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Judge Approves Republic Airways Settlement With Delta

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05/03/2016 | 08:55pm CEST

A bankruptcy judge has approved a settlement between Republic Airways Holdings Inc. and Delta Air Lines Inc. that includes a crucial code-share agreement, according to people with knowledge of the matter.

Judge Sean Lane of the U.S. Bankruptcy Court in New York approved the settlement as well as the $75 million bankruptcy financing provided by Delta, the people told The Wall Street Journal.

Representatives for Delta and Republic didn't respond to requests for comment.

The decision comes less than two weeks after the settlement was put before Judge Lane, who needed additional time to decide on it and the financing, which were met with objections from a group of shareholders.

The code-share deal and financing also received objections from the U.S. attorney and unsecured creditors, but these were resolved before the April 21 hearing.

Still, the shareholders group wouldn't budge in negotiations before the hearing.

At a hearing last month, Republic's lawyer said the code-share deal with Delta was vital to the survival of the carrier and would pave the way for negotiations over similar agreements with American Airlines Group Inc. and United Continental Holdings Inc.

The code-share agreements allow Republic to operate flights for Delta and other large carriers.

The settlement with Delta was tied to the $75 million in financing, and the rejection of one would have doomed the other. Republic's bankruptcy lawyer said last month that the Delta loan had the most favorable terms. The shareholder group opposed the pact with Delta.

The shareholders, who own more than 40% of Republic's equity, had asked the court to deny the financing package and settlement, saying would give Delta enormous power in Republic's bankruptcy proceedings.

Tension between Republic and the shareholders arose shortly after the carrier filed for bankruptcy protection in late February. The airline says shareholders are out of the money and likely won't see any recovery on their claims.

The Indianapolis-based Republic's woes stem from a pilot shortage brought on by relatively low starting salaries and new U.S. regulators' rules requiring aviators to have additional training.

Republic, in particular, suffered because of an outdated pilot contract that made it less attractive than its rivals to prospective hires.

Because of the pilot shortage, Republic was forced to ground some of its planes, leading to a lawsuit from Delta that claimed damages because of the loss of service for some Delta flights that had been operated by Republic.

Republic and Delta reached a settlement in March, which resulted in the code-share agreement and bankruptcy loan.

Write to Lillian Rizzo at Lillian.Rizzo@wsj.com

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