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Republic Airways to Enhance Ties with Delta Air Lines - Analyst Blog

Zacks Equity Research
Updated

Following a recent extension of the Capacity Purchase Agreement (“CPA”) between Republic Airways Holdings Inc. (RJET) and Delta Air Lines Inc. (DAL), the former has decided to operate nine additional 69-seater E170 aircraft. 

 

The additional planes are expected to commence services in between the third quarter of 2015 and second quarter of 2016, for a period of six years. Meanwhile, the existing agreement concerning 14 E170 aircraft has been extended for a term of four years, through Oct 2021. Also, the present contract involving a fleet of 16 E175 aircraft has been extended through Feb 2024.

 

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Through an earlier CPA agreement, Republic Airways had decided to operate 41 of its 50-seat aircraft under Delta Air Lines till May 2016. However, the success of the agreement has encouraged both the parties to extend it. If the company had failed to renew its CPA agreement, Republic Airways would have considered some other partner.

 

In order to drive profitability, Republic Airways has decided to ground 50-seater planes along with 76-seater regional jets. This is expected to help the company drive profits apart from ensuring better flight maintenance. This is also likely to increase the availability of pilots.

 

Previously, Republic Airways had teamed up with American Airlines Group Inc. (AAL) to flag off 76 planes. Such strategic partnerships with major airlines will initially increase ownership costs for the company but boost profits in the long haul. 

 

Republic Airways currently sports a Zacks Rank #1 (Strong Buy) while another stock having the same Zacks Rank is Hawaiian Holdings Inc. (HA).


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REPUBLIC AIRWAY (RJET): Free Stock Analysis Report
 
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AMER AIRLINES (AAL): Free Stock Analysis Report
 
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Zacks Investment Research