US Airways [UAIRQ] has decided to accept Republic Airways' [RJET] offer to buy its fleet of Embraer [ERJ] 170s.

Last March, Republic offered US Airways a deal worth $235 million. It would invest $125 million to help recapitalize the bankrupt carrier and pay $110 million for the 28 existing Embraer planes and future purchase options, as well as the slot rights at New York LaGuardia Airport and Ronald Reagan Washington National Airport (RAN, March 21). As US Airways filed its plan to exit bankruptcy, it became clear that Republic will not be one of the investors in the new US Airways, the merged operations of US Airways and America West Airlines [AWAC].

The asset sale has been repriced lower at $100 million. The sale of the slots - 113 in Washington and 24 in New York - is expected to close by the end of the month. US Airways will continue to use the slots under a rental agreement with Republic. US Airways will have the right to repurchase the slots.

The Embraer 170s in the US Airways Express fleet are currently operated by the company via its MidAtlantic Airways unit. Republic will purchase 10 of the planes and assume the leases on another 18 planes. However, MidAtlantic will continue to operate the planes until the Federal Aviation Administration (FAA) certifies Republic Airlines, a new unit of Republic Airways, to operate the planes. This element of the transaction will not be completed until next summer.

At the same time, Republic will assume seven ERJ 145s from the US Airways Express fleet.

Both US Airways and Republic Airways continue to talk about adding more Embraer 170s to the transaction, as well as the prospect of adding Embraer 190s in the future.

In the wake of the U.S. Justice Department approval of the US Airways-America West merger, US Airways last month released its bankruptcy exit plan. Air Wisconsin will be the second largest individual shareholder in the reorganized company. Its $125 million investment will be worth 15 percent of the company. The largest shareholder will be Wellington Management with 16 percent of the stock.

Once recapitalized, America West stockholders will own 39 percent of the new carrier. However, US Airways stockholders will not receive any of the new stock. The carrier's smaller creditors will receive up to $5,000 toward their claims - 10 cents on the dollar. The largest creditors will receive stock in the new carrier.

The Air Transportation Stabiliza-tion Board will hold about 12 percent of the new stock while the Pension Benefit Guaranty Corp. will hold at least 5 percent of the stock. Collectively, the U.S. government will control 17 percent of the company's stock.