UPDATE: Republic’s future unclear after pilots union spurns vote

Republic Airways Holdings Inc.’s future was in doubt after the local pilots’ union recommended against allowing members to vote on the carrier’s contract offer.

Shares in the Indianapolis-based airline business dropped 37 percent Wednesday after the decision was announced.

The leadership of the Teamsters’ local objects to language in the contract preventing it from encouraging members from taking positions at other regional airlines, Local 357 President Jim Clark said. The national union could override the local’s decision and present it to members, he said.

The lack of an agreement is one reason behind a pilot shortage that Republic has warned threatens the company’s future. The alternative to an accord is court-supervised restructuring, said Matt Koscal, vice president of human resources for the carrier, which makes regional flights for larger airlines.

Chapter 11, which protects a company from creditors while it reorganizes, is one possible type of restructuring, Koscal said Friday.

Republic hopes the national union will send the contract to pilots for a vote, Koscal said on Wednesday. He called Local 357’s decision an attempt to undermine the company’s efforts to reach goals that are good for both the pilots and the airline.

“I think their concerns are without merit and a continued effort by this leadership team to prevent the pilots from approving this contract and improving their pay and quality of life,” Koscal said.

Galen Munroe, spokesman for the International Brotherhood of Teamsters, said a decision hasn’t been made yet on whether to overrule Local 357.

Republic shares fell to $2.12 each at Wednesday's closing. The stock has declined 85 percent this year, leaving the company with a market value of $107.9 million.

The airline last month hired Seabury Group LLC to help stabilize its operations and finances, and has been negotiating with American Airlines Group Inc., Delta Air Lines Inc. and United Continental Holdings Inc. to reduce regional flights the rest of this year and possibly into 2016. Republic handles about 1,250 flights daily to about 100 cities in the U.S., Canada and the Caribbean.

“If management is not able to resolve both of these negotiations positively, bankruptcy could be the only option,” Helane Becker, a Cowen & Co. analyst, said in an Aug. 12 report.

The airline is losing as many as 40 pilots a month, while adding about 30, according to Duane Pfennigwerth, an analyst at Evercore ISI. The lack of a new contract with higher pay is one factor behind the attrition. Talks on a new contract date back to 2007.

Under Republic’s latest contract offer, which it presented to pilots Thursday, new first officers would receive a 74-percent pay increase, with a smaller raise for more-senior aviators. The agreement also would give pilots a ratification bonus of $1,000 to $11,000 based on length of service, as well as another bonus on the one-year anniversary of ratification.

Republic pilots would move to at or near the top of the regional airline industry under the contract, said Kit Darby, an aviation consultant in Atlanta who charts pilot pay.

The Teamsters’ proposal contains provisions that would cost Republic more than $1 billion over three years, not including a proposed $348 million ratification bonus, the Indianapolis-based airline said on Aug. 7. In a message posted on its website, officials of Local 357 said the difference had been narrowed to $120 million, excluding the bonus.

Republic warned in July that increased attrition, new U.S. requirements for pilot training and limits on duty hours had forced it to reduce flying for larger airlines. A lawsuit filed by the union to block signing bonuses for new pilots also has driven away potential employees, Republic said.

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