On Thursday, Republic Airways filed for bankruptcy protection. I figured you might have some questions, so I'll answer them here.
What is Republic Airways?
Republic Airways is an Indianapolis-based company that owns two airlines - Republic Airlines and Shuttle America. You may not be familiar with either airline. But Republic Airlines flies as United Express and American Eagle, while Shuttle America flies as United Express and Delta Connection.
If you fly on regional jets, especially on the East Coast, chances are you've flown on one of the two airlines owed by Republic Airways.
Why is Republic Airways flying for bankruptcy? I thought airlines were making lots of money.
Republic has been making money, too. Just not that much of it. In the third quarter of last year, the most recent period for which data is available, it made $2.9 million.
Republic has a different model than major U.S. airlines. It does not sell you tickets directly. Instead, it is paid by major airlines to fly passengers on their behalf. Those contracts can be lucrative, but they're generally long-term deals. So, while big airlines are making a lot of money now, they're not paying much more to regional airlines companies like Republic Airways than they did a few years ago.
Republic Airways also doesn't benefit much from lower fuel prices because it doesn't usually pay for gas. The big airlines do.
If Republic is making money - even a small amount - why is it filing for bankruptcy?
Republic Airways has a problem with its fleet.
Shuttle America and Republic Airlines essentially fly two types of planes. The first is a larger, comfortable regional jet made by the Brazilian company Embraer. There are two versions of this plane - the E170 and E175 - but they are similar. These planes tend to have 65-76 seats, and they feel a lot like a larger jet, with roomy overhead bins and (relatively) comfortable seating. They can fly long distances for small planes - New York-Minneapolis is one example - and passengers like them.
Republic Airways likes the E170s and E175s and wants to keep them for a long time.
But Shuttle America also flies about 41 Embraer E145s for Delta. These older planes have only 50 seats, and they're terribly inefficient. But Delta likes its contract with Shuttle America, and it wants the airline to fly these planes until 2021. Republic Airways wants out of these contracts, and a bankruptcy court might permit that.
"We have worked for months with our stakeholders to attempt to restructure the obligations of our out-of-favor aircraft and to increase our codeshare revenues," Republic Airways CEO Bryan Bedford told employees in a message. "It has increasingly become clear that this process has come to an impasse and that we can no longer afford to waste our valuable resources."
Republic Airways also has about 40 E145s that it no longer flies. They're parked somewhere, but Republic Airways is still paying for them. The company wants out of those deals, too.
"More and more of these unwanted, out-of-favor aircraft are sitting idle yet they are costing us approximately $10 million a month and earning us nothing," Bedford told employees.
Republic also flies some turboprops for United Express, but those are leaving the fleet no matter what.
What about a pilot shortage?
Others have reported that Republic Airways doesn't have enough pilots. This mostly has been a problem because of an issue that was finally solved last year. For years, Republic had an antiquated contract with its pilots. The pilots were underpaid, and many of them left.
There's a new contract now, and Republic is hiring quickly. It will take awhile for the company to get to full strength, but given that it now pays well, it could probably do enough hiring to regain its footing in a reasonable amount of time.
But if Republic Airways can shrink its fleet and drop the 50-seat jets, the company will quickly have more pilots for the larger jets. So bankruptcy could be a quick way to solve the pilot issue.
How will this affect travelers?
It should not affect travelers much.
Passengers may not know it, but Republic Airways has already has been struggling with its operation for at least a year now. As mentione earlier, both Republic Airways and Shuttle America have a shortage of pilots, and that has caused it to cut its schedule and cancel some flights. This will continue, but it should not get worse.
It should be business as usual for Republic.
What about creditors and employees?
Both should be fine. This is not a traditional bankruptcy. Republic Airways filed because it wants to remake its fleet, bolster it pilot ranks and renegotiate its contracts with major airlines. Republic Airways says it will pay all of its workers and its bills.
Have more questions about Republic Airways? Leave them in the comments section, and I'll try to answer.
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