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Republic studies $113M boost from sale of planes, slots

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Republic Airways Holdings Inc. is considering the sale of planes and airport landing rights in Washington, D.C., to help raise about $113 million in a second round of restructuring at its unprofitable Frontier Airlines unit.

The plan also includes removing a lavatory to make room for three more seats on some of the carrier’s Airbus SAS jets and indefinitely deferring some aircraft purchases from Embraer SA, CEO Bryan Bedford told employees in a memo obtained by Bloomberg News.

Republic fell $15 million short of its goal to keep an unrestricted cash reserve of at least $200 million in the third quarter, Bedford wrote. The Indianapolis-based airline is projected to post a profit when it reports results next month, based on estimates from seven analysts surveyed by Bloomberg.

“Absent asset sales, we will be even further below that target by the end of the year,” Bedford said. “So again, we have to make tough choices, and we will.”

Republic isn’t discussing Bedford’s memo because it was an internal letter to employees and not intended for distribution outside the company, Peter Kowalchuk, a spokesman, said Wednesday in an e-mail.

Bedford took on a new business model by operating Frontier under its own brand after Republic bought the Denver-based airline out of bankruptcy in October 2009 for $108.8 million. Republic’s previous focus had been regional flights for carriers such as Delta Air Lines Inc. and American Airlines.

Republic is “close to completing” an initial $120 million restructuring at Frontier, including concessions from employees and vendors, Bedford told employees.

Steps under study in the new restructuring round include whether to sell flight slots at Ronald Reagan Washington National Airport valued at almost $50 million, and 10 Embraer E190 jets, for a total of about $40 million, Bedford wrote.

“We have placed aircraft on the market for sale to test the water on cash values, but we have not made a decision to remove any aircraft as yet,” he said.

Another $20 million in cash would become available under a tentative agreement with Embraer to accept two new E190s next month under a previous order and defer the remaining jets, Bedford wrote. Embraer would return about $3 million in cash deposits to Republic, he wrote.

“Investing limited cash reserves in new aircraft is just impossible right now,” Bedford told employees.

The airline ordered six E190s in November 2010 for delivery from August through December of this year, with a “conditional” order for 18 E190 or E195 jets. Embraer declined to comment on Republic’s pending orders, said Flavia Sekles, communications director for the Sao Jose Dos Campos, Brazil- based planemaker.

A quarterly profit for Republic would end a streak of three losses that began in the last three months of 2010. The shares have tumbled 65 percent this year, closing Wednesday at $2.55 each.

Republic’s 2012 business plan is being completed over the next several weeks and will go to directors for approval on Nov. 2, Bedford wrote.

Taking out one of three lavatories on Frontier Airbus A318s and A319s would let the carrier put three more passengers on each flight, boosting sales and spreading operating costs across more seats on each plane, Bedford wrote.

“We can generate much-needed extra revenue from those additional seats with a very small risk to customer satisfaction,” the CEO said.

The change would make Frontier’s jets comparable to similar-sized planes flown by Southwest Airlines Co., Allegiant Travel Co. and Spirit Airlines Inc., all of which have two bathrooms, according to the memo.

Frontier can add six seats to its larger A320 jets by switching to a “slim-line” model that also would reduce weight and fuel burn, Bedford wrote. Frontier has 41 A319s, four A318s and 14 A320s, according to its website. Republic, operating for Frontier, flies 15 E190s.

The future for four Bombardier Inc. Q400 turboprop aircraft and three E170s is being evaluated, Bedford wrote.


 

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  1. Cramer agrees...says don't buy it and sell it if you own it! Their "pay to play" cost is this issue. As long as they charge customers, they never will attain the critical mass needed to be a successful on company...Jim Cramer quote.

  2. My responses to some of the comments would include the following: 1. Our offer which included the forgiveness of debt (this is an immediate forgiveness and is not "spread over many years")represents debt that due to a reduction of interest rates in the economy arguably represents consideration together with the cash component of our offer that exceeds the $2.1 million apparently offered by another party. 2. The previous $2.1 million cash offer that was turned down by the CRC would have netted the CRC substantially less than $2.1 million. As a result even in hindsight the CRC was wise in turning down that offer. 3. With regard to "concerned Carmelite's" discussion of the previous financing Pedcor gave up $16.5 million in City debt in addition to the conveyance of the garage (appraised at $13 million)in exchange for the $22.5 million cash and debt obligations. The local media never discussed the $16.5 million in debt that we gave up which would show that we gave $29.5 million in value for the $23.5 million. 4.Pedcor would have been much happier if Brian was still operating his Deli and only made this offer as we believe that we can redevelop the building into something that will be better for the City and City Center where both Pedcor the citizens of Carmel have a large investment. Bruce Cordingley, President, Pedcor

  3. I've been looking for news on Corner Bakery, too, but there doesn't seem to be any info out there. I prefer them over Panera and Paradise so can't wait to see where they'll be!

  4. WGN actually is two channels: 1. WGN Chicago, seen only in Chicago (and parts of Canada) - this station is one of the flagship CW affiliates. 2. WGN America - a nationwide cable channel that doesn't carry any CW programming, and doesn't have local affiliates. (In addition, as WGN is owned by Tribune, just like WTTV, WTTK, and WXIN, I can't imagine they would do anything to help WISH.) In Indianapolis, CW programming is already seen on WTTV 4 and WTTK 29, and when CBS takes over those stations' main channels, the CW will move to a sub channel, such as 4.2 or 4.3 and 29.2 or 29.3. TBS is only a cable channel these days and does not affiliate with local stations. WISH could move the MyNetwork affiliation from WNDY 23 to WISH 8, but I am beginning to think they may prefer to put together their own lineup of syndicated programming instead. While much of it would be "reruns" from broadcast or cable, that's pretty much what the MyNetwork does these days anyway. So since WISH has the choice, they may want to customize their lineup by choosing programs that they feel will garner better ratings in this market.

  5. The Pedcor debt is from the CRC paying ~$23M for the Pedcor's parking garage at City Center that is apprased at $13M. Why did we pay over the top money for a private businesses parking? What did we get out of it? Pedcor got free parking for their apartment and business tenants. Pedcor now gets another building for free that taxpayers have ~$3M tied up in. This is NOT a win win for taxpayers. It is just a win for Pedcor who contributes heavily to the Friends of Jim Brainard. The campaign reports are on the Hamilton County website. http://www2.hamiltoncounty.in.gov/publicdocs/Campaign%20Finance%20Images/defaultfiles.asp?ARG1=Campaign Finance Images&ARG2=/Brainard, Jim

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