When is an airline not an airline?
When it is Republic Airways Holdings, Inc. (RJET) After reading the news that RJET snatched Frontier airlines from the jaws of Chapter 11 and then picked up Midwest airlines the next day, I decided to do some investigation. The most complete and concise pitch that I have read in a long time was written by EarningsPower back in Feb, 2008 when the stock was selling for about $19. One of the things that he mentioned is the notion of acquiring smaller regional airlines as part of their growth strategy:
"Assuming RJET doesn't overpay for aquisitions as well as that it will be able to integrate its aquisitions without serious difficulties, this scenario would further fuel additional upside..."
So what did they do?
Republic Airways Holdings Inc. said it agreed to acquire fellow regional carrier Midwest Airlines from TPG for $31 million, just 17 months after the private-equity giant and then-partner Northwest Airlines paid $452 million for Midwest.
That sounds like a pretty smart move to me!
And the deal with Frontier:
Republic Airways (NASDAQ:RJET) announced Tuesday that it will buy 100% of the equity of reorganized Frontier Airways (OTC:FRNTQ) to bring the company out of bankruptcy. Under the deal, which is subject to court approval, Republic will pay $108.75 million, and Frontier will become a wholly owned subsidiary of Republic Airways.
We'll have to wait and see if their deals generate more cash than debt, but so far it looks to me like they are making all the right moves! I bought a few shares today.