Republic Airways Holdings Inc. (OTCMKTS: RJETQ) bankruptcy are slowly coming to an end after reaching an agreement with its largest customer. An agreement with American Airlines Group to continue providing regional flights, paves the way for the embattled airline to exit bankruptcy. The pact also complements earlier agreements with and Delta Air Lines, Inc. (NYSE:DAL) and United Continental Holdings Inc (NYSE:UAL).
Reaching an agreement with American Airways was critical, given that the world largest carrier accounts for nearly half of Republic Airways revenues. The agreement is also a major achievement for debtors as the same paves the way for the airline to emerge from bankruptcy as part of the restructuring push. Republic Airways has already filed the motion of the agreement for approval in the US bankruptcy court.
“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,” said Bryan Bedford, Chairman, President and CEO of Republic.
Agreement Terms
The agreement clearly stipulates the number of aircraft that Republic Airways will operate on behalf of American Airlines with the option of increasing the same in future. American Airlines is also to receive $250 million in unsecured bankruptcy claim as part of the settlement. American Airlines has also agreed to pay for the reconfiguration of some of the Embraer E175 aircraft to 76 seats from 80.
Republic is trying to pick itself from a yearlong mess that threatened its existence prompting bankruptcy filing. Last year, it lost $27.1 million on revenues of $1.3 billion making it impossible for it to meet its obligation to other larger airlines. National pilot shortage compounded by a standoff with employed pilots over contracts left the airline at risk of going out of business.
The agreements with Delta United and America Airline provide a new lease of life as Republic Airways Holdings Inc. (OTCMKTS:RJETQ) moves to pick itself from the murky waters of bankruptcy. However, it faces an uphill task to return to profitability given the events of the past year.
