA.

      Component overhaul and repair involves sending parts, such as engines, landing gear and avionics to a third-party, FAA-approved maintenance facility for repair or overhaul. We have a time and materials contract with General Electric on our CRJ engines. We are also party to maintenance agreements with various other vendors covering avionics, auxiliary power units and brakes.

      The average age of the regional jets in our fleet is approximately 1.9 years. In general, the CRJ aircraft do not require their first heavy maintenance checks until they have flown approximately 8,000 hours, (3.5 to 3.75 years). Northwest is required to reimburse us for and pay a margin on these maintenance expenses for our CRJs under the ASA. The profit we derive from maintenance has been minimal, but we expect that it will grow as the aircraft age.

Training

      We perform the majority of training of our flight personnel in Memphis, Tennessee at our Corporate Education Center and the simulator center operated by FlightSafety International. FlightSafety International provides some overflow training at various other simulator centers throughout the U.S. at our request. The Memphis simulator center currently includes three CRJ full-motion simulators. Under our agreement with FlightSafety International with regard to the Memphis simulator center, we have first call on all of the simulator time available in the Memphis center. We expect that essentially our entire simulator needs will be met by the Memphis center throughout the delivery stream of the committed aircraft. Instructors used in the Memphis center are typically either professional instructors or trained line pilot instructors.

      We provide in-house and outside training for our maintenance personnel and take advantage of manufacturers’ training programs offered, particularly when leasing new aircraft.

Training (continued)

      Professional instructors conduct training of mechanics, flight attendants and customer service personnel in the Corporate Education Center.

Safety and Security

      We have taken numerous measures, as required by regulatory authorities, to increase both the safety and security of our operations in the wake of the terrorist attacks of September 11, 2001. Some of the security enhancements implemented include reinforcement of all cockpit doors and implementation of strict in-flight cockpit access procedures, including the removal of all cockpit access keys from within the main cabin.

Insurance

      We currently maintain insurance policies for: aviation liability, which covers public liability, passenger liability, hangar keepers’ liability, baggage and cargo liability and property damage; war risk, which covers losses arising from acts of war, terrorism or confiscation; hull insurance, which covers loss or damage to our flight equipment; directors’ and officers’ insurance; and workers’ compensation insurance. The ASA requires that we maintain specified levels of these types of policies.

      Our aviation liability, war risk and hull insurance coverage is obtained through a combined placement with Northwest. Under the ASA, our cost of aviation liability, war risk and hull insurance will be capped at the lower of actual cost and amounts based on the value of our fleet and the number of revenue passengers we carry. Northwest will reimburse us and pay us a margin on these costs. As a result, our operating margin would not be adversely affected if our insurance costs for these items increased.

      We were given the option under the Air Transportation Safety and Stabilization Act, signed into law on September 22, 2001, to purchase certain third-party war risk liability insurance from the U.S. government on an interim basis at rates that are more favorable than those available from the private market. We have purchased this insurance from the FAA as provided under the Act.

Regulations

      We operate under an air carrier certificate issued by the FAA and under commuter air carrier authorization issued by the DOT. This authorization may be altered, amended, modified or suspended by the DOT if it determines that we are no longer fit to continue operations. The FAA may suspend or revoke our air carrier certificate if we fail to comply with the terms and conditions of our certificate. The DOT has established regulations affecting the operations and service of the airlines in many areas, including consumer protection, non-discrimination against disabled passengers, minimum insurance levels and others. Failure to comply with FAA or DOT regulations can result in civil penalties, revocation of our right to operate or criminal sanctions. FAA regulations are primarily in the areas of flight operations, maintenance, ground facilities, security, transportation of hazardous materials and other technical matters. The FAA requires each airline to obtain an operating certificate authorizing the airline to operate at specific airports using specified equipment. Under FAA regulations, we have established, and the FAA has approved, a maintenance program for each type of aircraft operated by us that provides for the ongoing maintenance of these aircraft, ranging from frequent routine inspections to major overhauls.

      The Transportation Security Administration (“TSA”) now regulates civil aviation security under the Aviation and Transportation Security Act. Since the events of September 11, 2001, Congress has mandated and the TSA has implemented numerous security procedures that have imposed and will continue to impose additional compliance responsibilities and costs on airlines. The DOT allows local airport authorities to implement procedures designed to abate special noise problems, provided such procedures do not unreasonably interfere with interstate or foreign commerce or the national transportation system. Certain airports, including the major airports at Boston, Washington, D.C., Chicago, Los Angeles, San Diego, Orange County (California) and San Francisco, have established airport restrictions to limit noise, including restrictions on

Item 1.                                 Business

Regulations (continued)

aircraft types to be used and limits on the number of hourly or daily operations or the time of such operations. In some instances, these restrictions have caused curtailments in services or increases in operating costs, and such restrictions could limit our ability to commence or expand our operations at affected airports. Local authorities at other airports are considering adopting similar noise regulations.

