FEBRUARY 25TH, 2015

Republic Airways Holdings Reports Fourth Quarter and Full Year 2014 Financial Results

INDIANAPOLIS—(BUSINESS WIRE)—Republic Airways Holdings Inc. (NASDAQ/NM: RJET) today reported financial results for the fourth quarter and full year ended Dec. 31, 2014. Key points include:

Republic’s pre-tax income excluding special items, for the fourth quarter of 2014 was $32.1 million, an 8.4 percent increase over the fourth quarter or 2013. Republic’s adjusted income from continuing operations for the fourth quarter of 2014 was $19.8 million, or $0.39 per diluted share, and its adjusted pre-tax margin was 9.3 percent.
For the full year of 2014, Republic’s pre-tax income, excluding special items, was $120.2 million, a $17.7 million increase over 2013. Republic’s adjusted income from continuing operations for 2014 was $73.4 million, or $1.40 per diluted share, with an adjusted pre-tax margin of 8.7 percent.
On a GAAP basis, including special items, Republic’s fourth quarter 2014 pre-tax loss was $1.4 million, pre-tax margin was -0.4 percent and income from continuing operations was $11.7 million, or $0.23 per diluted share. On a GAAP basis, including special items, Republic’s 2014 pre-tax income was $85.2 million, pre-tax margin was 6.2 percent and income from continuing operations was $64.3 million, or $1.24 per diluted share.
On Jan. 1, 2015, Republic completed its consolidation of all Chautauqua Airlines operations onto the Shuttle America operating certificate. All operating aircraft and related employees are now transferred to Shuttle America’s operation. Republic hopes to sell the remaining Chautauqua Airlines entity and related assets during the first half of 2015.
During the fourth quarter of 2014, Republic extended the service terms of aircraft under its fixed-fee capacity purchase agreements with US Airways, Inc. and Delta Air Lines, Inc. Republic also agreed to operate an additional nine E170 aircraft for Delta Air Lines, Inc.
“We took some significant steps in 2014 in our effort to simplify and streamline our business,” said Republic Airways Holdings Chairman, President and CEO Bryan Bedford. “While this simplification strategy results in near-term transition expenses, such as the fleet impairment charge we took this quarter, the actions that we’ve taken in 2014 and that we intend to take in 2015 are key to the future success of our airline.”

Operating Revenue Highlights

Total operating revenues for 2014 increased by 2.1 percent to $1,375.4 million compared to $1,346.5 million for 2013. Fixed-fee service revenues increased $72.4 million, or 5.7 percent, to $1,348.5 million due to increased E175 flying with American Airlines, offset by the removal of a combined 27 small jets from United and American fixed-fee service. Passenger service revenue decreased $46.3 million because of the removal of the last two E190 aircraft operating under a pro-rate agreement with Frontier.

Operating Expense Highlights

Wages and benefits increased $7.7 million, or 9.0 percent, to $93.2 million for the quarter and $25.9 million, or 7.6 percent, to $368.0 million for the full year 2014 primarily due to increased E175 operations, an increase in the cost of benefits we provide to our employees and the financial impact of the newly imposed pilot flight and duty regulations (FAR117) in 2014.

Fuel expense for the fourth quarter of 2014 decreased $3.4 million, or 43.6 percent, to $4.4 million due to a 0.8 million gallon reduction in gallons consumed as a result of reduced E190 aircraft operations for Frontier. The fuel cost per gallon, including into-plane taxes and fees, decreased to $3.28 per gallon in the fourth quarter of 2014, compared to $3.62 per gallon in the prior year’s fourth quarter.

Fuel expense for the full year 2014 decreased $22.5 million, or 50.1 percent, to $22.4 million compared to $44.9 million for the prior year. Gallons consumed decreased 51.1 percent because of reductions in E190 aircraft under pro-rate operations at Frontier. The fuel cost per gallon, including into-plane taxes and fees, increased to $3.67 per gallon during 2014, compared to $3.60 per gallon in the prior year.

