Republic Airways Emerges From Chapter 11 as Industry Faces Headwinds
Republic Airways, the second-largest regional airline in the United States, announced that it has emerged from its Chapter 11 restructuring. According to its court-approved reorganization plan, Republic will remain a privately held company.
“Today starts a new chapter for Republic,” said Republic CEO Bryan Bedford. “We have streamlined the airline around a single fleet of E-Jets and a single operating certificate. These operational simplifications, along with restructured commercial agreements with each of our core business partners, has positioned Republic to deliver on its mission.”
As of March 31, Republic operated a fleet of 170 Embraer E170/E175 dual-class aircraft, and it expects to expand its fleet by more than 10% during the remainder of 2017 with the delivery of additional E-Jet aircraft. The airline offers scheduled passenger service with about 900 flights daily to more than 100 cities in the United States, Canada, the Caribbean and Central America.
But it emerges at a time when the industry is facing new headwinds. Airlines have been in the limelight lately, with the social backlash to the United Continental incident of dragging a passenger off a plane and American Airlines staff instigating passengers. Southwest has had its share of customers tweeting about bad service at the gates.
But last week’s disappointing earnings reports from American Airlines Group Inc. (NASDAQ: AAL) and Southwest Airlines Co. (NYSE: LUV) were more driven by financials than social justice. Even though Southwest hit record revenue in its first quarter, this was still not enough to balance out the rising costs in the field.
While United Continental Holdings Inc. (NYSE: UAL) recent quarterly results were better than Wall Street had expected, they were of course overshadowed by the bad press surrounding that violent removal of a passenger from a flight. United CEO Oscar Munoz said in the earnings report, “In the first quarter of 2017, our financial and operational performance gives us a lot of confidence about the foundation we are building. It is obvious from recent experiences that we need to do a much better job serving our customers.”
Industry woes, including those earnings trends, higher fuel prices and even some good old-fashioned labor cost pressure, have also called into question the recent forays of Warren Buffett and Berkshire Hathaway Inc. (NYSE: BRK-A) into airlines — this after Buffett’s blatant avoidance of airline stocks for many years. It was portfolio managers Todd Combs or Ted Weschler who took the airline stakes, though Buffett himself subsequently directed Berkshire Hathaway to purchase shares of Southwest as well. Now investors might wonder if the Oracle of Omaha had been right about airline stocks for all those years.