Successful Pact with American Airlines Moves Republic Airways Closer to Exit from Bankruptcy

by San Antonio Attorney

Beleaguered regional carrier Republic Airways Holdings Inc. has recently clinched a major deal to continue providing regional flights for American Airlines—the third in a series of  key agreements that could potentially turn the tables for Republic and ease its way in climbing out of bankruptcy.

In a court filing last Friday, Republic acknowledged the deal as a crucial point towards solvency, given that American Airlines Group Inc.  remains as the regional airline’s biggest and most important client, generating more than half of Republic’s current revenue.

According to Republic, they consider the settlement and resolution of claims with American as a big accomplishment for the debtors.  Also, these will clear the way for a triumphant exit from Chapter 11 bankruptcy, the Republic said.

Under the latest arrangement, American Airlines agreed to reconfigure a number of Embraer E175 aircraft operated by Republic to reduce the number of seats from 80 to 76, making them consistent with the rest of the fleet used by Republic.  American Airlines also agreed to rework Republic’s pilot contracts in compliance with existing standards with American’s larger partners.  In return, American is set to receive a $250 million unsecured bankruptcy claim as part of the settlement.

While the current deal shrank the number of flights to be supplied by Republic, the option to increase the number of flights remains, as long as American Airlines approves.  While the actual amount of flights to be provided was redacted from court documents, it must be noted that the struggling regional airline previously signed similar agreements to continue providing flights for Delta Air Lines Inc.  and United Continental Holdings Inc.  Based on the data contained in last Friday’s court filing, as of July 31 of this year, Republic was making about 470 daily flights for American, 280 for United and 225 for Delta.  The agreement is subject for the approval of U.S. Bankruptcy Court Judge Sean Lane.

The Indianapolis-based carrier, known for carrying passengers to and from smaller cities and major hubs, was granted court protection from creditors last February after suffering from a lack of pilots.  Republic signed a new contract with its employees in 2015 but failed to negotiate deals with larger airlines to cover burgeoning operating costs and higher pilot wages.

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