U.S. Bankruptcy Judge Sean Lane on Tuesday approved American Airlines? proposal Tuesday to have regional carrier Republic Airlines operate 47 airplanes on American?s behalf.
In the 12-year deal, Republic will acquire the 76-seat airplanes from Embraer and fly them under American?s ?American Eagle? brand, primarily out of Chicago?s O?Hare International Airport.
An American official said in a filing that American wants to have regional partners flying as many as 215 of the larger regional jets by 2018. A new contract with American?s pilot union allows the carrier to contract much more flying of the larger airplanes than in the past.
American?s previous contract with the Allied Pilots Association had allowed a maximum of 47 regional jets with 51 to 70 seats. At present, its sister company, AMR Eagle, operates 47 Bombardier CRJ-700s with 65 seats. The new contract greatly expands the number of those larger airplanes, and takes the limit up to 76 seats.
American?s vice president of network planning, Chuck Schubert, in his declaration gave American?s rationale and defense for the contract with Republic. Here are some high points:
? ?The Debtors? business plan calls for regional fleet growth both in count and gauge beginning in 2013 with a goal to acquire up to 215 large regional jets by 2018.?
? Only two existing aircraft met the pilot contract?s limits and American?s needs for a 76-seat jet with two classes of service: the Bombardier CRJ-900 and the Embraer E-175. Republic will use the E-175.
? American put out a request for proposals in October 2012 for up to 60 regional aircraft, to be owned and financed by the other party. It receives replies from five of six independent airlines to which the RFP was sent. The five submitted 25 bids using new and/or used aircraft that would start operating between 2013 and 2015.
? American sent a request for proposals to American Eagle, the regional operator owned by parent AMR. ?But, American Eagle lacks the required 76-seat regional aircraft. American Eagle also could not, as contemplated by its business plan, realistically purchase or gain access to such aircraft within the timeframe required under American?s business plan. Accordingly, American Eagle did not submit a bid for the regional airline services.?
? Even though American Eagle wasn?t able to bid, it will remain American?s biggest partner. The agreement was ?consistent with American Eagle?s business plan and strategy,? Schubert wrote.
?The Debtors? business plan for American Eagle balances the goal to diversify regional feed operators of American generally but also to maintain and protect the value of American Eagle. Accordingly, the Debtors? business plan contemplates that American Eagle will remain American?s largest regional service provider and will continue to operate at competitive costs.
?The Agreement will not reduce or divert flying opportunities from American Eagle as contemplated by the American Eagle business plan. The aircraft to be provided by Republic under the Agreement are incremental to the regional services contemplated to be provided by American Eagle to American under the Debtors? business plan. American Eagle will still operate the majority of the 50-seat aircraft at Chicago O?Hare International Airport (approximately 80% of 50-seat aircraft).
? ?The Agreement, as amended, is for the purchase of all of the capacity of 47 Embraer E-175 76-seat aircraft for a term of 12 years commencing on the implementation date of the last aircraft. All 47 of the aircraft will be new aircraft. The aircraft will phase into operation at a rate of approximately 2-3 aircraft per month commencing in mid-2013. Republic will acquire, finance, and/or own all aircraft.?
Originally, Republic also proposed using six used E-175s, but the two sides amended the contract in January to take those out.
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