Markets and Routes

      As of December 31, 2004, we operated 117 CRJs serving 103 cities in 35 states and four Canadian provinces out of Northwest’s three hubs and two focus cities, and our route network spanned the entire eastern half of the United States. We fly as far west as Casper, Wyoming, as far east as Halifax, Nova Scotia, as far north as Winnipeg, Manitoba and as far south as San Antonio, Texas.

Recent Developments

      In February 2005, we completed the sale of $121 million principal amount of our 3.25% senior convertible notes due February 15, 2025 (the “Notes”). Our sale of the Notes was made to qualified institutional investors under Rule 144A of the Securities Act of 1933. As part of the terms of the sale, we agreed to file a registration statement with the Securities and Exchange Commission for the resale of the Notes and the shares of common stock issuable upon conversion of the Notes within 90 days after the closing of the sale.

      We used the net proceeds from the Notes, together with cash on hand, to purchase the outstanding $120 million note payable to Northwest at a discounted price of $101.6 million, to repay $5 million of borrowings outstanding under the Revolver with Northwest, in each case with accrued and unpaid interest, and for general corporate purposes. As a result, we recorded a pre-tax gain of $18.4 million related to the extinguishment of debt during the first quarter of 2005. A more detailed discussion of our borrowings from Northwest is provided in Note 6 “Note Payable and Dividends to Northwest” and Note 7 “Lines of Credit” in the notes to our consolidated financial statements under Item 8 of this Form 10-K.

      The Notes pay interest semiannually in arrears in cash on February 15 and August 15 of each year, beginning August 15, 2005. The holders of the Notes may require us 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 the principal amount of the Notes to be repurchased plus accrued and unpaid interest, if any, to the purchase date. The Notes are structured such that, upon the occurrence of certain events, holders may convert the Notes into the equivalent value of our common stock at an initial conversion rate of 75.6475 shares per $1,000 principal amount of Notes, representing an initial conversion price of $13.22 per share. Upon conversion, we will pay the holder the portion of the conversion value in cash up to the $1,000 principal amount. To the extent that the conversion value exceeds the $1,000 principal amount, the excess will be settled in cash, common stock or a combination of both, at our option.

      Holders may convert their Notes only during the following periods:

Recent Developments (continued)

      Because the $1,000 principal amount of the Notes will be settled in cash upon conversion, the number of shares used in our calculation of fully diluted earnings per share will only be increased by the number of shares of our common stock with a market value equal to the excess of the Notes’ conversion value over their $1,000 principal amount.

      The following table summarizes the number of shares that would be used in our calculation of fully diluted earnings per share as a result of our issuance of the Notes:

Risk Factors Affecting Our Business

Risks Relating to our ASA with Northwest

      We generate substantially all of our revenues under our ASA with Northwest. If Northwest terminates the ASA for cause, it will have the right to terminate our leases and subleases with it for the regional jet aircraft covered by the agreement and take immediate possession of these aircraft. As a result, we will have no significant source of revenue or earnings unless we are able to enter into satisfactory substitute arrangements. We currently sublease all of our regional jets from Northwest. The current term of the ASA expires on December 31, 2017. A further discussion of our ASA is included in “Business — Our Airline Services Agreement.”

      We currently use Northwest’s systems, airport facilities (including maintenance facilities) and services to support a significant portion of our operations, including our information technology support, dispatching, fuel purchasing, ground handling services and some of our insurance coverage. If Northwest terminates our ASA and no longer provides these services to us, we may not be able to replace them with services of comparable quality or on terms and conditions as favorable as those we receive from Northwest, or at all.

      The ASA does not guarantee the growth of our fleet beyond 139 CRJs. Northwest is permitted under the ASA to add an additional 165 CRJs to our fleet on the same economic terms as the first 139 aircraft; however, Northwest may instead choose to offer to lease or sublease any additional CRJs to us on economic terms and with financing commitments that are less favorable to us than those contained in the ASA. In the future, we may also agree to modifications to the ASA that reduce certain benefits to us in order to obtain additional aircraft from Northwest. Additionally, even if Northwest chooses to expand our CRJ fleet to more than 139 aircraft, it will be allowed at any time to subsequently reduce the number of regional jets covered by the ASA so long as our fleet is not reduced below 139 regional jets.

