Airlines and Lawsuits and Law and Transportation, Distribution & Logistics

Republic Airways loses DOT appeal to keep financial info from public, other regional airlines

February 16, 2009

The U.S. Department of Transportation has denied a request by Republic Airways Holdings to continue keeping financial data on two of its airlines confidential. It's a practice the CEO of JetBlue Airways called "gaming" of DOT rules.

Indianapolis-based Republic in recent years argued successfully to have DOT withhold from public disclosure certain financial details of its Republic Airlines and Shuttle America. All airlines provide the data to DOT on a monthly basis as part of so-called Form 41 reports. Republic also owns Chautauqua Airlines.

Republic Airways argued that DOT's disclosure of information about aircraft costs and income of its individual carriers would allow competitors to figure out details of fee-for-service contracts with major airlines, allowing them to under-bid Republic carriers for future contracts.

As a publicly traded company, Republic Airways reports financial results of its carriers on a consolidated basis.

It maintained that, because Republic Airlines and Shuttle America flew only a single aircraft type and each flew for just a handful of carriers, it would be easy for competitors to calculate reimbursement and other sensitive information.

At the same time, Republic Airways argued that it cannot obtain comparable information from competitors because other regional airlines operate either multiple aircraft types and/or fly for a number of mainline customers "so that the financial information is bundled in a way that cannot be disaggregated."

Republic Airlines flies for US Airways Express and Midwest Connect, with a fleet of 65 Embraer 170- and 175-seat planes.

Shuttle America operates 50 of the aircraft as Delta Connection, United Express and Mokulele Airlines.

Disclosure would give competitors "unfair and unilateral" insight into Shuttle and Republic Airlines and "undermine" the fee-for-service sector, Republic Airways argued.

"This directly contradicts the [DOT's] stated 'mandate to encourage, develop, and maintain an air transportation system that relies primarily on market forces.'"

DOT ruled last month that the two Republic Airways carriers failed to prove they would suffer "substantial competitive harm" from DOT's making the information public.

JetBlue CEO David Barger wrote DOT in September to complain about the confidentiality status of the Republic Airways carriers and of Virgin America.

"The gaming of the department's procedural system by a few carriers in continually withholding this data from public view places those of us who comply ... at a clear disadvantage," Barger said.

The DOT agreed, saying numerous carriers that have a single or very large customer already have their financial information publicly available.

It also said Republic's agreements with other carriers are "hardly unique" and that the airlines appear "to equate competition with the likelihood of substantial competitive harm—hardly the same standard."

At least one industry expert agrees that release of the Republic Airlines and Shuttle America information likely won't amount to much in the way of competitive harm.

"That's a crock," said Michael Boyd, CEO of Boyd Group International, an Evergreen, Colo., aviation consultancy.

Boyd said he wasn't surprised Republic Airways would at least test the department. The company has not been timid, he said, as evidenced by its growth in the market against such competitors as Phoenix-based Mesa Air Group and Memphisbased Pinnacle Airlines.

"This is another indication of a very aggressive company," he said.

Republic Airways does not plan to challenge the DOT decision, airline spokesman Carlo Bertolini said.

Shuttle's profit in the third quarter was $5.8 million on revenue of $116.5 million, while Republic had profit of $6.4 million on revenue of $86.5 million, according to DOT data the two carriers must now report.

Their parent, Republic Airways, plans to announce fourth-quarter earnings on Feb. 17. In the third quarter, it earned $17 million on revenue of $385 million.

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