On October 26, Republic Airways filed an SEC Form 8-K with interesting language.

On October 20, 2016, Republic Airways Holdings Inc. (the “Company,” or “we,” or “us”), along with Republic Airline Inc. (“Republic”) (a wholly-owned subsidiary of the Company), and Bombardier Inc. (“Bombardier“), Learjet, Inc., and C Series Aircraft Limited Partnership (collectively, the “Bombardier Parties”) entered into Contract Change Order No. 3 (the “Amendment”) to amend the original aircraft purchase agreement with Bombardier, dated February 25, 2010 (the “Purchase Agreement”), for the delivery of 40 Bombardier CS300 Series aircraft with the option to purchase up to an additional 40 aircraft. The Amendment provided for deferral of (1) scheduled aircraft payments to Bombardier and (2) scheduled aircraft deliveries, as previously scheduled under the Purchase Agreement.

In addition, the Company and the Bombardier Parties reached a settlement agreement (the “Settlement”) to provide for a general unsecured claim in the amount of $1.5 million and an administrative claim of $0.7 million for the satisfaction of certain claims asserted against the Company and Republic.

The Company filed a motion in the United States Bankruptcy Court for the Southern District of New York (the “Bankruptcy Court”) to seek approval for the Settlement and the Amendment. The motion is scheduled to be heard before the Bankruptcy Court on November 17, 2016. The agreements will become effective following issuance of the approval order by the Bankruptcy Court.”

Chapter 11 bankruptcy proceedings which have allowed Republic to extricate itself from several contracts.  What is interesting here is that the deal is an agreement with Bombardier to defer its orders and options for the CSeries – not cancel the deal.  Republic has not reported how much it paid Bombardier for the order and options to date. We understand the airline was making progress payments through the end of 2015, but none in 2016.  This means that Bombardier has received more than the current 8-K infers.

Another point one might want to consider is this – when the airline filed for Chapter 11 it was determined to slim down the fleet.  As the link points out, the airline parked some 80 ERJs.  It is not clear what the Chapter 11 filing allowed the airline to do in terms of any obligations on those aircraft.  We do know the airline maintained interest in the larger Embraer it already operated.  CEO Bryan Bedford has previously spoken about simplifying the airline’s AOC.

Which, in the end, makes the decision to defer the CSeries really interesting.  We don’t know if the contract with Bombardier has clauses that will claw more cash from the airline if it cancels the deal.  Remember Republic was the launch CSeries order and that deal for sure came with all sorts of special arrangements and language.  It is also uncertain if the Bombardier deal is loosened under Chapter 11.  Bombardier is not saying a word (we tried).  Why would Republic hold onto that order?  Does the aircraft really offer Republic something they have not yet shared?  This is an issue that Mr Bedford is asked every time he faces the trade press.  He never quite gives an answer.  So the mystery continues.

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