Originally Posted by Chancellor

Dear Associates,

Good morning. I hope this update finds you well today. It’s been another week back in the deep freeze. Like many of you, I am ready for spring to arrive, yet I know we still have another six to eight weeks of winter to endure. The older I get, the more I want to move Headquarters to Florida. Don’t worry … no plans to relocate our HQ.

We just wrapped up our quarterly leadership meeting this evening, and there are number of rumors circulating these days I would like to address. First, let’s talk about crew bases. Aside from the normal, “when will we open a west coast base?” there seems to be a lot of concern about the possibility of our existing crew bases shrinking, particularly ORD.

First, our codeshare partners adjust their network planning regularly. For example, both AA and UA are making considerable network adjustments to account for the transition of Air Wisconsin flying from AA to UA. We also see reductions in our service when a codeshare partner determines a particular city pair is better served by mainline metal. While these types of network adjustments are a regular occurrence among our codeshare partners, the short answer is despite some of these shifts, we do not see any of our crew bases being materially affected one way or the other.

Regarding a west coast base, we do continually ask United to consolidate our westward flying to achieve sufficient schedule density to justify a new crew base. These conversations are “on-going,” and we remain optimistic we will be able to open a new westward-leaning crew base in Q2 of 2018. Such a development likely also would include development of a new westward line maintenance station. We don’t want to open a new base until we are confident we can keep the base open for the long haul. Please be patient as we continue to negotiate to obtain the necessary schedule density and commitments from our mainline partners to give us the protections we need to establish a new crew base.

What about growth in 2018? We are focused on growing our fleet between 14 and 20 aircraft per year over the next couple of years, and we are aligning our staffing plans to be ready to take advantage of such growth opportunities. In 2018, we already have added one aircraft to our American CPA. Separately, we are in discussions to add two more Ejets in September under a long-term CPA amendment with a codeshare partner. Lastly, we are in active discussions with a codeshare partner to add an additional 12 to 15 aircraft, which would begin to arrive on property during the back half 2018.

As we evaluate each growth opportunity, we are committed to ensuring we do not jeopardize the outstanding operational reliability you are delivering to our partners and our guests. To ensure this, we will not overextend our crews. Getting our new Pilot agreement ratified certainly puts us in a much better position to build our Pilot corps, and as such we now feel confident we can commit to additional growth. Solidifying such growth in 2018 will have a positive benefit on future crew bases and the scheduling efficiency of our existing bases. Stayed tuned.

Finally, let me address the issue of consolidation of regional carriers. Twice each month I visit our Training Center to meet our new hire classes, congratulate our Captain upgrades, and visit with our recurrent ground school classes. Over the course of a year, I am able to visit with the majority of our flight crews, which I dearly enjoy. Recently, the topic of consolidation has been a lot more frequent inquiry during these visits the past few months. So let me say for the record, there are no pending transactions on the horizon.

I have not been shy about expressing my belief that the regional market is too fragmented and could benefit from consolidation. However, I have been equally critical that the potential adverse social costs and operational disruption could easily wipe away those benefits. I’ve also been candid about the failure we experienced with Frontier. Of course, the lesson learned is that we cannot (and will not) engage in any form of merger and acquisition activity without engaging our labor leadership teams on the front end. If any form of consolidation involving Republic is going to be successful, it must be accomplished with the full participation of the leadership of the respective labor groups. This is the only manner to ensure social concerns are addressed on the front end of any consolidation effort.

Since the ratification of the 2015 Tentative Agreement, we have been working hard to develop a relationship of transparency and collaboration with our labor leadership teams. The ratification of the recent Letter of Agreement with our Pilots shows the promise of what the future of engaged labor relations can hold at Republic.

Thank you for everything you do, and may God bless you and yours.

Bryan