Indianapolis, Indiana-based Republic Airways Holdings—parent of Chautauqua Airlines, Republic Airlines and Shuttle America—reported third-quarter net income of $18.5 million, reversing a $13.8 million loss in the year-ago quarter. Third-quarter revenue was $349.7 million, up 3.3% while expenses were down 5.5% to $288.9 million, resulting in operating income of $60.8 million, up 85.4% year-over-year.
In September, Republic announced the addition of 50 new Embraer E-175 aircraft to its capacity purchase agreement [CPA] with United Airlines, to be delivered between July 2015 and August 2017. “They will attach to our existing fixed fee agreement with United and have a duration of 12 years from the in-service date of each aircraft,” Republic CEO Bryan Bedford said Wednesday in a conference call with analysts. “The first 31 E-175 aircraft will replace, one for one, the [Bombardier] Q400s currently in the United operation. We anticipate those aircraft will be wound down between January 2015 and September 2016.”
He said 27 of the 31 Q400 aircraft were leased to Republic, and the remaining four are owned by the carrier. Twenty-four of the Q400s will be subleased to UK carrier Flybe Limited, as part of an agreement signed in September. Of the remaining seven aircraft, three of the leased Q400s will be returned to their lessor and the four owned aircraft Republic plans to sell or lease once removed from United service.
“We have made great strides on our streamlining and simplification effort … by the end of the year we hope to be down to just two air carrier operating certificates—Republic and Shuttle America,” Bedford said in the conference call. “Our agreement with United to add 50 new 76-seat E-175 aircraft and remove 31 Q400 aircraft is another transformational opportunity for Republic.”
“At the start of the year, we highlighted a plan to go from four different fleet types to two by the end of 2016. However, with the recent United agreement, combined with the eventual wind-down of our small regional jet aircraft … there is now a pathway to eventually get down to a single fleet type and possibly even a single operating certificate by the end of 2016,” Bedford said.
“Streamlining and simplifying our business will enhance our efficiency and allow us to focus on the products that we feel have the strongest future. In fact, we were never more efficient as an airline than when we operated one fleet type under one operating certificate,” Bedford said.
Fuel expenses for the third quarter decreased 54.9% year-over-year, to $5.1 million, primarily due to a 56.9% decrease in gallons consumed related to the elimination of pro-rated flying for Frontier.
The number of passengers carried in the third quarter rose 5.7% to 5.9 billion, while RPMs increased 12% to 3.01 billion. Capacity rose 10% to 3.8 billion ASMs, producing a load factor of 78.9%, up 1.4 point.
As of Sept. 30, Republic operated a fleet of 240 aircraft. “Through September, the company has removed 27 Embraer ERJ aircraft from CPA service, and has taken delivery of 17 E-175 aircraft and expects to take delivery of seven additional E-175 aircraft during the remainder of 2014. As of Sept. 30, within its fixed-fee and charter agreements, the company operated 42 aircraft with 44-50 seats and 198 aircraft with 69-99 seats,” the company said in its quarterly financial results.