Republic Airways to Return Planes Along with Sale of Frontier Airlines

Republic Airways Holdings Inc. (NASDAQ:RJET) said on Tuesday that the company is planning to return four places after splitting up from its unprofitable business of Frontier Airlines.

The company announced on Tuesday that is planning to defer deliveries of few planes, while cutting lease payments of a few planes. The company is also set to return two planes back. The other major announcements were the cutting of a significant number of jobs.

Frontier has lost close to $102.4 million in 2011, the airline popular among travelers as the plane having its tail covered with pictures of animals. It is believed by Republic that Frontier Airline business will be profitable in 2012 and it says it will hire advisers on board to help them get a buyer.

Republic Airways in 2009 was facing a threat of bankruptcy acquired Frontier with a bid of $108.8 million, outbidding Southwest Airlines Co. The acquisition was planned to expand from the low margin business of commuter planes.

This move for Republic turned unpleasant with the pressure of increasing fuel costs and strong competitions in the airline business in Denver pushing Republic to reorganize Frontline and consider cutting down its stake as much as possible by 2014, following the equity exchange for employee concession.

Bryan Bedford, Chairman and Chief Executive of Republic, on a quarterly result discussion call said that it is time to initiate the separation of the two businesses, citing strategic investors or private equity buyers as potential buyers. This sent Republic shares to 62 percent, or $1.66 to $4.35.

Republic Airways, the Indianapolis carrier, said on Tuesday that the third fiscal quarter net income dropped to $9 million or 18 cents per share. During the same quarter last year the net profits were $21.2 million or 58 cents per share. Republic’s revenue increased 8 percent to $768 million, compared to previous years $711.8 million.

Republic said excluding special items the company would have earned 40 cents per share or $20.4 million in the most recent quarter that ended September 30. According to a survey done by analysts they were expecting earnings of $163.3 million or 24 cents per share.

The company gave no time limit for the planned separation, which will see cutting off Frontier Airline’s business by 10 percent to 12 percent next year. The move pursues efforts from other regional carriers to expand as network carriers impose more difficult terms for flying on contract basis.

One of the major factors to draw potential bidders is the final contract of Frontier that was announced on Tuesday to acquire the Airbus A320neo planes, a restructured version of the best selling plane. Frontier might appear as the United States launch customer for the aircraft. With some desirable early delivery slots.

Post Written By: Ed Liston Ed Liston is a senior contributing editor at TheStockMarketWatch.com. An active market watcher and investor, Ed guides an independent team of experienced analysts and writes for multiple stock trader publications. He is widely quoted in various financial publications on the Internet. When Ed is not writing about stocks, investing in stocks, talking about stocks, or otherwise doing something stock related, he likes to go sailing and fishing in his yacht.