Republic eyes future with fewer small RJs

 - November 24, 2009, 7:20 AM

Now that his company has joined the ranks of the major airlines with its takeover of Frontier and Midwest Airlines, an admission by Republic Airways CEO Bryan Bedford of a “jaundiced view” of the small regional jet market might not come as a surprise. After all, the airline continues to cut its “exposure” to 50-seat aircraft, most notably due to the removal of 22 Bombardier CRJ200s from its Continental Connection system “as part of the normal contract process,” the planned removal of seven Embraer ERJ 145s from its United Airlines system by year-end and the final seven CRJ200s from the Continental program.

“We continue to manage our fixed-fee fleet to reduce our exposure to 50-seat aircraft,” said Bedford. “In 2010 more than 75 percent of our fixed-fee capacity in revenues will be derived from our [Embraer E-Jets].”

Of course, the E-Jets will also play a part in Republic’s “branded” business side, as twelve 76-seat E170s already flown by Republic Airlines as Midwest Connect remain with the Midwest Airlines system, while five 99-seat E190s supplement Airbus A320-series jets in Denver for Frontier. Another 10 dual-class E190ARs acquired from US Airways in October will serve in Midwest Airlines service from Milwaukee. Meanwhile, Republic has already begun transferring Frontier A319s from Denver to Milwaukee, where they fly high-demand, low-yield markets alongside Republic E190s and E170s.

Finally, three E170s formerly flown by Republic Airways subsidiary Shuttle America for Mokulele Airlines in Hawaii will find their way back to the mainland to fly for Midwest Airlines.

That move comes as Mesa Air Group takes a controlling stake in Mokulele Airlines under the terms of a deal signed in October that resulted in Mesa CRJs replacing the three Shuttle America Embraer E170s. Under the terms of the contract, Mesa takes a 75-percent interest in the joint venture and Republic a 25-percent share. Current Mokulele shareholders must also supply the $1.5 million to capitalize the joint venture, while Republic forgives Mokulele’s $3.1 million in outstanding debt.
Republic gladly ceded the thin Hawaiian markets to Mesa and its CRJ200s, aircraft types the Indianapolis-based airline will no longer operate once its Continental code-share deal ends next year.

“There’s clearly overcapacity on the small jet side right now as networks are being restructured,” said Bedford. “American’s industry-leading moves in St. Louis are what we expect to continue to see as Delta-Northwest finalize their consolidation and integration.

“The fact is there are just too many small jets out there for the market need,” continued Bedford. “And of course that creates margin compression and an exercise in stealing share; those are just the conditions we live in. The Republic plan has been to de-emphasize the smaller jets in favor of the larger-capacity E-Jets, and as market conditions change–hopefully the economy stabilizes in 2010; maybe we start seeing some growth in 2011, and we’re going to be prepared to contest heavily for that business.”