      Additionally, the ASA does not prohibit Northwest from contracting with other regional airlines to fly any aircraft, including regional jets and turboprops, in any market. Northwest currently has airline services agreements with Mesaba Airlines, under which Mesaba, operating as a Northwest Airlink carrier, provides Northwest with regional airline capacity at its hub airports in Detroit, Minneapolis/St. Paul and Memphis. Northwest currently owns approximately 28% of the outstanding common stock of Mesaba, which operates Avro RJ85 regional jets and Saab turboprops. We have no assurance that Northwest will not expand those relationships in competition with us, or that Northwest will not establish relationships with other regional carriers, including awarding them future deliveries of the 165 CRJs on which it has option.

      Under the ASA, a portion of our revenues from Northwest is derived from our actual flights. A portion of the compensation that we receive from Northwest is based on block hours, cycles and certain reimbursable expenses, primarily fuel, that we incur only when we fly. Approximately 37% of our 2004 revenue from regional airline services was from block hour and cycle payments and the reimbursement of fuel costs. If Northwest reduces the utilization of our fleet, our revenues and profits would decrease. Northwest is solely responsible for scheduling our flights, but the ASA does not require Northwest to meet any minimum utilization levels for our aircraft. For example, after September 11, 2001, Northwest reduced our scheduled capacity by approximately 20% on an available seat mile basis. Northwest could decide to significantly reduce the utilization levels of our fleet in the future.

Risks Relating to our ASA with Northwest (continued)

      The payments we will receive from Northwest under our ASA based on pre-set rates for block hours, cycles and fixed costs are not based on the actual expenses we will incur in our operations. However, the rates on which these payments are based were established to cover all of our expenses in respect of the ASA that are not directly reimbursed by Northwest. The substantial majority of expenses intended to be covered by the payments for block hours, cycles and fixed costs relate to labor costs, passenger handling costs, landing fees, overhead and depreciation. The ASA also provides that we will earn an operating margin ranging from a floor of 9% to a ceiling of 11%, with a target operating margin of 10%, for 2004 and 2005 and an operating margin ranging from a floor of 8% to a ceiling of 12%, with a target operating margin of 10%, for 2006 and 2007. Our operating margin could be less than the target operating margin for those periods if our actual costs that are intended to be covered by the pre-set rates described above deviate from the expected costs used in developing those pre-set rates. Our operating margin for those periods could also be less than the applicable floor if we incur specified excluded costs, such as employee bonuses and incentives to the extent they exceed amounts used in calculating our pre-set rates, employee salary expenses in excess of standard industry wages, depreciation expense relating to capital expenditures in excess of $250,000 and deemed by Northwest to be inconsistent with the provision of regional airline services and penalties based on our failure to satisfy specified performance measures. These excluded costs may be substantial, and, as a result, we could suffer losses under the agreement, and we may be unable to generate sufficient cash flow to pay our debts on time.

      While the capacity purchase business model and targeted operating margins reflected in our ASA with Northwest reduce our financial risk and exposure to fluctuations in many of our variable costs, they also limit our potential to experience higher earnings growth from improved market conditions or increased operational efficiency.

      The rates we will receive for our services under the ASA will be reset in 2008 based on our historical and expected operating costs. In addition, the target operating margin will be reset to a market-based percentage, provided that it will be no lower than 8% and no higher than 12%. In addition, beginning in 2008, Northwest will not guarantee us a minimum operating margin. If the target operating margin is set to achieve less than a 10% target operating margin, our revenues and earnings will decrease beginning in 2008 unless we increase the level of regional airline services that we provide.

      The ASA provides that we cannot use any of our officers, employees, facilities, equipment or aircraft that are used to provide regional airline services to Northwest in any such new operations without the prior written consent of Northwest with a few exceptions. Pursuant to the terms of the ASA, in order to provide regional airline services to another airline, Pinnacle Airlines Corp. would have to establish new operations that would be largely independent of Pinnacle Airlines, Inc.’s operations and could incur significant incremental costs in the process. Additionally, Pinnacle Airlines Corp. or a subsidiary other than Pinnacle Airlines, Inc. may only provide airline services to other major airlines using aircraft certificated as having (1) less than 60 seats and (2) a maximum gross takeoff weight of less than 70,000 pounds (or such greater seat or weight limits as may be established under Northwest’s collective bargaining agreement with its pilots).

