By Mary Schlangenstein - Nov 8, 2011 12:20 PM GMT+0700
Republic Airways Holdings Inc. (RJET) said it had reached agreement with lessors on cutting Airbus SAS A319 payments by $26 million next year and returning four aircraft, as it turns around unit Frontier Airlines.
The carrier will return the planes in the first quarter of next year, it said in a Businesswire statement dated today. The Indianapolis-based company has also deferred delivery of four Embraer SA (EMBR3) E190 planes and agreed to return two others to lessors ahead of schedule.
Republic said it has achieved “substantially” all of its restructuring goals for Frontier under a plan designed to generate $120 million in annual improvement at the unit, which was bought out of bankruptcy in 2009. That helped the carrier post better-than-estimated third-quarter ex-item net income of $20.4 million or 40 cents a share.
“We are beginning to see the benefits of our network- restructuring efforts,” Bryan Bedford, Republic’s chairman and chief executive officer, said in the statement. “Our team remains focused on optimizing the fleet at Frontier to produce a sustainable and profitable network.”
Republic was expected to post ex-item net income of 24 cents a share based on the average of seven analyst estimates compiled by Bloomberg. A year earlier, net income, excluding items, was $25.9 million.
The carrier had $15.3 million of ex-item, pre-tax income at its branded operations in the quarter. The company also flies regional services for other carriers, such as Delta Air Lines Inc. (DAL) and American Airlines.
A320neo Order
Republic completed a previously announced agreement to buy 80 A320neo planes from Airbus, it said. The company’s total operational fleet declined by three planes to 279 in the third quarter.
Republic fell 0.7 percent to $2.69 in New York trading yesterday. It has tumbled 66 percent in the past year.
On a GAAP basis, Republic reported net income of $9.0 million, compared with $21.1 million a year earlier. The profit ended a succession of three quarterly losses that began in the last three months of 2010.
The carrier will accept two Embraer E-190 planes in the fourth quarter. It will return two E-190s to lessors late next year.
An agreement with Embraer on deferring new planes would make about $20 million in cash available to Republic, Bedford wrote in a memo to employees last month,
The company is considering further steps to boost liquidity, which may include issuing debt backed by spare parts and selling some assets, it said without elaboration.
Steps under study in a second round of restructuring at Frontier, worth about $113 million, include selling flight slots at Ronald Reagan Washington National Airport valued at almost $50 million, and 10 Embraer E190 jets, for a total of about $40 million, according to Bedford’s memo.
To contact the reporters on this story: Mary Schlangenstein in Dallas at maryc.s@bloomberg.net
To contact the editor responsible for this story: Ed Dufner at edufner@bloomberg.net
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