republic e175
CARMEL, Ind. and PHOENIX, April 7, 2025 /PRNewswire/ — Republic Airways Holdings Inc. and Mesa Air Group, Inc. (NASDAQ: MESA) today announced that they have entered into a definitive agreement to merge and create a leading publicly-traded regional airline company in an all-stock transaction. Upon closing, the combined company will be renamed Republic Airways Holdings Inc. and is expected to remain NASDAQ-listed under the new ticker symbol “RJET”.
“Today’s announcement is an exciting next step in Mesa’s more than 40-year history, one that represents the best outcome for our shareholders, employees, and all of our stakeholders,” said Jonathan Ornstein, Mesa’s Chairman and Chief Executive Officer. “By bringing the best of our organizations together, we will create a regional carrier that continues to connect communities across America while providing advancement opportunities to our employees.”
“We’re thrilled to combine the Republic and Mesa teams to create one of the world’s leading Embraer Jet operators,” said Bryan Bedford, Republic’s President and Chief Executive Officer. “Republic and Mesa share a common mission to connect communities across America, and we believe that we can better achieve that mission together. With this combination, we are establishing a single, well-capitalized, public company that will benefit from the deep expertise of Republic and Mesa associates, creating value for all stakeholders well into the future.”
Republic Airways Overview
Republic Airways has been a leading regional airline since its inception in 1974 and is now one of the largest regional airlines in the United States. Republic has a fleet of more than 240 Embraer 170/175 aircraft and carried approximately 17.5 million passengers on more than 300,000 flights and 591,000 block hours in 2024. The airline primarily serves Northeast and Mid-Atlantic hubs and operates exclusively under long-term capacity purchase agreements with American Airlines, Delta Air Lines and United Airlines. In 2024, Republic delivered strong financial performance, producing net income of approximately $65 million on total revenues of approximately $1.5 billion. During the year then ended, Republic generated total operating expenses of approximately $1.3 billion, of which approximately $117 million is non-cash depreciation and amortization expense, other net non-operating expenses (primarily interest expense) of approximately $50 million, and income tax expense of approximately $22 million, resulting in EBITDA performance of approximately $254 million and pre-tax income of approximately $87 million. As of December 31, 2024, Republic’s cash and debt balances were $323 million and $1 billion, respectively, resulting in net leverage of approximately 2.7x. Republic expects to take delivery of 15 new E175 aircraft during 2025 and all of the deliveries are expected to be debt financed.
Compelling Strategic Rationale
- Economies of Scale:Â The proposed combination represents a transformational opportunity to significantly enhance the scale of the combined airlines, both financially, and operationally, with a larger, unified fleet. This will enable more efficient and productive regional flying and crew resource management. The enhanced platform is well positioned for a valuation uplift, supported by a stronger financial profile, increased relevance among global institutional investors, and improved access to capital markets.
- Enhanced Capital and Liquidity Position:Â Pro forma net leverage at close is expected to be approximately 2.5x and liquidity as a percent of pro forma revenues is expected to be greater than 15%. Together, the combined company will have the financial strength and flexibility to make critical investments, drive sustained profitability, and continue delivering best-in-class customer service under a unified brand. A stronger balance sheet for the combined airline will bolster the Company’s ability to navigate market cycles, respond to strategic opportunities, and maintain a flexible capital allocation strategy that optimizes returns for all stakeholders.
- Complementary Networks and Operations: The proposed combination represents a unique opportunity to bring together Mesa’s and Republic’s networks to establish America’s regional airline of choice. The post-merger company will maintain a single fleet of approximately 310 Embraer 170/175 (“E-Jet”) aircraft, with over 1,250 daily departures, across both airlines’ existing flying networks and will operate within Mesa’s and Republic’s current basing structures and routes. Mesa and Republic will continue to operate under their existing Federal Aviation Administration (FAA) operating certificates until securing a single-operating certificate for the combined airline.
- Synergistic Cultures Rooted in Safety and Reliability:Â Mesa and Republic share common values and principles, which include an uncompromising focus on providing safe and reliable services for passengers, operational excellence, and a culture which provides career growth and advancement opportunities for associates. Both Mesa and Republic are included in the International Air Transport Association’s Operational Safety Audit (IOSA) registry, the internationally recognized standard for airline safety and operational excellence. These principles will be maintained and enhanced by the merger.
- Talented Team Positioned for Exciting Growth Opportunities:Â The combined company will continue serving key partners, including American Airlines, Delta Air Lines, and United Airlines. The parties expect to retain all flight crews, technicians, and other operational staff within the post-merger entity, which will be led by an experienced and seasoned management team.
Overview of the Combined Company:
Republic will continue to support American Airlines, Delta Air Lines, and United Airlines under its existing capacity purchase agreements (“CPA”), and Mesa’s operations will support United Airlines under a new 10-year CPA, as a result of this transaction. The combined company is expected to produce revenues of approximately $1.9 billion, pretax margins of 7% to 9%, excluding one-time merger and integration costs, and adjusted EBITDA in excess of $320 million. As part of the transaction, Mesa will not contribute any debt to the combined airline. The pro forma cash and debt balances post-merger are forecasted to be $285 million and $1.1 billion, respectively. The transaction is anticipated to deliver value creation for both Mesa and Republic shareholders, who stand to benefit from the ownership of a better capitalized airline with increased economies of scale, due to Republic’s strong financial position, stable earnings and cash flow.
Management and Governance
The combined company will be led by Republic’s executive leadership team. The Board of Directors will be comprised of six existing directors from the Republic Board of Directors and one independent director from the Mesa Board of Directors.
Transaction Details and Conditions to Close
Upon closing of the transaction, Republic shareholders will own 88% of the combined company’s common shares. Mesa shareholders will own a minimum of 6%, and up to 12% of the combined company dependent upon Mesa’s achievement of certain pre-closing criteria. All outstanding Mesa debt obligations will be extinguished as a result of the transaction.
Concurrently with the execution and delivery of the Merger Agreement, Mesa, Republic and United Airlines, Inc. (“United”), among other parties, entered into a Three Party Agreement (the “Three Party Agreement”), pursuant to which, among other things: (i) Mesa will take certain actions at or prior to the closing of the Merger to dispose of certain assets, extinguish certain liabilities and effectuate certain related transactions; and (ii) United will take certain actions at or prior to the closing of the Merger to facilitate Mesa’s actions in the foregoing clause (i).
The transaction has been unanimously approved by the Boards of Directors of both companies and is expected to close in either the late third or early fourth quarter of 2025. The transaction is subject to customary closing conditions, including regulatory and shareholder approvals by both companies.
Notes:
- With US regionals under growing pressure from their primary customers, the only way out is to get bigger. Besides, Mesa has been struggling for some time.
- This new airline offers SkyWest some competition from a segment with very little competition.
- The airline business remains one that chases economies of scale.
- The post-merger company has a fleet of approximately 310 Embraer 170/175 aircraft, with over 1,250 daily departures.
- The post-merger company expects to have revenues of approximately $1.9 billion and pretax margins of 7% to 9%.
- Republic’s executive leadership team will lead the combined company. There is no mention of what happens to Jonathan Ornstein, Mesa’s Chairman and Chief Executive Officer. A plain speaker and sometimes industry gadfly, he will be missed if he retires.
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