In a $1 million deal, Republic Airways Holdings [RJET] may be able to solve its scope problems that limit its flying the new Embraer [ERJ] jets.

Late last week, Indianapolis-based Republic offered $1 million, plus the assumption of less then $1 million in debts, for Shuttle America, based in Fort Wayne, Ind. The deal would be within the family. Shuttle America is owned by Connecticut-based Wexford Capital and Wexford owns 63.2 percent of Republic's stock.

Shuttle America operates a fleet of 11 Saab 340s as part of the United Express fleet. Some of these Saabs were once part of Chautauqua Airlines' fleet. Chautauqua, Republic's current operating asset, flies 116 Embraer regional jets for four airlines, including United [UALAQ].

For nearly two years, Republic has tried to get a second carrier, Republic Airlines, certified so it can fly the Embraer 170s for United. The Federal Aviation Administration (FAA) has not given its final approval on the proposed airline's charter. Another code-share partner, American Airlines [AMR], has scope restrictions in its labor contract which prohibit Chautauqua from flying aircraft as large as the 170. Chautauqua has been flying the 170s since last fall. Republic is required to pay American $1.1 million a month beginning April 22 for each month that Chautauqua continues to fly the 170s.

With the Shuttle America deal, Republic would add the 170s to the Shuttle America fleet as soon as possible. Once certified, Republic Airlines will eventually fly the Embraer 190, possibly for US Airways [UAIRQ]. Shuttle America would stop flying its Saabs by the end of the year. Leases on eight of the Saabs expire this year or in early 2006.

The two sides hope to close the deal in May.