Indianapolis / Bloomberg
Short-haul carrier Republic Airways Holdings Inc. filed for bankruptcy, blaming a lack of pilots for its failure to succeed when major airlines are enjoying record profits.
Indianapolis-based Republic operates a fleet of smaller planes that provide flights for larger airlines including American Airlines Group Inc., Delta Air Lines Inc. and United Continental Holdings Inc. Although it landed a three-year union contract with its pilots last year, the company still had to ground aircraft just as it was trying to renegotiate agreements with the larger carriers and to rework terms of aircraft leases.
“It’s become clear that this process has reached an impasse and that any further delay would unnecessarily waste valuable resources of the enterprise.” Bryan Bedford, Republic’s chairman and chief executive officer, said in a statement.
Major US airlines have reported record profits in the past two years. Republic’s filing is the first by a big airline since American went into Chapter 11 in 2011. Feeder Pinnacle Airlines sought court protection the following year.
While it was working to negotiate the labor contract, Republic was losing as many as 40 pilots a month, while adding about 30, according to Duane Pfennigwerth, an Evercore ISI analyst.
The new contract helped shore up the pilot base, but higher pay meant Republic had to get more compensation from Delta, American and United.
kins was involved in negotiations between the International Brotherhood of Teamsters, which represents Republic’s pilots, and the company last summer. If Republic was struggling to get the three major airlines to pay its higher fees, it may have turned to bankruptcy court to force their hand, he said: “It’s not the preferred path, and I know they did not want to do it.”
In bankruptcy, Republic could ask a judge to cancel unprofitable contracts without the penalties that would be imposed without court protection. The filing also will allow the company to escape leases for planes it’s not flying or that are too costly.