CSeries may take hit as Republic files for Chapter 11

One of Bombardier's biggest customers for the CSeries program, Republic Airways and holdings, filed for Chapter 11 today. This could potentially be a pretty significant hit to the CSeries program. Republic is the biggest customer for the aircraft, with 40 firm CS300 orders, and an option for 40 more. Only Macquarie AirFinance has an order for 40 aircraft, and they only have an option for 10, and only Air Canada has an order for more, with a just signed order for 45 aircraft, with an option for 30 more.

It's not clear what will happen with the order, as the airline intends to use the Chapter 11 filing to restructure and will keep flying.

Republic Airways Holdings Inc. (NASDAQ: RJET) announced today that it and certain of its subsidiaries have filed voluntary petitions for relief under Chapter 11 of the United States Bankruptcy Code. The petitions were filed in the U.S. Bankruptcy Court for the Southern District of New York.

Republic’s board of directors unanimously determined that a Chapter 11 reorganization is in the best interest of the company and its stakeholders. The process allows Republic and its subsidiaries to continue normal business operations while restructuring the company’s finances and contractual relationships.

“We worked hard to avoid this step,” said Bryan Bedford, Republic’s chairman, president and chief executive officer. “Over the last several months, we’ve attempted to restructure the obligations on our out-of-favor aircraft – made so by a nationwide pilot shortage – and to increase our revenues. It’s become clear that this process has reached an impasse and that any further delay would unnecessarily waste valuable resources of the enterprise. Our filing today is a result of our loss of revenue during the past several quarters associated with grounding aircraft due to a lack of pilot resources, combined with the reality that our negotiating effort with key stakeholders shows no apparent prospect of a near term resolution.”

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I wondered how long this would take to get out and if the times on the article are correct the press might have known about this well before I found out when Bedford sent out the email to employees today.

From my understanding from the information sent out today and talking with managers and VPs the primary purpose is to completely park the EMB145s and Q400s to focus on EJETs. As well as bring the company under 1 certificate instead of 3(we have already shut down Chautauqua Airlines and are currently working on merging Shuttle and Rebuplic Airlines.) I have heard nothing about how this will effect Cseries other then "Streamlined operations around a single aircraft type (EJET) under a single operating certificate."

a reply to: Pyle

I suspect we'll have to wait at least a few days, if not weeks to see how it will affect their order, but I don't see a good way for them to keep the order, and restructure. Moving to a single type would be the best thing they could do honestly.

It could be a very long time indeed. It is only the first few hours but things could take a while. The company is going to have a plan in 60 days from what the VPs told us. I think that is before the mandatory deadline for filling chapter 11 so it could be longer.

a reply to: Pyle

Yeah, some of these Chapter 11s take years to finally get close to getting out from under it. I'm sure Bombardier is holding its breath though. They've had some major issues lately too. They ended up selling 49% of the company to the government of Quebec to get some cash to keep things going. The CSeries is one of those programs where a lot of people rave about it, and say what a great aircraft it is, but it's taken so long to get to this point that interest isn't overly high right now.

a reply to: Zaphod58

It also seems like the aircraft it has the best chance of replacing (the E-Jets) are too young for most of their carriers to be looking too seriously at getting rid of them yet.

Especially in the low-margin regional/domestic world where the CSeries operates, it seems like airlines are doing everything they can to wring every last mile out of their fleets. Half the time I fly Southwest, it seems like I'm riding another tired old 737 Classic, and I'd imagine that most of the aircraft the 737Max will replacing are similarly nearing or over a quarter-century old. Same goes for the A320NEO, and both of them hit the size sweet spots for the European budget carriers.

Compare that to the E-Jets, which all the regional carriers are currently flying and have really been on the market for barely a decade. Also, compare it to the fact that the CSeries is really too small to work as a budget carrier "cattle-car-with-wings", and you've got a fantastic aircraft that really hasn't quite found it's niche yet. It could be the L-1011 all over again.

Then again, that's how the 737 started out, and if you hopped into your time machine and went back to 1976 to try and tell any civil aviation market analyst that would listen to you about where the 737 would be in 40 years, they would probably think you had either gone off your meds or had a brain tumor or something.

a reply to: Barnalby

It'll definitely be interesting to see what happens to the CSeries. There's been more interest with Delta and British Airways looking at possible buys. They still need to sell a bunch to reach break even though. They need to sell 800 aircraft to break even, and right now, even if everyone converts their options, they're only at 405. They need some big orders to help.

a reply to: Zaphod58

Was Republic ever going to see these jets in reality though? They're way bigger than the 76 seat scope limitation for all the mainline carriers they fly for. It seems like this order was in the same ballpark as the Skywest and TSA MRJ90 orders, throwing their hat in the ring hoping that mainline pilots were going to continue with their scope concessions, which has grinded to a halt.

Wouldn't be surprised if United tried to make a move on this order. It would largely be a benefit to all parties, both management and pilots, and they've been peeking for a while. But they just made 2 good sized orders for 737-700s. Delta may be possible but probably much less so, with their affinity for snatching up used airplanes with proven performance data at a fraction of the price.

a reply to: justwanttofly

They're not going to have a choice but to grant the regionals concessions. The majors are moving to 150 seat aircraft as their smallest aircraft, which will leave a fairly major gap in capacity. They're going to have to grant them the 70-90 seat market within the next 5 years at the most.

a reply to: Zaphod58

And I would imagine that passenger volumes are there like never before as well. I'm constantly amazed at some of the routes I see ERJ's and CRJ's flying on flightradar (think Delta feeders flying nonstop from Manchester NH or Burlington VT to Atlanta, that's a long friggin time to be stuffed in a small RJ), and I'm also amazed at just how packed every Southwest flight I take out of Manchester is.

The volume is there, to be sure, and all Bombardier needs is a major domestic looking to early-retire their A319s or upgrade their regional feeders.

And if I were JetBlue, I'd also be looking into the economics of switching my smaller-volume routes from E-Jets to CSeries's and selling my Embraers to Delta or someone else with a love for proven used hardware.