Republic hunkers down in 50-seat cost overhaul

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As it nears completion of a $120 million cost cutting scheme for its Frontier Airlines subsidiary, Republic Airways Holdings is seeking a similar cost restructuring of its 50-seat jet operations.

The latest fleet projections released by Republic on 1 March show that its Chautauqua Airlines subsidiary operates nine Embraer ERJ-145s for US Airways, 24 for Delta Air Lines, 15 for American and eight for United-Continental. The flying for Continental should be phased out by year-end.

During a 1 March call with analysts Republic CEO Bryan Bedford said the company has to address "what has become an industry challenge" with 50-seat jets, noting the company has to undertake a restructuring with its Chautauqua ERJ programme similar to what occurred at Frontier.

Republic needs to "address non-productive assets and escalating maintenance costs in order to insure the aircraft type produces positive results for us and will continue to have a productive future".

Bedford explained maintenance on the 50-seat fleet has been "escalating at an alarming rate. While we think we are on top of the curve today, we need to lower the curve".

Republic needs to have a series of conversations with its ERJ-145 key suppliers to ensure it will continue to be in demand by network partners, said Bedford.

He concluded overall the industry does not have a need for 1,100 50-seat jets, but believes a rational level is roughly 600 or more.

Republic has 65 aircraft that it needs to return to a "productive, cost efficient basis" so that they can continue to be "part and parcel" of the 600 smaller jets required by the industry in the long-term.

Bedford stressed Republic certainly does not expect "our network partners to fix our problems, we're going to have to fix it ourselves".

The aircraft not dedicated to its branded Frontier operations or its fixed fee flying either idle in charter operations. As of 31 December Republic said it had a total of 25 aircraft included in its "other" segment that included 11 ERJ-145s subleased offshore, 11 in the charter operations or temporarily parked and two Q400s and one E-170 that were temporarily parked.

Republic's latest fleet projection also shows 11 ERJ-135/145 aircraft operating in charter service for the first quarter of 2011, growing to 20 by year-end, and five E-170s and Bombardier Q400s also flying in charter service, which should increase to seven by year-end.

Bedford acknowledged that Republic obviously has "50-seat assets that are currently surplus to our fixed feed needs and we're going to have to find a solution for the asset overhang".

Republic this year is also adjusting how it is reporting financial results for its fixed fee and branded businesses. All the E-190 and ERJ flying performed by Republic's regional carriers for Frontier previously included in Frontier's results will now be included in pro-rate segment in Republic's fixed fee business and the Frontier branded segment reporting will only include the operation of Airbus narrowbodies.

The rationale behind the change was to give stakeholders a better understanding of the independent Republic and Frontier operations. Republic in late 2011 declared its planes to monetise Frontier.