Shares in Republic Airways Holdings Inc. continued to plunge Wednesday morning on investor concern that a bankruptcy is possible after Teamsters officials declined to force a vote on the regional carrier’s final contract offer to pilots.
The airline has said a court-supervised restructuring is an option if a new contract isn’t secured. After Teamsters General President James Hoffa refused Tuesday to overturn the decision by Local 357 negotiators to skip an election, Republic said it would keep the proposal on the table.
Republic stock dropped as much as 32 percent Wednesday morning before climbing back slightly. Shares were down 24 percent at midday, to $2.29 each. The shares had slumped 79 percent this year through Tuesday.
The Teamsters’ decision was “deeply disappointing,” Republic CEO Bryan Bedford said in a written statement. “Given the gravity of the situation, we believe these circumstances are extraordinary” and that pilots should be allowed to vote on the offer.
A lack of pilots is forcing the airline to cut the flights it makes for larger carriers, and the company says it needs a new agreement—with higher pay—to stop attrition and make new hires. Republic has also blamed increased U.S. requirements for pilot training and limits on duty hours for the shortage.
“The only option for the airline may be renegotiating its contracts with its airline partners, and the only way to do that may be through the courts,” Helane Becker, a Cowen & Co. analyst, wrote in a note Wednesday. “We would continue avoiding these shares.”
Becker downgraded the stock to underperform from market perform.
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.
The union hopes a new counterproposal completed last weekend will entice Republic back to the negotiating table, Local 357 President Jim Clark said Tuesday. Republic previously said it would not resume talks.