Centerlines - April 2008 - (Page 17) ONE ON ONE What advice would y you give to an airport trying to lure your service? While our network par partners set the schedule we fly, any a airline will tell fly, you that competitive costs are imporc tant in attracting service. In our heavservi ily taxed industry, and with soaring fuel prices, burdensom airport fees burdensome can be a real deterrent to attracting deterren new airline business. As you transition to larger jets, what will happen to those markets now served by your smaller planes? Our airline partners are responsible for all the market schedules for our aircraft. Each of our partners schedules our aircraft based on passenger demand. Most of our partners enjoy significant schedule flexibility with multiple regional jet providers offering a variety of seating capacity. This allows them to adjust capacity according to market fluctuations caused by a variety of factors. Republic now flies for American Airlines, Continental Airlines, Delta Airlines, US Airways, United Airlines and Frontier Airlines. Are any of these contracts short term? Do you have other carriers that you are about to fl y for but haven’t yet? All of our agreements are long term (10 years or longer). Republic Airways enjoys best-in-class revenue diversification with long-term agreements with five network carriers and one low-cost carrier. The company has three operating certificates, which provide us the platforms to respond to our current and new partner opportunities quickly and efficiently. You have three airlines. Why maintain three certificates? Is there a business advantage in fulfilling your contracts with the mainline airline? We do maintain three certificates, which include Chautauqua Airlines, Republic Airlines and Shuttle America. Having multiple certificates REPUBLIC AIRWAYS FLEET Bombardier CRJ200 Embraer ERJ-135 Embraer ERJ-140 Embraer ERJ-145 Embraer E170 Embraer E175 Total 24 17 15 60 76 28 220 allows us to operate within the scope agreements that limit the capacity provided by regional partners on behalf of major airlines. Each scope clause is unique and can specify restrictions, including the number of regional jets that can be operated, how many seats these planes can offer, and, in some cases, whether or not the regional partner can operate above a certain size for any of its network partners. Republic Airways enjoys greater flexibility with its multiple certificates. Pilots at Republic reside on one seniority list, which eliminates any concern that may arise from this strategy. Republic’s agreements with its mainline partners can be limiting. For example, while it has a hub in St. Louis for American Airlines, it cannot have hub operations in Nashville, Memphis or Kansas City for any other mainline partner. Each of its partners imposes similar restrictions on what cities Republic can serve while flying for its other partners. Some of these agreements also restrict the size of aircraft Republic may fly for another carrier in certain cities. With so many mainline contracts, how do you juggle your fl eet and best allocate your resources? We view ourselves as a solutions provider for our network partners, and we regularly talk with them about how we can best serve their needs. For example, in 2006, our partner, US Airways, wanted to reduce the amount of smaller, 50-seat ERJ145s we were flying for them. We proposed replacing them with an ad- ditional number of 86-seat Embraer 175 aircraft. The end result was an agreement for Republic to operate 30 more 175s for US Airways and remove 20 145s. We subsequently took those 20 ERJ145s and redeployed them for Continental as part of our new agreement to operate 44 50-seat regional jets as Continental Express. With our three operating certificates and six major-airline partners, we are able to develop win-win arrangements between Republic Airways and our partners. According to its recently filed annual report, Republic will take delivery of 29 Embraer 175s over the next 12 months. The acquisition of these 29 planes results in a “musical chairs” asset reallocation with Delta and US Airways getting the new planes, but United and Frontier getting Embraer 170s to be abandoned by the other two. Republic also has options for purchasing the larger Embraer 190 and 195; however, at this point none of its mainline partners has assigned these planes to a regional carrier. What sets you apart from your competitors? We are the only regional airline with six airline partners. Thanks to these multiple partnerships, we enjoy best-in-class revenue diversification. Our three certificates allow us to respond to the differing needs of our customers and respond quickly to opportunities for our partners. REPUBLIC’S 2007 REVENUE BY SOURCE Delta United US Airways Continental American Frontier 33% 24% 22% 10% 9% 2% Republic began flying for Continental and Frontier in 2007. www.aci-na.org | CENTERLINES 17 http://www.aci-na.org
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