Republic Airways Holdings Inc.RJET

Republic has a contract with Embraer to take delivery of 29 planes during the next two years to meet its current code-share agreements. In addition, Republic has the option to purchase an additional 74 planes, giving the regional carrier the ability to meet the needs of a current partner or a new one easily.

Republic is a highly diversified regional airline, boasting code-share agreements with five partners. Customer diversification reduces its financial and operational risk and offers significant growth prospects, as the regional airline is not constrained by the expansion plans of any one affiliate.

Republic's nonfuel cost per available seat mile is among the best in the regional airline industry. The firm's low-cost operations enable it to outbid competitors for new business (as in the recent Continental CAL win), while maintaining above-average profit margins. Read more 

Republic recently announced the termination of its code-sharing agreement with Frontier Airlines FRNTQ after the Denver-based carrier filed for bankruptcy protection under Chapter 11. Although Frontier makes up a nominal amount of firm revenue, the incident highlights how vulnerable Republic is to its partners' financial well-being.

Delta, under bankruptcy protection, voided its original contract and renegotiated a new one with a permanent 3-percentage-point reduction of block hour fees on Republic's remaining fleet, after agreeing to cut out 15 aircraft. This restructuring depicts the strength the legacy carriers have over their regional partners.

Although Republic has enjoyed a disruption-free relationship with its union workforce, unionized workers represent 75% of the total workforce and could represent a significant deterrent in negotiating salary concessions, which will become increasingly important in this higher-cost environment. Read more