Republic Airways yesterday declared Chapter 11 bankruptcy, after several quarters of falling revenues and being forced to ground aircraft due to a pilot shortage. The company, which has feeder contracts with American, Delta, and United, will continue flying its full schedule of about 1,000 flights to more than 100 cities while it restructures its finances and contracts.

While the major airlines are showing robust performance, regional airlines have suffered. This bankruptcy follows other Chapter 11s in the regional sector, which has been shrinking as 50 seat jets are being phased out and a pilot shortage is changing economic conditions.

Republic, which shows assets of $3.6 billion and liabilities of $3.0 billion, has sufficient liquidity to meet working capital and operating expenses during the restructuring process, and will continue to honor union agreements with its 6,000 employees.

One key question moving forward is whether the company will be able to extricate itself from a contract for 40 Bombardier CS300 aircraft that it has on firm order. This early order for C Series was likely at a launch-customer bargain price. There has been speculation is that Republic, which initially intended these aircraft for Frontier, would prefer to sell those positions, for which it has paid substantial deposits.  Time will tell.

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