Republic Airways Holdings Inc., one of the biggest U.S. regional carriers, filed for bankruptcy protection, succumbing to the pressures of a pilot shortage and a shift by large network airlines to using larger planes.
Indianapolis-based Republic, which flies on behalf of the commuter brands of carriers including American Airlines Group Inc. and Delta Air Lines Inc., said on Thursday that it plans to maintain operations while it restructures.
Regional carriers have struggled to find enough pilots because of relatively low starting salaries and new rules by U.S. regulators requiring new aviators to have additional training. Republic has been particularly hard hit because of an outdated pilot contract that made it less attractive than its rivals to prospective hires. It had warned last year it could be pushed into bankruptcy protection.
Its pilots approved a new contract in October, and the company as recently as last month expressed optimism it could work through the pilotshortage.
The major U.S. airlines have been generating record profits amid falling fuel prices and robust traffic growth, but their regional partners remain in a state of flux as big carriers look to cut costs and shift to larger planes, leaving the smaller companies to find homes for the tinier jets.
Major airlines outsource nearly half their domestic short-haul flights to operators such as Republic and SkyWest Inc., mainly using smaller regional jets and turboprops that are being replaced with larger planes more popular with higher-paying business customers.
Republic also has been forced to ground some of its planes because of the pilot shortage, which led to a lawsuit from Delta claiming damages because of the loss of service.
In a regulatory filing, Republic has said it failed to reach a deal with big creditors and partners, but had agreed with Delta to stay the outstanding litigation.
On Thursday in a statement, Republic said it “worked hard to avoid this step,” but its “negotiating effort with key stakeholders shows no apparent prospect of a near-term resolution.” The airline declined to make an executive available for interview.
American Airlines said it would “work with Republic and our other regional partners to make sure we take care of our customers.”
Delta said it expected “business as usual.”
United said: “We are working with Republic to continue to serve our customers and do not expect an impact.”
Republic last summer hired airline restructuring specialist Seabury Group LLC to explore its options after a tumultuous five-year period that included expanding its geographical footprint by acquiring Milwaukee-based Midwest Airlines and a push into the low-cost segment by acquiring Denver-based Frontier Airlines. It sold Frontier to Indigo Partners in 2013.
Republic had debts of $2.98 billion and assets of $3.56 billion at the time of filing, according to court documents. Its stock fell 77% to 78 cents in after-hours trading Thursday.
Republic said it is operating its normal flight schedules, and salaries and benefits are unchanged.
Republic, at the time of the filing, had a fleet of 242 aircraft operating more than 1,000 daily flights for American, Delta and United Continental Holdings Inc. It also held orders with Brazil’s Embraer SA for 55 E175 regional jets that would fly with American and United.
The carrier is also a major customer of Bombardier Inc. ’s CSeries CS300 jetliner, with firm orders for 40 aircraft. However, Republic’s commitment to the Canadian plane maker has been in doubt, and it has since stopped paying pre-delivery deposit payments, according to its filings. The plane maker has long-considered the completion of the order as unlikely as it has shifted away from flying larger jets, a person familiar with the order said.
The Wall Street Journal
Republic Airways files for Chpt. 11
