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American Airlines deal gets Republic closer to bankruptcy exit

September 2, 2016

Indianapolis-based Republic Airways Holdings Inc. has reached an agreement to continue providing regional flights for American Airlines—a step Republic says “clears the pathway for a successful emergence” from its Chapter 11 bankruptcy case.

Republic said its agreement with American is especially important because American is Republic’s largest single customer, representing about half of the regional carrier’s revenues.

“This is a major milestone in our journey toward a successful restructuring," Republic CEO Bryan Bedford said in a news release issued Friday afternoon.Our amended agreement with American Airlines secures a majority of our flying commitments and importantly secures the size and scope of our ongoing Ejet fleet.”

Under the agreement, Republic will reduce both its flight schedule and the number of planes it flies for American. Details of these reductions were redacted in court documents. This reduction “will reduce the debtors’ flying operations for American to sustainable levels,” while giving the option for Republic to increase its flying, a court document says.

Also under the agreement, American will pay to convert a number of aircraft from 80-seat planes to 76-seat planes. Republic says this will bring all of its aircraft into size alignment, allowing it to operate more efficiently under a single operating certificate.

American will also receive a $250 million unsecured bankruptcy claim, the agreement says.

Republic has already come to agreements with Delta Air Lines Inc. and United Airlines. As of July 31, Republic was providing about 470 flights a day for American, about 225 flights a day for Delta and about 280 flights a day for United.

Republic filed for Chapter 11 bankruptcy protection in February. The regional airline lost $27.1 million on revenue of $1.3 billion in 2015.

A national pilot shortage combined with Republic’s years-long dispute with its pilots over a new contract left the company unable to fulfill all of its obligations to larger airlines. Republic and the pilots reached a deal last fall, but the pilot shortage continues.

“The comprehensive commercial settlement and claims resolution with American is a major achievement for the debtors that clears the pathway for a successful emergence from Chapter 11,” Republic said in a court filing.

The agreement between Republic and United still must be approved in U.S. Bankruptcy Court. The court is set to consider the agreement on Sept. 21.

Republic employs about 5,800 people, including about 1,600 locally.
 

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