A federal judge approved a deal between bankrupt Republic Airways Holdings Inc. and Delta Air Lines Inc. that will increase the regional carrier’s rates for ferrying Delta passengers and provide it with $75 million in financing.
U.S. Bankruptcy Judge Sean Lane cleared the deal, which becomes effective on May 6, Republic said in a statement Tuesday. Delta had sued last year, accusing Republic of failing to complete some scheduled flights for regional unit Delta Connection.
Republic, which ferries passengers from smaller cities to hub airports for Delta, American Airlines Group Inc., and United Continental Holdings Inc., filed for bankruptcy protection in February after struggling with a shortage of pilots. The carrier had agreed to a new contract with the workers late last year but was unable to negotiate new deals with the three bigger airlines to help cover the costs of higher pay, leading to the filing.
The agreement announced Tuesday will allow Republic to stop flying 50-seat aircraft, which have fallen out of favor in the industry, and move exclusively to more profitable 70- to 88-seat aircraft. Delta will provide Republic with $75 million in debtor-in-possession financing, according to the statement.
A committee representing Republic’s unsecured creditors originally opposed the settlement, saying any agreement should be put on hold until Republic works out deals with its other partners. Todd Goren, an attorney for that committee, on Tuesday said the group ended its objections and now supports the settlement.
Representatives of Delta and Republic didn’t immediately return calls seeking comment.
The case is In re Republic Airways Holdings Inc., 16-10429, U.S. Bankruptcy
Court, Southern District of New York (Manhattan).