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Anyone looking at RJET? Here's my take.
Republic Airways (NASDAQ: RJET) is an airline that doesn’t sell tickets.
It flies regional routes for American, Delta and United under fixed-fee contracts. The big airlines set the schedules, sell the tickets, keep the fares and carry the fuel and passenger-demand risk. Republic supplies the aircraft and crews and gets paid to fly.
The numbers are pretty compelling. At $20.58, its price-to-operating-cash-flow ratio is 2.16. It trades well below book value and has a Piotroski F-Score of 7. It only returned to the public market nine months ago and seems to be largely off the radar.
It also has something resembling a moat.
After airline deregulation in 1978, the major carriers started using regional contractors. This annoyed the mainline pilots because the regional pilots were flying the same passengers between the same cities for a fraction of the pay.
The pilots’ unions pushed back. Since 2012, all three major US carriers have had contractual limits on the aircraft used for these regional contracts: no more than 76 seats and a maximum takeoff weight of 86,000 pounds.
There is exactly one regional aircraft still being manufactured anywhere in the world that fits those limits: the Embraer E175.
Republic owns a very large chunk of the E175 fleet in America. And Embraer owns a big chunk of Republic.
United owns 22.4%, American owns 20.8%, Delta owns 14.5% and Embraer owns 8.8%. Embraer ended up with equity after Republic owed it a lot of money going into Chapter 11.
The free float is tiny. Average daily volume is around 155,000 shares. These are strategic holdings, not passive index funds.
Which brings us to the messy history.
Republic went into Chapter 11 in 2016. Delta had sued it the previous year for failing to fly its full contracted schedule. Its completion factor, the percentage of scheduled flights it actually operated, had fallen below the contract requirements.
Republic couldn’t deliver partly because it had spent eight years fighting with its pilots over pay. Management had been using multiple subsidiaries to stay under union-imposed caps on regional pilot wages.
The plan was clever in a short-sighted kind of way: keep the pilots cheap, stay competitive on the contract price and win more business.
Eventually, nobody wanted to pay for pilot school and accept poverty-level wages at the other end. The pilot pool dried up. Republic couldn’t fly the schedule. Delta sued. Republic went bankrupt.
The company had $3.6 billion in assets and $3 billion in liabilities. Two hedge funds lost $45 million buying equity that turned out to be worthless. Shareholders got absolutely nothing. The stock traded at three cents.
The CEO was Bryan Bedford. He had been running Republic since 1999.
You’d think losing every shareholder’s money would end a career. In America, apparently, it starts the next chapter.
Bedford ran Republic for 26 years, through the bankruptcy and out the other side. In 2022, he lobbied the FAA to let pilots qualify with 750 hours of training instead of the current 1,500. That would help Republic deal with its pilot shortage and help its in-house flight school, LIFT Academy. The FAA said no.
Then Trump nominated Bedford to RUN the FAA.
He was confirmed by the Senate and retired from Republic. During his confirmation hearings, senators asked if he would recuse himself from decisions affecting his former company. He said no. They asked if he would promise to leave the 1,500-hour rule alone. He said no.
If the rule comes down, Republic gets access to a larger pilot pool and LIFT gets a larger market. Could be good for RJET.
It also creates a fairly obvious conflict of interest. Welcome to America.
Mesa’s side of the merger is no cleaner.
In 2006, Mesa launched an inter-island Hawaiian airline called Go! Yes, with an exclamation mark.
Mesa had apparently been talking to Hawaiian Airlines about a possible investment. It looked at Hawaiian’s books during due diligence and then decided to launch a competing airline instead.
Hawaiian sued. During discovery, Mesa’s CFO used disk-wiping software to permanently destroy laptops and network drives. A judge found that conduct intentional, deliberate, wilful and in bad faith, and ordered Mesa to pay $80 million.
Mesa fired the CFO. Hawaiian eventually settled for $52.5 million.
Then Aloha Airlines sued Mesa for predatory pricing and went bankrupt in March 2008.
More recently, American Airlines fired Mesa in 2022 after Mesa’s operating profit swung from positive $64 million to negative $185 million in a single year. More pilot trouble. Mesa eventually filed its own Chapter 11.
In 2025, Republic did a reverse merger with Mesa and took over its stock-exchange listing. Republic shareholders received 88% of the combined company, Mesa shareholders got 6%, and Republic’s management and board took control.
Anyway, the risks aren’t difficult to find.
Between Republic and Mesa, you have two bankruptcies, disk-wiped laptops, lawsuits from multiple major airlines and a complete shareholder wipeout.
This industry punishes bad execution fast. If Republic can’t fly the schedule, it can lose the contracts. That’s what killed it the first time. Then there are pilot availability, wages, maintenance costs, contract renewals and whatever happens to air travel if the US economy falls over.
The airline ownership is the part I’m still wrestling with.
On the one hand, having your three customers own 57.7% of the company probably makes it less likely that they’ll let it collapse. They need Republic alive and flying.
On the other hand, American, Delta and United want cheap regional capacity. Minority shareholders want Republic to earn better margins. Those are not necessarily the same objective.
The price was $21.39 when I ran it through my checklist over the weekend. It’s now around $20.58. It scored near the top of my buy list, so I bought it.
Does having the three major customers control 57.7% of the company protect the minority shareholders, or screw them?
I did a longer breakdown on the QAV podcast this week if anyone wants it.
Not financial advice. I own RJET. I’m just an Australian guy with a spreadsheet. DYOR.