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Republic stock plunges on possible flight disruptions

DALLAS (AP) — 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.

Its shares fell 56 percent to their lowest level since January 2012.

Republic disclosed late Friday that it had cut flying by 4 percent in early summer and was talking with American, United, Delta and US Airways about reducing its flying more through the first half of next year.

At American Airlines, which also owns US Airways, spokesman Casey Norton said the airlines use 10 regional carriers and were working with Republic on “minor schedule adjustments” to reduce impact on passengers. Delta and United spokesmen said their airlines were trying to minimize effect on customers but declined to say more.

Regional carriers operate about half the nation’s domestic flights, linking many small and mid-sized airports with the hubs run by the big airlines.

Subsidiaries Republic Airlines and Shuttle America fly about 1,200 flights a day in the U.S. and Canada using smaller planes that seat 44 to 99 passengers. At the end of 2014, they were flying 99 planes for American Eagle and US Airways Express, 71 for Delta Connection, and 66 for United Express. The big airlines use several other regional carriers and could ask them to pick up flights that Republic drops.

Regional carriers have complained about a pilot shortage since 2013, when the Federal Aviation Administration raised minimum experience for new hires to 1,500 flight hours, up from 250. Another rule increased mandatory crew rest for pilots. Unions say the regional airlines could end the pilot shortage by raising pay, which starts at less than $25,000 at some carriers.

Republic, which has about 2,100 pilots, said its ability to staff flights has been compounded by stalled contract negotiations with the Teamsters. Pilots rejected a Republic offer last year, and the company said the union’s demands since then have been unreasonable and make it hard to say when the dispute might be settled.

A Teamsters spokesman said talks were scheduled to resume next week. He declined further comment.

In recent months, Republic has tried to keep planes flying by offering pilots extra pay for working on their days off and by giving signing bonuses to new hires. The Teamsters took the unusual step of suing the company for giving its members more money — the union said the pay increase outside of normal negotiations violated federal law and undercut its leverage for a new contract.

Helane Becker, an analyst for Cowen and Co., said Monday that without a pilot deal, “employee unrest” will increase and reliability of service will suffer. She said that without a contract, the company will shrink.

The Indianapolis company said Friday that second-quarter earnings would be between $4 million and $5 million, or eight to 10 cents per share. Analysts had expected 20 cents per share, according to a FactSet survey. The company said it hired Seabury Group for advice on strategic options.

Shares of Republic Airways Holdings Inc. fell $4.73, or 56 percent, to $3.77 on Monday.

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