Regional airline operator Republic Airways Holdings Inc. (NASDAQ:RJET) has been focused on three goals this year: selling or spinning its Frontier Airlines subsidiary; winning new fixed-fee contracts from the network airlines; and sealing competitive labor agreements with its employees.
The Frontier sale has been delayed several times, although management has suggested that it may be resolved within a few weeks. The contest for new fixed-fee contracts has been a mixed bag: without signed labor agreements, Republic Airways Holdings Inc. (NASDAQ:RJET) has trouble making competitive bids. Republic Airways Holdings Inc. (NASDAQ:RJET) did win a big contract from AMR Corporation (OTCBB:AAMRQ) recently, but other major contracts have gone to top competitor Skyworks Solutions Inc (NASDAQ:SKYW).
Achieving the third goal — reaching competitive labor agreements — is thus doubly important. Fortunately for shareholders, Republic Airways Holdings Inc. (NASDAQ:RJET) has started to make significant progress. In the past two weeks, it has announced two new tentative agreements, covering Republic Airways Holdings Inc. (NASDAQ:RJET)’s dispatchers and flight attendants. Yet Republic Airways Holdings Inc. (NASDAQ:RJET) still has not come to an agreement with its largest and (arguably) most important labor group: its regional airline pilots.
New deals
Both of the recently announced tentative labor agreements have five-year terms. Both agreements still need to be ratified by the union membership; assuming that happens, they will provide greater cost certainty for Republic.
The flight attendant agreement was particularly important, because it covers more than 2,000 workers (whereas there are fewer than 100 dispatchers). The previous flight attendant agreement became amendable in 2009, meaning that a new contract was long overdue. This could cause some moderate cost inflation, but the company has stated that the economics of the agreement will allow Republic to remain cost-competitive.
The big one: still missing
Unfortunately, the most important deal — covering Republic’s more than 2,300 regional jet and turboprop pilots — is nowhere in sight. In late February, management told investors that it had made a “best and final offer” to the pilot union’s negotiators, but that offer had been rejected.
There was a brief hope that the union’s national leadership would organize a vote among the Republic pilots concerning the company’s final offer. However, based on comments made by management on the most recent earnings conference call (in late April), that vote never took place. The National Mediation Board — which supervises labor negotiations in the airline industry — has stated that it has no plans to convene further negotiating sessions in the near future. In other words, the airline and its pilot union appear to have reached an impasse.
