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Republic selling, who's buying?

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Flying the Line

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Feb 17, 2004
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Republic Airways Studies Selling Jets, Flight Slots for $113 Million Boost
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By Mary Schlangenstein and Mary Jane Credeur - Oct 27, 2011 1:15 PM MT

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Republic Airways Holdings Inc. (RJET) is studying whether to sell planes and airport landing rights in Washington to help raise about $113 million in a second round of restructuring at its unprofitable Frontier Airlines unit.
The plan includes removing a lavatory to make room for three more seats on some of Airbus SAS jets and indefinitely deferring some Embraer SA (EMBR3) aircraft purchases, Chief Executive Officer Bryan Bedford told employees in a memo obtained by Bloomberg News. The shares surged the most in four months.
Republic came up $15 million short of its goal for an unrestricted cash reserve of at least $200 million in the third quarter, Bedford wrote. The Indianapolis-based airline is projected to post a profit when it reports results next month, based on estimates from seven analysts surveyed by Bloomberg.
“Absent asset sales, we will be even further below that target by the end of the year,” Bedford said. “So again, we have to make tough choices, and we will.”
Republic isn’t discussing Bedford’s memo because it was an internal letter to employees and not intended for distribution outside the company, Peter Kowalchuk, a spokesman, said yesterday in an e-mail.
Bedford took on a new business model by operating Frontier under its own brand after Republic bought the Denver-based airline out of bankruptcy in October 2009 for $108.8 million. Republic’s previous focus had been regional flights for carriers such as Delta Air Lines Inc. (DAL) and American Airlines.
Shares Gain
Republic rose 13 percent to $2.89 at 4 p.m. in New York trading, leading a rally among U.S. airlines and making the biggest advance since June 27. The shares have fallen 61 percent this year.
“Whether desperation or necessity, Republic’s plans today underscore the limited number of options it has to shore up a very fragile balance sheet,” said William Swelbar, a research engineer at Massachusetts Institute of Technology’s air transportation center in Cambridge. “The fact that shares are responding favorably to today’s plan does signal that shareholders are yearning for any news or plans that will reduce Frontier’s drag.”
Bedford told employees that Republic is “close to completing” an initial $120 million restructuring at Frontier, including concessions from employees and vendors.
Steps under study in the new restructuring round include whether to sell flight slots at Ronald Reagan Washington National Airport valued at almost $50 million, and 10 Embraer E190 jets, for a total of about $40 million, Bedford wrote.
‘Test the Water’
“We have placed aircraft on the market for sale to test the water on cash values, but we have not made a decision to remove any aircraft as yet,” he said.
Another $20 million in cash would become available under a tentative agreement with Embraer to accept two new E190s next month under a previous order and defer the remaining jets, Bedford wrote. Embraer would return about $3 million in cash deposits to Republic, he wrote.
“Investing limited cash reserves in new aircraft is just impossible right now,” Bedford told employees.
The airline ordered six E190s in November 2010 for delivery from August through December of this year, with a “conditional” order for 18 E190 or E195 jets. Embraer declined to comment on Republic’s pending orders, said Flavia Sekles, communications director for the Sao Jose Dos Campos, Brazil- based planemaker.
Loss Streak
A quarterly profit for Republic would end a streak of three losses that began in the last three months of 2010. Republic’s 2012 business plan is being completed over the next several weeks and will go to directors for approval on Nov. 2, Bedford wrote.
Taking out one of three lavatories on Frontier Airbus A318s and A319s would let the carrier put three more passengers on each flight, boosting sales and spreading operating costs across more seats on each plane, Bedford wrote.
“We can generate much-needed extra revenue from those additional seats with a very small risk to customer satisfaction,” the CEO said.
The change would make Frontier’s jets comparable to similar-sized planes flown by Southwest Airlines Co. (LUV), Allegiant Travel Co. (ALGT) and Spirit Airlines Inc., all of which have two bathrooms, according to the memo.
Frontier can add six seats to its larger A320 jets by switching to a “slim-line” model that also would reduce weight and fuel burn, Bedford wrote. Frontier has 41 A319s, four A318s and 14 A320s, according to its website. Republic, operating for Frontier, flies 15 E190s.
The future for four Bombardier Inc. (BBD/B) Q400 turboprop aircraft and three E170s is being evaluated, Bedford wrote.
“If they can get some hard direction on what they want to be, Frontier has a path to success,” said Michael Boyd, president of consultant Boyd Group International Inc. in Evergreen, Colorado. “You can’t be a remnant of one airline and a remnant of another. It just doesn’t have any direction.”
To contact the reporters on this story: Mary Schlangenstein in Dallas at [email protected]; Mary Jane Credeur in Atlanta at [email protected]
To contact the editor responsible for this story: Ed Dufner at [email protected]
 
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When investors asked UsAirways on it's conference call today about whether they were interested in these slots held by republic they did not comment on it. Hmm.
 
Not 100% sure but I thought that when US sold the DCA slots to Republic that if they ever sold them that US had first shot to get them back. Not sure how that would play out in the DL slot swap in progress right now either.
 
I just flew with a captain who has a buddy in management. He indicated that US is looking to buy those 10 E190s.
 
I am sure someone will correct me if I am wrong but didn't US Airways sell 10 E190's to Republic a little while back. Is the number 10 just a coincidence ? Rumor has been floating about of more new hires and 10 190's coming back to the property for about a week now. Things that make you go HMMMMM.
 
Not 100% sure but I thought that when US sold the DCA slots to Republic that if they ever sold them that US had first shot to get them back. Not sure how that would play out in the DL slot swap in progress right now either.

It sounds like the DCA slots for sale are those used by Frontier. The slots that went with the 170's I believe are still being used for US Airways express flying by Republic. And I believe you are correct that Airways has the right to take them back should Republic decide to sell them.
 
It sounds like the DCA slots for sale are those used by Frontier. The slots that went with the 170's I believe are still being used for US Airways express flying by Republic. And I believe you are correct that Airways has the right to take them back should Republic decide to sell them.
Nope. The slots used by UsAir /170s etc. are owned by RAH due to one of the UsAir bankruptcies, and THEY are for sale back to UsAir. The Frontier slots aren't for sale & we are trying to get more.
 
190 Check Airman friend of mine told me the same thing -- new hires coming by February. Maybe things are finally getting better here...
 
190 Check Airman friend of mine told me the same thing -- new hires coming by February. Maybe things are finally getting better here...

Ohhhh Nooooo You Did'nt. SSSSHHHHHHHH !!!!!!!!! You will jinx it. Last time we spoke well of our prospects here I believe it was the 2nd or 3rd day of class. You remember what was announced like 5 days later don't ya ? It has been nothing but one big party ever since.
 

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