Republic squeeze worsens as pilot union lets local skip vote

Republic Airways Holdings Inc. may be moving closer to a possible bankruptcy after national Teamster officials backed a local pilot union’s decision against voting on the carrier’s final contract offer.

The Teamsters “will not take the extraordinary step of ordering an election over the unanimous and emphatic objections of Local 357’s democratically elected local leadership,” General President James Hoffa said in a letter Tuesday to Local 357.

Republic shares plunged in after-hours trading on the Teamsters’ decision, because the airline has said it might be forced into a court-supervised restructuring if a new contract isn’t secured. A Chapter 11 filing is one possibility, Matt Koscal, vice president of human resources at Republic, said on Aug. 21.

The Teamsters’ decision was “deeply disappointing,” Republic CEO Bryan Bedford said in a written statement. The company will leave its contract proposal on the table for a vote, he said.

“Given the gravity of the situation, we believe these circumstances are extraordinary and that the LBFO should be brought before our pilots as soon as possible,” Bedford said, referring to Republic’s “last, best and final offer.”

Pilot shortage

The lack of a new accord that would boost pay is contributing to a pilot shortage at Republic, which has forced the carrier to reduce regional flying for larger airlines. Republic has said its proposal would provide pay that would lead the regional airline industry and improve quality of life with work rule and benefit changes.

Republic’s shares have been battered by the dispute. The stock tumbled 21 percent after-hours, to $2.40 per share, after plunging 79 percent this year through the end of regular trading Tuesday. The airline has said it won’t resume talks if pilots reject its final offer.

Union letter

Local 357 leaders refused on Aug. 26 to send the final offer to a vote in part because Republic didn’t provide data to support pay proposals, modified contract language previously agreed to, and added wording that prevented some communications between the local and international unions and Republic’s pilots, according to a letter sent to members.

“I hope they will come back to the negotiating table,” Local 357 President Jim Clark said Tuesday. “They haven’t been interested in that for quite awhile. We want to sit down with them and negotiate contract language.”

Republic hired Seabury Group LLC in July to help stabilize operations and finances, and has been negotiating with American Airlines Group Inc., Delta Air Lines Inc. and United Continental Holdings Inc. to cut back on regional flights for 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.

Indianapolis-based Republic is losing as many as 40 pilots a month, while adding about 30, according to Duane Pfennigwerth, an analyst at Evercore ISI.

Talks on a new contract date back to 2007, and pilots rejected a tentative contract agreement in 2014.

Pay increase

Under Republic’s latest contract offer, 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’ pay would move to or near the top of the regional airline industry under the contract, said Kit Darby, an aviation consultant in Atlanta.

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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