Analytics, 01 July 2021
What to know about Republic Airways IPO
US-based Republic Airways is exploring going public through an initial public offering this year. Republic operates flights through fixed-fee agreements for American, Delta, United Airlines – all of which are listed in US exchanges.
Its competitors are SkyWest and Mesa Airlines which are also publicly traded, and Republic has a fleet of more than 220 Embraer SA planes.
What to know about Republic Airways IPO
- Bloomberg reported that Republic is working with underwriters – including Raymond James Financial Inc. as it prepares for an initial public offering as soon as the third quarter.
- Founded in 1974, the Indianapolis-based Republic is led by Chief Executive Officer Bryan Bedford.
- With a fleet of more than 220 Embraer SA planes, the company ferries passengers from small and mid-sized cities to major airport hubs where they often catch other flights.
- Republic operates flights through fixed-fee agreements for American Airlines Group’s, American Eagle, Delta Air Lines’ Delta Connection, and United Airlines’ United Express. The Airline carries the brands of its partners, serving regional routes.
- Republic competes against regional airlines including Utah-based SkyWest Inc. and Phoenix-based Mesa Air Group Inc.
- It has been a busy year for IPOs in the airline sector, and a public offering by Republic would be the third this year for a U.S. airline, following Frontier Group Holdings Inc. and Sun Country Airlines Holdings Inc., as carriers seek to capitalize on a surge in domestic travel demand following stay-at-home orders during the pandemic. Breeze Airways also began flying last month and plans to expand to 16 cities by July.
- Its targeted valuation couldn’t immediately be learned, as representatives declined to comment. But the company emerged from a bankruptcy restructuring in April 2017, with ownership stakes totaling 61% at that time held by American, Delta, and United.
Outlook of Airline stocks
- With coronavirus vaccines continuing to be rolled out globally, the resumption of travel has boosted airline stocks. The Bloomberg World Airlines Index has risen 7.1% this year and is up 41% from a year ago.
- Airlines are an important part of the economy, but, for much of their history, the stocks have been lousy investments. Airline stock prices move with economic cycles, and past downturns caused airline bankruptcies and failures.
- Industry consolidation has created a small group of competitors that are more effectively using technology to manage schedules and set fares. Today, four airlines control about 80% of the U.S. market.
- If you’re bullish on airlines but would rather not choose among individual stocks, lower-risk investments such as exchange-traded funds (ETFs) also cover the airline sector. The U.S. Global Jets ETF is specifically focused on airlines, while the iShares Transportation Average ETF and the SPDR S&P Transportation ETF each allocate more than 25% of their holdings to airlines.