Bankrupt US Airways last night said it secured a $125 million financing package from Wexford Capital, the majority shareholder of Republic Airways Holding, operator of both Republic and Chautauqua regional airlines. The deal, which helps position US Airways to emerge from Chapter 11 protection, is the second in as many weeks struck with a regional jet company. It requires bankruptcy court approval, which could come at a hearing March 31.
The agreement with Wexford and Indianapolis-based Republic follows a similar $125 million commitment from Air Wisconsin operator Eastshore Aviation
(BTN, March 7). Like the earlier deal, the newer one calls for US Airways to use Chautauqua and Republic regional jets within the US Airways Express network. In this case, US Airways would continue working with Chautauqua-which also flies feeder services for American, Delta and United-and enter into a new arrangement with Republic.
"This transaction provides us with new equity, reduced debt, enhanced liquidity and a strengthened relationship with a key regional airline partner, as well as efficiencies in running the business that will allow us to focus more of our resources on the mainline operations," said US Airways president and CEO Bruce Lakefield. "Overall, we will have both flexibility and a stronger regional jet network that will improve both our bottom line and service to our customers."
In addition to court approval, the agreement requires US Airways to find $100 million in additional investment to fund its reorganization plan, which currently calls for completing bankruptcy proceedings by June 30. Other provisions of the deal include a US Airways option by year-end to grow liquidity by another $110 million by selling to Republic as many as 28 Embrarer 170 regional jets and related assets, including 113 commuter slots at Reagan Washington National Airport and 24 at New York LaGuardia.
The deal also allows Republic to approve US Airways' business plan. In conjunction with yesterday's announcement, US Airways said primary financial backer GE Capital Aviation Services agreed to extend the deadline to April 15 for submitting that plan. The earlier deadline was today.