Risks Related to Our Business and Operations

      We derive 99.4% of our operating revenue from Northwest Airlines. Northwest has incurred significant losses since 2001, including a net loss of $862 million in 2004. Should Northwest continue to experience operating losses, it may have difficulty fulfilling its financial obligations, including the payment of revenues owed to us under the ASA. In addition, Northwest may be forced to seek protection under Chapter 11 of the United States bankruptcy code. Such an action could adversely affect our financial condition.

      Northwest also provides us with a number of services that we need in order to operate, including ground handling services and access to its leased airport facilities. If Northwest were to experience operational difficulties, including a strike, it may not be able to provide these services to us. Since our revenues and profits are dependent on our level of flight operations, a strike at Northwest could adversely affect our financial condition. Northwest has experienced strikes by its employees in the past. Northwest could experience strikes or other operational difficulties that require it and us to cease operations again in the future.

      Our business is labor-intensive. We require large numbers of pilots, flight attendants, mechanics and other personnel. We anticipate that our rapid growth, including the addition of 22 aircraft to our fleet in 2005, will require us to locate, hire, train and retain a significant number of new employees. If we are unable to hire and retain qualified employees at a reasonable cost, we may be unable to complete our expansion plans, which could adversely affect our operating results and our financial condition.

      The airline industry has in the past experienced, and may again in the future experience, a shortage of qualified personnel, specifically pilots and mechanics. In addition, as is common with most of our competitors, we face considerable turnover of our employees. Our pilots often leave to work for major airlines, which generally offer salaries higher than those regional airlines are able to offer. We may not be able to locate, hire, train and retain the qualified employees that we need to carry out our expansion plans or replace departing employees.

      If we are unable to reach agreement with any of our unionized work groups on the terms of their collective bargaining agreements, we may be subject to work interruptions or stoppages. Our bargaining agreement with our pilots becomes amendable on April 30, 2005, and we are already engaged in discussions with pilot’s union representatives. Work stoppages may adversely affect our ability to conduct our operations and fulfill our obligations under the ASA. Under the ASA, adverse consequences could result from a strike or a work stoppage, including possible termination of the ASA.

      Labor costs constitute a significant percentage of our total operating costs. For example, during the year ended December 31, 2004, our labor costs constituted approximately 19% of our total operating costs. Under our ASA with Northwest, our block hour, cycle and fixed cost rates contemplate labor costs that increase at a market rate, which is based on increases in the producer price index (“PPI”) as defined in the ASA, through 2007. Although the ASA generally provides for adjustments to the payments we receive under the agreement to maintain our operating margin between 9% and 11% for 2005 and between 8% and 12% for 2006 and 2007, adjustments will not be made with respect to labor cost increases exceeding standard industry

Item 1.                                 Business

Risks Related to Our Business and Operations (continued)

wages. As a result, an increase in our labor costs over standard industry wages could result in a material reduction in our earnings. Any new collective bargaining agreements entered into by other regional carriers may also result in higher industry wages and increased pressure on our company to increase the wages and benefits of our employees. We have entered into collective bargaining agreements with our pilots, flight attendants and fleet and passenger service employees, which are amendable in 2005, 2006 and 2010, respectively.

      Our other employees are not covered by collective bargaining agreements. Future agreements with our employees’ unions may be on terms that are not economically as attractive as our current agreements or comparable to agreements entered into by our competitors. Any future agreements may increase our labor costs or otherwise adversely affect us. Additionally, we cannot assure you that the compensation rates that we have assumed will correctly reflect the market for our non-union employees, or that there will not be future unionization of our currently non-unionized groups which could adversely affect our costs.

      As of December 31, 2004, we had a stockholders’ deficiency of $7.5 million and our debt accounted for 106.4% of our total capitalization. In February 2005, as discussed in “Recent Developments” in Item 1 of this Form 10-K, we issued $121 million of our 3.25% senior convertible notes due 2025. We used the proceeds to repurchase all of our long-term debt payable to Northwest and to repay the outstanding balance of $5 million under our revolving credit facility with Northwest. After giving effect to these transactions, as of December 31, 2004 our stockholders’ equity would have been $4.0 million and our total debt would have accounted for 96.8% of our total capitalization on a pro forma basis. Our high degree of leverage could:

      On October 14, 2004, one of our aircraft, which was not being operated in commercial service, was involved in an accident with no passengers or flight attendants on board. The two pilots did not survive the accident. The National Transportation Safety Board investigation following the accident and the subsequent FAA inspection, although still ongoing, have not revealed any regulatory violation or negligence on the part of the Company to date. While this accident has not had a material adverse effect on our business, we cannot assure you that we would not be adversely affected by any accident in the future.

      An accident or incident involving one o