Republic Airways Holdings Inc. · NASDAQ:RJET
Republic Airways — Investor Presentation (May 2014)
39 slides from Republic Airways's investor presentation, May 20, 2014
Slide 1: Republic Airways Holdings Inc. Investor Update
Republic Airways Holdings Inc. Investor Update May 20, 2014
Slide 2: Safe harbor disclosure
Safe harbor disclosure 2 Statements in this presentation, as well as oral statements that may be made by officers or directors of Republic Airways Holdings Inc., its advisors, affiliates or subsidiaries (collectively or separately the “Company”), that are not historical fact constitute “forward-look
Slide 3: Agenda
Agenda 5/20/2014 3 I. Introduction to RJET II. Our industry III. Leading the regional industry IV. Reducing risk & simplifying the business V. The way forward
Slide 4: Introduction to RJET
INTRODUCTION TO RJET 4 5/20/2014
Slide 5: Experienced management team
Experienced management team 5/20/2014 5 Tim Dooley Wayne Heller Lars Arnell Bryan Bedford Chairman, President and Chief Executive Officer 27 years of industry experience 15 years at RJET Executive Vice President and Chief Operating Officer 35 years of industry experience 15 years at RJET Executive V
Slide 6: Fixed-fee model characteristics
Fixed-fee model characteristics 5/20/2014 6 •We are paid on our cost drivers (departures, block hours, flight hours, aircraft days) •Limited exposure to domestic economy Predictable Revenue •No fuel exposure, airport costs, insurance, property taxes and in most cases aircraft ownership costs are pas
Slide 7: Stable financial performance
Stable financial performance 5/20/2014 7 RJET Financial Overview Metric 2012 (actual) 2013 (actual) 2014 (midpoint guidance) ’14 vs ’13 YOY% change Block Hours 701,040 749,931 786,613 4.9% ASMs (millions) 13,437 13,486 14,771 9.5% Revenue (millions) $1,377 $1,347 $1,375 2.1% Pre-tax Income (millions
Slide 8: Improving revenue mix
Improving revenue mix 5/20/2014 8 Overall, our fixed fee revenue is up 22% since 2012, despite a few important considerations: United began paying for fuel and landing fees in 2012 and 2013, respectively, decreasing pass-through revenues by an estimated $60 million. (On a pro forma basis, the fixe
Slide 9: Best in class fleet mix and diversity
Best in class fleet mix and diversity 5/20/2014 9 15 0 10 5 2014(F) 14.8 90% 10% 2009 13.9 76% 24% M ill io n s o f A S M s 6% 800 700 400 600 0 500 200 100 300 T h o u s a n d s o f B lock h o u rs DL UA/CO AA/US Other 2014E 10% 26.6% DL 15.7% 42.5% 1% 2009 29.9% US 32.4% 9.9% CO 11.1% 717 AA 7.6%
Slide 10: Our industry
OUR INDUSTRY 10 5/20/2014
Slide 11: Mainline partner consolidation
Mainline partner consolidation 5/20/2014 11 Domestic passengers by carrier 150 50 400 300 450 350 250 200 100 0 99 67 2009 32 24 67 101 47 117 407 34 45 Do m e stic p a ss e n g e rs (0 0 0 s ) 414 2013 132 56 +2% WN AA FL UA CO DL NW US Four large industry players remain American, Delta, United
Slide 12: US Carrier TRASM and CASM trends, 2009-2013
US Carrier TRASM and CASM trends, 2009-2013 5/20/2014 12 13 14 15 16 17 18 2009 2010 2011 2012 2013 C e n ts , U S D CASM TRASM Capacity rationalization has contributed to significant TRASM gains over the past 5 years Stabilizing oil prices and strong cost management by mainline airlines have te
Slide 13: LCCs Growing, But…
LCCs Growing, But… 5/20/2014 13 The non-legacy controlled market remains highly fragmented between LCC, ULCC and hybrid carriers JetBlue and Alaska roughly 50% of remaining market share ULCCs growing at a faster rate (Allegiant, Spirit, Virgin America) ULCCs narrow focus on leisure traffic (
Slide 14: Mainline partner scope changes
Mainline partner scope changes 5/20/2014 14 Trading ~ 550 small jet aircraft in favor of ~ 300 larger aircraft (76 seat) Why does this make sense? Taking more connections over fewer hubs means revenues are produced more efficiently Economies of scale (spreading the fixed cost of the business
Slide 15: Mainline partner expected pilot retirements
Mainline partner expected pilot retirements 5/20/2014 15 14,000 18,000 10,000 16,000 4,000 0 12,000 8,000 6,000 2,000 Cu m u la ti ve p ilo ts retir in g 2016 2014 8,377 2020 2,264 3,580 2021 6,644 2018 5,029 2022 2015 12,594 10,388 15,155 17,751 2017 1,032 2019 2013 Expected cumulative pilot retire
Slide 16: Where do mainline partners' pilots come from?