Landing fees and airport rents decreased $2.0 million to $6.1 million for the quarter and $19.5 million to $26.9 million for the full year 2014. Beginning in June 2013, landing fee expense and the related pass-through reimbursement revenue from United fixed-fee operations were no longer incurred as United began paying airports directly for its landing fee costs. Landing fee expense was also favorably impacted by a decrease related to the reduction in small jet and pro-rate operations with Frontier.

Maintenance and repair decreased $8.4 million, or 12.4 percent, in the fourth quarter of 2014, primarily due to a decrease in flying of 27 small jet aircraft, offset by the increase in engine maintenance relating to our GE motors on our E170 and E175 aircraft.

Insurance and taxes decreased $2.6 million to $4.0 million for the quarter and $5.2 million to $19.9 million for the full year 2014, primarily due to a decrease in property tax expense, which is a pass through cost under our fixed-fee agreements, coupled with the removal of 27 small jet aircraft flying.

Depreciation and amortization increased $5.6 million to $45.8 million for the quarter and $22.3 million to $173.0 million for the full year 2014, primarily due to the increase in the E175 operations, offset by lower depreciation costs on small jet operations.

The impairment and other charges in 2014 were due to impairment and other charges on owned E140 aircraft which were abandoned of $19.9 million; owned E190 aircraft which are in the process of being sold of $14.4 million; owned Q400 aircraft which are scheduled to come out of service in the third quarter of 2016 of $13.3 million, and a loss on sale of E190 aircraft of $5.8 million. The 2013 impairment charges of $21.2 million related to owned E190 aircraft and the write-off of maintenance deposits on leased E190 aircraft.

Fleet Highlights

During 2014, our operational fleet decreased from 258 to 244. The company took delivery of 22 E175 aircraft, permanently parked 15 E140 aircraft, temporarily parked 13 E145 aircraft, sold two E190 aircraft and leased three E145 aircraft and three E190 aircraft.

During 2014, we took delivery of 22 E175 aircraft and removed 28 small regional jets.

In December 2014, we completed the sale of two E190 aircraft and executed an agreement to sell three other E190 aircraft. The sale of these five aircraft will leave us with two owned E190 aircraft and three leased E190 aircraft that are expected to be removed from fixed-fee charter service in August of 2015. We expect to return the three leased aircraft to the lessor in 2015 and the remaining two aircraft are under a firm sales agreement.

Balance Sheet and Liquidity

The Company’s total cash balance decreased $55.1 million to $245.6 million as of Dec. 31, 2014, compared to Dec. 31, 2013. Restricted cash decreased $2.3 million, to $21.7 million, from Dec. 31, 2013, due to the escrow requirements under our fixed-fee charter agreements. The Company’s unrestricted cash balance decreased $52.8 million, to $223.9 million, from Dec. 31, 2013, due primarily to equity investments in new aircraft and the redemption of the $22.3 million and $26.5 million convertible notes on April 7, 2014, and Oct. 28, 2014, respectively. The Company also purchased 212,881 shares of its common stock on the open market, during the third quarter of 2014 for total consideration of $2.1 million. A consolidated balance sheet and summary cash flow statement have been included in the tables section of this release.

The Company’s debt increased to $2.34 billion as of Dec. 31, 2014, compared to $2.17 billion at Dec. 31, 2013, primarily related to the financing of 22, new E175 aircraft purchased for our American Airlines fixed-fee agreement. As of Dec. 31, 2014, approximately 98 percent of our debt is at a fixed interest rate. The Company has significant long-term lease obligations for aircraft that are classified as operating leases and are not reflected as liabilities on the Company’s consolidated balance sheet. At a 6 percent discount factor, the present value of these lease obligations was approximately $0.48 billion and $0.59 billion as of Dec. 31, 2014, and Dec. 31, 2013, respectively.