Republic Airways to streamline operations with Embraer, adding doubts about CSeries order
A big buyer of Bombardier's CSeries planes says it intends to streamline operations by using a single fleet of Embraer aircraft, heightening doubts about the fate of its firm order with the embattled Canadian transportation giant.
The chairman of Republic Airways Holding Corp. said in a bankruptcy court filing that its restructuring plan includes operating Embraer E170/R175s under a single operating licence and moving up plans to unload its Q400 turbos.
"Republic expects to sell its remaining related assets and complete the wind-down of its smaller regional jet and turboprop aircraft," Bryan Bedford said in a 70-page filing Thursday with the U.S. Bankruptcy Court for the Southern District of New York.
The airline, which provides regional service for larger U.S. carriers, filed for relief under Chapter 11. It reported $3.56 billion US in assets and $2.97 billion US in liabilities.
Bedford said the company has attempted over the last several months to restructure its operations to address a loss of revenue from the grounding of aircraft due to a shortage of pilots.
Republic only U.S. airline to order CSeries planes
Republic is the only U.S. airline to have made a CSeries order. In 2010, it placed a firm order for 40 CS300 planes and options for 40 more of the aircraft, represent 16 per cent of the CSeries firm orders.
Bombardier spokesman Marianella de la Barrera said the Montreal-based manufacturer has spoken with Republic since the filing but has no new information about the fate of the CSeries order.
"We have a firm order in place and see no immediate impact (from the filing)," she said in an interview.
She declined to confirm an analyst's report that Republic had stopped making pre-delivery deposit payments.
Questions about Republic's jet order
Industry observers have long questioned the viability of the order with Republic since it changed its business model. The planes were originally intended for former subsidiary Frontier Airlines. But that was sold in 2013, leaving the 120- to 160-seat planes too large for its remaining operations.
Walter Spracklin of RBC Capital Markets said Republic has several options to rid itself of the CSeries order, but can ask a judge to cancel "unprofitable contracts without penalty." That would switch the onus in placing the aircraft back onto Bombardier, he wrote in a report.
Republic's first CSeries planes were slated to be delivered starting in the second quarter of 2015 through 2017. The CS100 is expected to enter into service in the coming months, followed about six months later by the CS300.
Republic said it hasn't entered into financial commitments for the planes because of delays in the CSeries and general uncertainties.
De la Barrera added that Bombardier has no exposure to Republic's plans to speed up the disposal of its leased Q400s. Republic began last year to shed its 31 Q400s by subleasing 24 of the 71-seat planes to Flybe.