Last week was busy for Republic Airways Holdings in that it amended its American/Chautauqua agreement and loaned partner US Airways $35 million.
In an amended agreement with American, Republic Airways Holdings Subsidiary Chautauqua will reduce the number of the aircraft next June from 15 to 13 Embraer ERJ 140s, although the reimbursement on the two aircraft will continue so American can use them as spares. However, Chautauqua has the right to sell, sublease or place the aircraft elsewhere. The agreement also calls for a reduction of about three percent to Chautauqua’s reimbursement rate effective April 1 as well as extends the date on which American may early terminate the agreement by three years, from March 2009 to March 2012.

RJET as LCC to Payouts
Deep into its spending spree in which it has already invested $35.5 million in Midwest, Frontier and Mokulele airlines, Republic Airways Holdings Inc. entered into a loan agreement with US Airways to provide up to $35 million in two tranches. All liquidity raised will be used for general corporate purposes.
The first tranche of $10 million was funded on October 20, 2008. At US Airways' option, and subject to certain other conditions, the second tranche of $25 million may be funded in the first quarter 2009. Interest will be paid quarterly, with the principal amounts to be repaid between October 2009 and October 2011.
"US Airways and Republic have enjoyed a successful partnership for nearly 35 years," said Republic President and CEO Bryan Bedford. "Through this partnership and over that time, we have developed a mutually beneficial relationship that centers on a commitment to our customers, employees and shareholders. Our investment in US Airways' today simply reaffirms our commitment to US Airways and its ability to continue managing through uncertain economic times for our industry."
US Airways Express President Dion Flannery stated, "We are extremely appreciative of the commitment Republic is making today, and greatly value their support over our long-standing partnership. We will work diligently with them so that our customers continue to benefit from our partnership and we look forward to future success with this integral partner in the US Airways network."
The deal was part of a comprehensive liquidity program launched in mid August, through which US Airways raised approximately $950 million of financing and near-term liquidity commitments. On October 20, 2008 the company closed on $800 million of these transactions with $400 million of proceeds used to prepay the company's $1.6 billion bank debt facility. In exchange for this prepayment, the unrestricted cash covenant contained in the loan agreement for the bank debt facility has been reduced from $1.25 billion to $850 million. The loan agreement's term remains the same at seven years with substantially all of the principal amount payable at maturity in March 2014.
The remaining proceeds from these financing transactions, approximately $370 million after payment of certain bank and other service fees, increase the As with the Republic loan, the proceeds will be used for general corporate purposes. The remaining $150 million of liquidity commitments are expected to close during the fourth quarter, with cash benefits realized through 2009.
"Today's announcement confirms that US Airways' financial footing is solid," said Chair and CEO Doug Parker. "As a result of these financings our total cash position relative to annual revenues ranks solidly among the highest of the largest US carriers. Most notably, we were able to complete this financing in the midst of unprecedented global financial unrest, which is a testament to the confidence our investors and business partners have in the people of US Airways. We are extremely appreciative of their support, and we intend to reward their commitment to us by continuing to run a great operation and returning our airline to profitability in the years ahead."
The company estimates that 2009 expenses will increase by approximately $90 million owimg to costs related to these transactions, of which approximately $65 million is non-cash.
Chief Financial Officer Derek Kerr added, "Combined with our August equity offering which generated $179 million, and other financings completed during the quarter, US Airways has raised or secured approximately $1.2 billion in cash and payment deferrals since we released our second quarter financial results. I want to personally thank and publicly acknowledge our internal finance and legal teams for their exceptional and diligent work over this period. Our outside advisors were also extremely helpful in this endeavor. On behalf of the entire US Airways leadership team, we thank Seabury Group Chairman and CEO John Luth and his team for their outstanding work as our financial advisor, as well as the team at Skadden, Arps, Slate, Meagher & Flom LLP for their excellent legal counsel."