Republic Airways Holdings Inc. Common Stock 2026 Q3 Earnings Call

Keely, please go ahead. Thank you, Kenneth, and thank you everyone for joining our earnings call.

On with me today are Matt Koscal, President and Chief Executive Officer, and Joe Allman, Executive Vice President and Chief Financial Officer. In the investor relations section of our website, you will find the earnings press release and slide presentation to accompany today's discussion. This call is being recorded and will be available for replay in our investor relations website. Today's discussion will include forward-looking statements regarding Republic Airways future performance, strategic initiatives and market outlook. These statements reflect our current expectations and beliefs based on information available to us today, but they are subject to various risks and uncertainties that could cause actual results to differ materially from our projections.

The aviation industry operates in a dynamic environment with inherent risks, including regulatory changes, economic fluctuations, weather-related disruptions, and evolving market conditions that can significantly impact our operations and financial performance. Additionally, our business is subject to the operational and financial health of our major airline partners, labor market conditions, aircraft availability, and other factors beyond Republic's direct control. For a comprehensive understanding of the specific risks and uncertainties that may affect our business and financial results, I encourage all participants to review our detailed disclosures in our filings with the Securities and Exchange Commission, including our Form 10-K on file with the SEC and subsequent periodic reports. These documents provide important context and detailed information that supplement today's discussion and are, or will be, available on both the SEC's website and in the investor relations section of our company website at rjet.com.

Additionally, throughout this webcast, we will also present and discuss non-GAAP financial measures. Reconciliations of our non-GAAP financial measures to their most directly comparable GAAP financial measure, to the extent they are available without unreasonable effort, appear in today's earnings press release and accompanying presentation, which are available on our investor relations website. I will now turn the call over to Matt.

Thank you, Keely, and good morning, everyone. Before turning to our third quarter results, I want to build on a theme I shared on our last quarterly earnings call. This has been a transformational year for Republic, but this year is part of a much larger story, a transformational decade in which we have helped redefine what a regional airline can be. Our three partners have been focused on building stronger brands through premium products, exceptional reliability, and a customer experience that earns lasting loyalty. That promise must extend across the entire journey, including the flights we operate. We recognized this early that regional service needed to evolve to match that ambition, and over the past decade, we have invested deliberately to be ready. It starts with our people.

Creating an industry-leading work environment, world-class training infrastructure, and a relentless commitment to culture give our associates the foundation to deliver for our partners and their passengers. We paired those investments with a premium regional product led by the E175, a passenger experience across all classes of service that complements our partners' brands. Together, these investments in people, product and technology have built a Republic that has been ready to answer our partners' calls. Reliability is where those investments come together. We serve our partners' most complex, congested, and important hubs, particularly in the Northeast. Weather and air traffic control disruptions are a reality of that operating environment. Our ability to anticipate disruption and recover effectively is a key competitive advantage and a critical part of protecting the customer experience when it matters most. None of this happened by chance.

We made deliberate choices to invest early in our people and culture, innovative technology solutions for our crews and operations center, and our fleet. We sustained that commitment through disruptive periods, including the pandemic, when we broke ground on our state-of-the-art aviation campus. Bringing training and operations together on one campus reflects our long-term approach to excellence. These are capabilities built over years, not in response to a single quarter. We cannot control macroeconomic or geopolitical uncertainty, weather or air traffic control, but we can stay focused on where we have an impact with our people, our product, our reliability and the successful integration of Mesa and Republic. That discipline has underpinned our results throughout this year and positions us to grow as the solution provider of choice for our partners' most complex and important opportunities.

With that context, I want to thank our more than 8,500 Republic and Mesa associates for supporting the integration and delivering this quarter's operational and financial results in a challenging environment. As we approach the first anniversary of the Mesa merger, we have made meaningful progress toward a fully integrated airline. Let me now turn to the quarter's results and the work ahead. Earlier this morning, we reported third quarter adjusted net income of $40 million, or $0.85 per diluted share. July was a historically challenging month for our operation, with an overall completion factor of just 92% due to weather and ATC disruptions. Conditions improved considerably through the remainder of the quarter, and demand from our partners remained strong. By September, our completion factor had recovered to 97.6%.

For the third quarter, completion factor was 94.6%, slightly above the challenging first quarter, but 360 basis points below the second quarter's 98.2%. Severe weather in the Northeast's highly congested airspace can significantly disrupt our operations, creating irregular operations, or IROPs. Our focus is on recovering efficiently when those disruptions occur, and we continue to make investments in our people and technology to further improve those recovery efforts, ultimately serving our crews and passengers better. These investments will continue to show up in our controllable completion factor, which was 99.96% and allowed us to complete nearly 115,000 flights, despite the high number of IROP days and a challenging ATC environment. We achieved perfect controllable completion on 81 days during the quarter. That performance reflects our associates' commitment to getting our partners' passengers to their destinations safely.

During the quarter, we also reached an agreement to place five additional E170 aircraft into service for American Airlines, which represents the continued demand for premium regional connectivity, even in a high fuel cost environment. Now let me turn to the integration of Mesa and Republic. We continue to make great progress on the integration across three key areas: operations, regulatory milestones, and fleet harmonization. We continue to advance toward a fully harmonized operation and a single operating certificate. in August, Mesa's operations center moved from Phoenix to our aviation campus in Carmel, Indiana, and we welcome the Mesa associates who relocated to the greater Indianapolis area. We also received FAA acceptance of the second of five revision cycles, aligning our pre-flight procedures and activities. We remain on track to file, implement, and complete revision cycles three, four, and five during 2027 and early 2028.

In maintenance, we completed the transition of all Mesa maintenance and material control specialists to Republic and migrated their system of record into Republic's maintenance and material control system. Substantially all of Mesa's corporate functions have now transitioned to our aviation campus. Each of these milestones moves us closer to completing the integration. Regarding fleet harmonization, our goal is to complete that process by the end of 2027. During the quarter, we continued to improve fleet health and maintenance harmonization, meeting our targeted improvements in heavy check turnaround times. Total turnaround times are approximately 40% lower today than they were just a year ago. Supply chain challenges remain an industry headwind, as you've heard throughout this earnings season, and we have made this harmonization progress despite these constraints.

Our supply chain and engineering teams remain fully engaged with the manufacturers and OEMs that supply spare parts and components for our E-Jets. Once these challenges are fully mitigated, we will be positioned to increase aircraft availability and utilization across the entire fleet. Turning to labor, we experienced reduced attrition of pilots throughout the first half of 2026, mostly driven by the availability of Spirit pilots post their liquidation. In the third quarter, pilot attrition normalized to what we had expected it to be for 2026, and we are positioned well to support the expected demand from our partners in 2027. There continues to be a strong pipeline of pilot supply and Republic's world-class aviation campus and training center and culture differentiates us as an employer of choice.

Regarding our flight attendants, implementation of our joint collective bargaining agreement, or JCBA, with IBT and AFA continued throughout the quarter, including the introduction of boarding pay in July. I want to thank everyone who has been working on this implementation effort throughout the year. We remain in active pilot negotiations with the joint negotiating committees of IBT and ALPA. If we are unable to reach an agreement, interest arbitration is expected to begin in mid-December and continue into 2027. We expect to finalize labor integration in 2027. Let me turn the call over to Joe to review the financial highlights for the quarter.