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Monday, July 18, 2005

Quick Takes

  • For the second time in less than a year, Republic Airways [RJET] is returning to the public well to finance its growth plans. The parent of Chautauqua and Shuttle America has filed registration papers with the U.S. Securities and Exchange Commission to sell at least 7 million shares in the near future. The underwriters have the right to sell an additional 1 million shares. Republic told the SEC that it anticipates the 8 million shares will sell for $14.05 per share and net $113.1 million. However, the share price has declined since the stock sale was announced. More than one analyst questioned the possible dilution that current shareholders will suffer. Republic in late January sold 6 million shares at $12.50 a share to raise $75 million. The company has been publicly traded only since May 2004. Republic has turned to the public markets to raise the $100 million it will pay US Airways [UAIRQ] for MidAtlantic's fleet of Embraer 170s and landing slots at New York LaGuardia International and Ronald Reagan Washington National Airport. The asset sale is expected to close on July 31. Earlier this year, Republic offered to buy these assets from the bankrupt US Airways, as well as make a $125 million capital infusion. After US Airways announced its plan to merge with America West Airlines [AWAC] as part of its reorganization plan, Republic decided not to make the equity investment.
  • As US Airways works its way through the regulatory channels to get is merger with America West cleared, another investment company wants to get a piece of the new operation. Tudor Investment has committed $65 million in exchange for 3.9 million shares. Earlier investors, which include Air Wisconsin and the parent of Air Canada, have agreed to invest $565 million into the merged carrier. The deal, which is expected to close by early fall, has already been approved by the anti-trust division of the U.S. Justice Department. In operational news, US Airways is shifting 89 crews members from its PSA Airlines from its Philadelphia base to airports in Ohio, North Carolina and Tennessee. PSA had opened the crew base in Philadelphia in April 2004.
  • The Federal Aviation Administration (FAA) has extended until Dec. 31, 2006, the current slot allocation at LaGuardia. The 14-month extension of the landing rights will enable the FAA to devise a long-term solution to the airport's congestion. The FAA has been studying an auction system to assign the landing slots (CRAN, July 26, 2004), but no decision has been made on this process.
  • The FAA begins negotiations this week with the National Air Traffic Controllers Association. FAA Administrator Marion Blakey has called for the union to abandon the "archaic work rules" that were renewed in the 1998 contract. These rules, she said, limit the agency's ability to use new technology. She said the first three years of the 1998 accord cost the FAA an additional $1 billion in labor costs over inital the projections. While the average controller now makes $165,000 per year, including benefits.
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