Where do mainline partners’ pilots come from? 5/20/2014 16 20,000 10,000 30,000 40,000 0 50,000 41,100 6,200 Network Regional LCC Cargo 17,000 Other 5,900 2,300 FAR 117 pilot demand Carrier Type Estimated additional pilots required Network 2,000-3,300 Regional 850-1,350 Cargo 300-500 LCC 300-500 Oth
Slide 17: Financial health of our mainline partners impacting the CPA model
Financial health of our mainline partners’ impacting the CPA model 5/20/2014 17 We’ve seen a trend towards our mainline partners buying 76-seat regional aircraft and allocating them to regional carriers under CPAs United Airlines – 30 E175 aircraft to Mesa Delta – 40 CRJ900 aircraft to Endeavo
Slide 18: Leading the regional industry
LEADING THE REGIONAL INDUSTRY 18 5/20/2014
Slide 19: Winding-down our 50-seat fleet
Winding-down our 50-seat fleet 5/20/2014 19 33 68 177 253 35 71 140 247 0 100 200 300 400 500 Envoy Skywest Air c ra ft Endeavor 500 PSA Chautauqua Air Wisconsin TSA E135/140/145 CRJ 200 50 seat jet fleets by regional operator (Operating under CPA as of 12/31/13)
Slide 20: Expanding our 70+ seat fleet
Expanding our 70+ seat fleet 5/20/2014 20 68 60 28 73 72 41 47 14 4720 47 0 20 40 60 80 100 120 140 160 180 67 173 Republic 42 Compass Endeavor Skywest 128 Ai rc ra ft PSA Gojet Envoy Mesa CRJ900 E175 E170 CRJ700 Q400 70+ seat jet fleets by regional operator (operating under CPA as of 12/31/13)
Slide 21: We own a majority of our aircraft
We own a majority of our aircraft 5/20/2014 21 We own 67% of our fleet (183 owned vs 92 leased aircraft) Within the E170 & E175 aircraft the ownership percentage increases to 85% Benefits of ownership for RJET: Fleet flexibility with idled aircraft (ability to sell or lease) Tax depreciati
Slide 22: RJET's track record
RJET’s track record 5/20/2014 22 Republic will celebrate its 40th anniversary in August 2014 Perfect passenger safety record First regional airline to operate under fixed-fee agreements with multiple Mainline Partners Smart fleet management to match capability with industry demand (eliminati
Slide 23: Pilot supply challenge
Pilot supply challenge 5/20/2014 23 200 400 370 300 420 450 YE-2011 Hire Attrit YE-2014F YE-2013 Attrit Hire Attrit YE-2012 Hire 2,330 2,180 2,380 1,980 • New First Officer Qualification rules are contributing to a significant reduction in the number of qualified candidates who meet our hiring stand
Slide 24: Other challenges we face
Other challenges we face 5/20/2014 24 CPA escalation not keeping pace with cost of labor, maintenance expense Our CPA rates basically increase by changes in CPI, which over the past five years has averaged ~1.8% Even without a new pilot contract, our captains are receiving a 3.1% seniority relat
Slide 25: Five Year Plan Targets
Five Year Plan Targets 5/20/2014 25 We have a high level of confidence in our ability to extend expiring CPAs for E170 & E175 aircraft Assuming no further capital investments, we will repay in excess of $1B of debt Focused on mitigating cost of LLP restoration on aging Ejet fleet (E170 / E175)
Slide 26: Reducing risk & simplifying the business
