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republic to sell frontier

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paddlehigh

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Nov 30, 2005
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Nov. 8 (Bloomberg) -- Republic Airways Holdings Inc. jumped the most since the shares began trading in 2004 after expanding its restructuring of Frontier Airlines and saying it plans to sell or spin off the carrier acquired out of bankruptcy in 2009.
Agreements have been reached to cut lease payments on some planes, defer deliveries of others and return two to lessors, the company said in a statement. Chief Executive Officer Bryan Bedford said today he expects an unspecified number of job cuts, and asset sales and new debt also are being evaluated.
Buying Frontier moved Indianapolis-based Republic away from its traditional role of providing regional flights for carriers such as Delta Air Lines Inc. and into competition on main jet routes. Analysts surveyed by Bloomberg project the parent company will post a second straight annual loss in 2011.
“It is time to start to separate the two businesses,” Bedford said on a conference call. Frontier “is going to be attractive either to private equity or to our shareholders or potentially to a strategic investor.”
Republic surged 61 percent to $4.34 at the close in New York, the biggest daily percentage gain since its initial public offering in May 2004. The shares have slid 41 percent this year.
Bedford said Republic was hiring advisers to “begin the process of looking for shareholder-friendly options to monetize” Frontier. The turnaround effort at the unit includes parking smaller regional jets to focus on flying larger Airbus SAS and Embraer SA models.
Job Cuts
Frontier’s 2012 capacity will fall as much as 12 percent from this year “and likely result in a similar reduction in staffing,” said Peter Kowalchuk, a spokesman for the unit.
“We don’t expect layoffs or involuntary furloughs,” he said in an e-mail. “We are confident we will be able to reach our staffing targets through attrition over the course of the next year.”
Absent additional action, the company’s unrestricted cash balance may fall as low as $150 million by the end of this quarter, Republic said.
The company said it achieved all but $10 million of an initial $120 million restructuring of Frontier that included concessions from employees, vendors and aircraft lessors. That set the stage for Republic to return to its roots as a commuter carrier and separate from Frontier, Bedford said.
Third-quarter profit excluding some items declined to $20.4 million, or 40 cents a share, from $25.9 million, or 70 cents, a year earlier. On that basis, Republic beat the 24-cent average of seven analyst estimates compiled by Bloomberg.
Net Income
Including $10 million in pretax costs related to a storm in Denver and expenses linked to fuel-purchase contracts and fleet changes, net income declined 58 percent to $9 million, or 18 cents, from $21.2 million, or 58 cents. Revenue increased 7.9 percent to $767.9 million.
The profit followed three consecutive quarterly losses.
The company earlier said it would maintain a minimum unrestricted cash balance of $200 million, a goal it fell short of last quarter.
Republic also said today it will take steps to reduce operating costs of its remaining 32 50-seat aircraft, including seeking concessions from lessors and vendors similar to those sought for Frontier’s Airbus and Embraer aircraft.
Concessions from lessors will reduce the company’s Airbus A319 lease payments by $26 million in 2012. Republic will return four A319s in 2012’s first quarter.
Embraer Deliveries
While Republic will accept of two Embraer E190 planes this quarter, it deferred delivery of four more E190s indefinitely. It will end leases early on two additional E190s, returning them to lessors in late 2012.
Embraer will retain $2.2 million of pre-delivery deposits to help offset the deferral and return $2.8 million to Republic, the company said. The remaining $12 million in deposits will be applied toward the two E190s Republic will take this month.
Bedford told employees in a memo last month that such an agreement with Embraer on deferring new planes would make about $20 million in cash available to Republic.
Republic said it completed a previously announced agreement to buy 80 planes from Airbus that it expects will enter Frontier’s fleet in 2016’s second half. It also finished an accord with engine maker CFM International Inc. for a fuel-burn guarantee on the new Airbus planes that sets future spare engine pricing and reduced overhaul costs for existing Airbus engines.
Steps under study in a second round of restructuring at Frontier, totaling about $113 million, include selling flight slots at Ronald Reagan Washington National Airport that Bedford said today were valued at $80 million, and 10 E190s.
Capacity in Denver and Milwaukee will be reduced this quarter and next year, while flying will increase in Kansas City, Missouri. Milwaukee capacity will tumble as much as 10 percent this quarter and as much as 13 percent in the first quarter of 2012, Vice President Daniel Shurz said on the call.
--Editors: Ed Dufner, John Lear
 
When are the regional management types going to learn from the ACA and Express Jets of the world. Add Republic to the mix of epic fail.
 
When are the regional management types going to learn from the ACA and Express Jets of the world. Add Republic to the mix of epic fail.

You need to learn the history of what happened with ExpressJet branded operation. The closing of branded was NOT the same as what happened to ACA.
 
Best thing that could have happened to the Rjet pilots drooling over the F9 seats. Best of luck to the F9 guys, you deserve better.
 
Hopefully a GOOD airline will pick them up. F9 guys don't deserve to be saddled with the RAH cross.
 

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