US regional carrier Republic Airways has reached agreements to reduce costs by about $45 million annually for the next five years at the restructuring of its loss-making Chautauqua Airlines subsidiary.
The carrier will place idled aircraft back into service with Delta Air Lines to achieve the cash improvements. Republic has previously reiterated a need to restructure Chautauqua, which is losing money in its capacity purchase agreements (CPA), through reducing maintenance costs and bringing grounded aircraft back into service.
"These agreements take us about three-quarters of the way to our stated need of $60 million in average annual cash flow improvements at Chautauqua in order to stabilise and secure its future," says Republic's chairman, president and chief executive Bryan Bedford.
Under an amended CPA with Delta, Chautauqua will operate an additional seven Embraer E-145 aircraft for a period of one year for each aircraft. All seven aircraft will be placed into service with Delta by end-2012. Before this amendment, Chautauqua operated 24 E-145s for Delta under a CPA which extends through May 2016.
"The deployment of these seven aircraft, combined with our other recent CPA activity, means we will have placed all remaining idle 50-seat regional jet aircraft back into revenue service by the end of 2012. Ensuring our 50-seat aircraft remain active under agreements with our major airline partners is an important component of our Chautauqua restructuring effort," says Bedford.
Bedford adds that about two-thirds of Chautauqua's fleet of 70 regional jets are still operating under CPAs with less than two years remaining. "We are focused on ensuring both our labour productivity and long-term maintenance costs of these aircraft remain competitive," he says.
In June, Republic amended Chautauqua's CPA with United Continental Holdings, which extends the agreement until August 2014. Under the agreement, Chautauqua will operate four additional Embraer ERJ-145 aircraft for United Continental, taking the total to 12 aircraft.