Republic Airways Cuts Capacity Outlook to Unchanged on Fuel
By Mary Schlangenstein - May 3, 2011 12:35 PM ET
Republic Airways Holdings Inc. (RJET), the operator of Frontier Airlines, slashed capacity growth plans this year to unchanged from an expansion of as much as 5 percent because of surging fuel costs.
The company, which also flies regional routes for larger carriers, is working to reduce Frontier expenses by $100 million to have “a sustainable business model,” Chief Executive Officer Bryan Bedford said on a conference call today.
“It’s an aggressive plan and we’ve got to get the rest of the way there,” he said. “It’s certainly necessary work to ensure we have a viable and sustainable franchise.”
Republic, based in Indianapolis, joins four of the five biggest U.S. carriers in trimming growth plans for the year in response to a 32 percent rise in fuel prices since the end of 2010. U.S. carriers also have boosted fares to help offset the increased costs.
Republic fell 8 cents, or 1.5 percent, to $5.27 at 12:34 p.m. New York time in Nasdaq Stock Market trading. The shares declined 27 percent this year before today.
The company bought Frontier out of bankruptcy in 2009 shortly after acquiring Midwest Air Group Inc. The Frontier purchase added a new business to its traditional operation of ferrying passengers to hub airports for carriers such as Delta Air Lines Inc. (DAL) and United Continental Holdings Inc.
“Over the next few months we’ll be engaging all of our business partners to achieve meaningful expense savings,” Bedford said.
Quarterly Loss
Republic today also reported a first-quarter loss excluding some items of $18.6 million, or 39 cents a share. That was wider than the 36-cent average of seven analysts’ estimates compiled by Bloomberg. Sales rose 8.3 percent to $659.1 million.
Republic said rising jet-fuel prices will add about $90 million to its costs this year, and forecast a second- quarter loss. The average of seven analysts’ estimates was for an adjusted profit of 29 cents.
Republic is moving six Embraer E170 aircraft to flying for Delta, joining eight of the planes already at the bigger carrier. Republic wants to move three remaining E170s into fixed-fee service by the end of this year, Bedford said.
A disruption of supplies from Japan has caused a two-month delay in planned deliveries to Frontier of six new Embraer E190s to fill the void, he said. The airline now expects to have three to four of the planes flying in 2011.
To contact the reporter on this story: Mary Schlangenstein in Dallas at
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To contact the editor responsible for this story: Ed Dufner at
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