American Air Deal Removes Hurdle to Republic's Bankruptcy Exit - Bloomberg
American Air Deal Removes Hurdle to Republic’s Bankruptcy Exit
Mary Schlangenstein
Schlangenstein
September 2, 2016 — 6:05 PM EDT
- Pact complements earlier agreements with Delta and United
- Accord provides $250 million unsecured claim to American
Republic Airways Holdings Inc. reached a deal to continue providing regional flights for its largest customer, completing its third pact with the biggest U.S. carriers and removing an obstacle on the path to exiting bankruptcy.
The agreement with American Airlines Group Inc. is critical because the world’s largest carrier accounts for about half of Republic’s revenue, the bankrupt regional airline said in a court filing Friday. While the accord will initially reduce Republic’s flying for the airline, there’s an option to increase it with American’s consent.
“The comprehensive commercial settlement and claims resolution with American is a major achievement for the debtors that clears the pathway for a successful emergence from Chapter 11,” Republic said in the filing. The agreement must be approved by U.S. Bankruptcy Court Judge Sean Lane.
The number of aircraft Republic will operate for American, and options for more in the future, were redacted from the legal filing. American will receive a $250 million unsecured bankruptcy claim as part of the settlement, Republic said in a statement. The Indianapolis-based carrier earlier reached agreements to continue operating flights for Delta Air Lines Inc. and United Continental Holdings Inc.
Under the latest deal, American will pay to reconfigure some Embraer E175 aircraft operated by Republic to have 76 seats instead of 80, making them consistent with the rest of the bankrupt carrier’s fleet and in compliance with pilot contracts at its larger partners. As of July 31, Republic was making about 470 daily flights for American, 280 for United and 225 for Delta, according to the court filing.
The regional airline, which ferries passengers from smaller cities to hub airports, sought court protection from creditors in February after struggling with a shortage of pilots. Republic secured a new contract with its workers in 2015 but was unable to negotiate deals with the larger airlines at that time to help cover costs of higher pilot pay.
The case is In re Republic Airways Holdings Inc., 16-10429, U.S. Bankruptcy Court, Southern District of New York (Manhattan).