Republic Airways became the second regional airline to claim a stake in US Airways last month when it inked a conditional deal to commit $125 million in equity and up to $110 million in asset-related financing. The deal came just weeks after a bankruptcy court judge approved a deal between US Airways and Air Wisconsin that will see the Appleton, Wis.-based regional take its own equity stake in the bankrupt major airline and fly up to 70 regional jets as US Airways Express (see Regionals Update, this page). However, US Airways must attract another $100 million in cash before Republic commits to its investment.
Under the agreement, still contingent on bankruptcy court approval, US Airways could get another $110 million through the sale and financing of certain assets to Republic, including 10 Embraer 170s. US Airways could also assign Republic the leases for another 15 Embraer 170s, while Republic helps locate an Embraer heavy maintenance facility within the US Airways network.
US Airways may also enter a sale/leaseback deal involving commuter slots at Reagan National and La Guardia Airports. If US Airways decides not to exercise its sale/leaseback option, Republic will get the option to buy or assume the leases on all 28 of US Airways’ Embraer 170s and fly them as US Airways Express. If US Airways draws down the $125 million equity commitment, Republic may buy, finance and operate as US Airways Express another 22 Embraer 170s and/or 190s.
The deal also would result in a 3-percent cut in Republic’s compensation for its Chautauqua Airlines Embraer 145 code-share agreement with US Airways, a one-time option for US Airways to remove five of the 35 ERJ 145s now flown under the Chautauqua agreement and do the same on another 15 of the 50-seat jets under certain conditions.