Indianapolis-based regional airline Republic Airways Holdings Inc. narrowly escaped a bankruptcy filing this fall when it finally reached a new three-year contract with its 2,100 pilots.
Republic and its pilots’ union had been negotiating a contract for more than eight years. But things heated up through 2015 as Republic felt the pressure of a national shortage of pilots.
Here’s in part how the problem originated: After investigations into a 2009 Colgan Air Flight crash revealed inadequate pilot training, Congress urged the Federal Aviation Administration to increase the minimum required flight time before pilots could become certified.
In late 2013, the rules went into effect, increasing from 250 hours to 1,500 hours the required minimum flight time. But starting salaries in the regional airline industry are low. That has created a situation in which the high cost of getting certified isn’t worth the low salary.
The shortage meant Republic didn’t have enough pilots to meet its contract schedules with the major U.S. airlines it works for—American Airlines, United Airlines and Delta Air Lines. In early October, Delta sued Republic over the lost flights.
Tensions between the International Brotherhood of Teamsters Local 357 and Republic had almost reached a boiling point before the agreement was reached in October. IBT Local 357 sued Republic in July, saying the airline violated the Railway Labor Act. The airline called the lawsuit a distraction tactic.
The deal the sides finally reached calls for a $50-million-per-year investment from Republic over the life of the contract.
The company’s performance is still shaky. Republic recently reported a quarterly profit of $2.9 million, or 6 cents per share, compared with profit of $18.5 million, or 35 cents per share, in the same period of 2014.
And investors still feel the stock is risky. It fell 26 percent in November alone.