Fort Wayne-based Shuttle America Corp. plans to convert from a propeller aircraft regional carrier into a regional jet carrier through a change in ownership.
The company is owned by Shuttle Acquisition, an affiliate of the Wexford Capital investment group, which also is the majority shareholder of Indianapolis-based Republic Airways Holdings.
Republic Airways announced Thursday an offer to buy Shuttle America for $1 million, plus the assumption of less than $1 million in debt. The deal is expected to close in May, if approved by Republics board.
Its an extreme makeover that will prepare the company for business growth, but executives said it was too early to predict what impact, if any, the changes could have on Shuttle America operations at Fort Wayne International Airport.
Officials at the airport have been watching the situation for weeks.
Republic said in a prepared statement it plans to add the Embraer 170 regional jet to Shuttle Americas fleet as soon as possible and phase out all of its propeller aircraft by the end of 2005 if the deal goes through.
Regional jets can fly farther than propeller aircraft, and the Embraer 170 has 70 seats twice the number on the Saab 340s used by Shuttle America.
Those major advantages make the transformation opportunity Republic presented about as attractive as you can get for a regional airline, said Scott Durgin, Shuttle Americas president and chief executive officer.
Republic operates the regional carrier Chautauqua, which wants to replace at least some of its Embraer 170s with Embraer 190s, a version that seats 100 passengers.
Moving the Embraer 170s to Shuttle America after the acquisition would allow Chautauqua to make the transition without violating pilot agreements.
Chautauqua offers scheduled service on more than 700 flights daily to 75 cities in 32 states, Canada and the Bahamas. All its flights are operated under major airline partner brands, such as AmericanConnection, Delta Connection, United Express and US Airways Express. Chautauqua employs more than 2,400 people and operates 116 regional jets, including 16 Embraer 170s.
If the acquisition is approved, Shuttle America will be a subsidiary of a very successful, larger, profitable, well-capitalized business, said Warren R. Wilkinson, Republic spokesman. The new owner will provide resources and support to help Shuttle America grow.
The merger will require Republic to revise its annual financial statements for 2002, 2003 and 2004 to reflect Shuttle America results for the same periods because both companies are controlled by Wexford.
Republic said a preliminary estimate based on unaudited financial information indicated that the restatement might show a reduction of $4 million to $7 million in its reported 2004 earnings of $44.8 million.
With new capabilities, Shuttle America will serve new markets. It is unclear whether the carrier will continue operating in any of the cities it now serves.
We serve the airports where United (Airlines) wants us to serve, and that has been and always will be fluid, Durgin said.
Shuttle America stopped providing US Airways Express service last year after US Airways announced plans to cut its service from Pittsburgh International Airport by one-third. The change cost Fort Wayne International the regional carriers flights.
Shuttle America began providing connecting flights in other cities for United Airlines from Dulles International Airport in Washington, D.C., as United Express last June.
The switch reduced Shuttle Americas business volume but restored its profitability. At the peak of its volume, it had 23 planes in its fleet and 19 in scheduled service, and we were losing money, Durgin said.
Now, with 11 planes, including nine in scheduled service, were making a little profit; its the difference between the contracts with United and United Airways.
Employment at the companys Fort Wayne headquarters and a maintenance operation has decreased to 113 from 145 a little more than a year ago.
Now that it has certification from the Federal Aviation Administration to fly larger planes, Shuttle America Corp. is expanding and updating its fleet and adding flights to new cities.
The agreement calls for Republic Airways Holding Inc. and its majority shareholder, Greenwich, Conn.-based Wexford Capital LLC, to invest $125 million after US Airways exits bankruptcy.
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