Regional Carrier Takes a Hit as Pilot Strike Looms

Steve Kanaval |

Republic Airways (RJET) is down 55% in mid day trading on heavy volume. The company provides scheduled passenger services and offers scheduled passenger service on thousands of flights daily to approximately 100 cities in the U.S. and Canada. Shares took a large hit today on the back of a poor earnings call and a potential pilot strike. Shares are down 56% on the day and 75% for the year.

You know these puddle jumpers airlines who provide fixed-fee regional airline services under United Express, Delta Connection, or US Airways Express/American Eagle. As of December 31, 2014, the company operated a combined fleet of approximately 244 aircraft and are an important cog in the system and is vulnerable to pilot shortage, this seems more like a leverage play by the unions as this would cause a major disruption in the delicate fabric of regional connection flights for domestic passengers, so beware of rising costs at the consumer level as these types of moves come out immediately in a higher ticket price.

Republic Airways warned that its operation of regional flights for the nation's biggest airlines could be disrupted by a pilot shortage and labor standoff. Republic disclosed late Friday that it is talking with American Airlines ($AAL), United (UAL) , Delta (DAL) and US Airways about reducing its flying for those airlines through the first half of next year.

Republic expects continued disruptions of flights because of a pilot shortage that it blames on federal rules raising training requirements for new pilots and increasing crew-rest hours. The company's negotiations with the Teamsters, which represents its pilots, are at standoff despite the use of a federal mediator. Republic said the Teamsters demands are unreasonable, making it impossible for the company to predict when it might settle the dispute.

Airline stocks are some of the most difficult to trade and often have large down drafts due to fuel prices, unions, crashes and missed earnings numbers like RJET is having today, what it means for the larger airlines is inconclusive, but if you are planning a short flight expect you will pay 25% more than previously for these puddle jumper seats and if you hold the stock you better fasten your seat belt and have a cocktail.

I will be doing a piece on regional airlines on the back of my upcoming beverage sector fremium product so stay tuned for upcoming information for our Small Cap Showdown newsletter series. It is all about the global consumer in 2015 so don't miss out on a unique perspective.

Steve Kanaval is the author of the upcoming Equities.com's Small-Cap Throwdown, a premium newsletter designed to help investors identify the best small-cap stocks to add to your portfolio and trading ideas to profit off them. The first issue pits the hottest beverage small-cap stocks against each other to find a winner. Sign-up here for a free issue today!

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DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer

Companies

Symbol Name Price Change % Volume
UAL United Continental Holdings 69.27 0.80 1.17 2,577,388
DAL Delta Air Lines Inc. 48.31 0.54 1.13 8,870,335
AAL American Airlines Group Inc. 46.10 0.35 0.77 6,505,099
RJET Republic Airways Holdings Inc. n/a n/a n/a 0

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