American Airlines (AAL) Finalizes Deal with Republic Airways

As per media reports, American Airlines Group Inc.AAL has finalized a long-term deal with Republic Airways Holdings Inc. RJETQ . The deal pertains to provision of regional flights by the latter. Notably, American Airlines is the largest customer of Republic Airways. The agreement will be effective only if approved by the U.S. Bankruptcy Court for the Southern District of New York in a hearing scheduled for Sep 21, 2016.

Based in Indianapolis, Republic Airways has been facing operational issues in recent times. Owing to the difficulties encountered, the airlines company filed for Chapter 11 bankruptcy protection in February this year. In 2015, the company had signed a new contract with workers but had to opt for bankruptcy after it was unable to secure deals with leading carriers U.S. carriers to fund higher pay for its pilots.

Terms of the Deal

According to the terms of the latest agreement, Republic Airways will continue to provide regional flights to American Airlines. As part of the settlement, Republic Airways will pay $250 million to American Airlines as unsecured bankruptcy claim. Per reports, American Airlines will be paying for the reconfiguration of some of Embraer E175 aircraft operated by Republic Airways. The reconfiguration will result in 76 seats instead of 80 for the changed aircraft, thereby taking them to the same standard as the other aircraft in Republic Airways' fleet. This change will also result in the aircrafts being compliant with pilot contracts of other large partners of Republic Airways, such as United Continental Holdings Inc. UAL and Delta Air Lines Inc. DAL . Republic Airwayshas reached an agreement with these airlines too.

American Airlines, which currently carries a Zacks Rank #3 (Hold), has a broad domestic flight services network in addition to its international operations. The company has an impressive record of continuous route additions to cater to customer needs.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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