REDUCING RISK & SIMPLIFYING THE BUSINESS 26 5/20/2014
Slide 27: Big moves to de-risk our model
Big moves to de-risk our model 5/20/2014 27 2011 – Restructuring of Frontier Mark-to-market aircraft lease costs Reduced labor costs to better compete with ULCCs Network Improvements provided for outsized RASM gains 2012 – Restructuring of Chautauqua Mark-to-market aircraft lease costs Red
Slide 28: Fewer Operating Certificates
Fewer Operating Certificates 5/20/2014 28 Current scope restrictions will allow us to consolidate operations with a goal to be down to 2 operating certificates by the end of 2014. Key benefits of fewer certificates: More organizational productivity Lower infrastructure and administration Consi
Slide 29: Fewer AC Types
Fewer AC Types 5/20/2014 29 We have a goal of eliminating two fleet types over the next 2 years: E190 by YE 2015 E145 by mid 2016 Benefits of Fewer AC types: Allocate our resources where they produce the best returns Significantly improve labor efficiency for crews, mechanics and operations
Slide 30: seat E175
76 seat E175 5/20/2014 30
Slide 31: Seat Q400
71 Seat Q400 5/20/2014 31
Slide 32: Management focus for the future
MANAGEMENT FOCUS FOR THE FUTURE 32 5/20/2014
Slide 33: 2014 Corporate Goals
2014 Corporate Goals 5/20/2014 33 Show current ERJ terms (41 AC with DL), how many AC we have total and what the lease and debt obligations are on those (in total) by year Serves the purpose of letting our investors know the magnitude of the issue Discuss plans in the works to sublease/sell up the r
Slide 34: Resolve Pilot Contract Situation
Resolve Pilot Contract Situation 5/20/2014 34 TA Vote was disappointing Vote followed on the heels of contract rejections at ExpressJet and Envoy TA was not supported by IBT Local 357 Executive Council ~85% of pilots voted against higher pay and better work rules Management remains fully c
Slide 35: Safe, Clean, Reliable Operation
Safe, Clean, Reliable Operation 5/20/2014 35 Mainline Partner carriers investing in dual/tri class product to ensure opportunity to capture high value business travelers Regional carriers must replicate the brand “experience” received on mainline aircraft We are incentivized to run a clean, saf
Slide 36: Solutions Provider for our Partners
Solutions Provider for our Partners 5/20/2014 36 We take an asset management approach to fulfilling our partners needs We have more than 70 aircraft that have transitioned between one or more of our mainline partner brands American/US – since 1974 Delta – since 2002 United – since 2004 M
Slide 37: Q&A Session
Q&A SESSION 37 5/20/2014
Slide 38: Non-GAAP Reconciliations
NON-GAAP RECONCILIATIONS 38 5/20/2014
Slide 39: Non-GAAP Reconciliations
Non-GAAP Reconciliations 5/20/2014 39 Reconciliation of non-GAAP to GAAP financial measures: Pre-tax income (loss) to adjusted pre-tax income: ($ in millions) 2009 2010 2011 2012 2013 Pre-tax income from continuing operations 71$ 77$ (149)$ 51$ 81$ Adjust: Impairment charges 15 0 191 0 21 Adjusted p
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