Republic Airways Holdings Inc. (RJET): Take a Look At This Regional Airline

Republic Airways Holdings Inc. (NASDAQ:RJET) is going to sell its Frontier segment. In the first quarter, Frontier accounted for 49% of total revenue. However, the segment reported a net loss of $20.1 million, while the Republic segment reported a $20.6 million profit. Frontier has $801.2 million in total assets and $144.4 million in total debt. How would the possible sale of Frontier impact the Republic Airways Holdings price? It would depend on the price that the company would be able to negotiate.

However, the sale of the asset that brings losses is generally good for the stock price. With the money that it would get from the purchase, Republic Airways Holdings Inc. (NASDAQ:RJET) would be able to cover a big portion of its long-term debt. Stockholders are interested in earnings, not the sum of total assets. The sale would possibly boost the earnings of Republic Airways.

The bottom line

Republic Airways trades with an attractive P/E of approximately 9.4 and forward P/E of about 6.2. If we compare it to other regional airlines, we would see that JetBlue Airways Corporation (NASDAQ:JBLU) trades at 18 P/E and 9.2 forward P/E, while Southwest Airlines Co. (NYSE:LUV) has a 28 P/E and 11.7 forward P/E.

This difference in valuation is due to the big debt level of Republic Airways Holdings Inc. (NASDAQ:RJET) and uncertainty about the Frontier sale. The big debt level would be a problem if the expenses picked up significantly. This would happen in one major scenario – a big rise in oil prices, and, thus, the aircraft fuel prices. If you don’t believe this is going to happen, then Republic Airways presents a value for you.

Vladimir Zernov has no position in any stocks mentioned. The Motley Fool recommends Southwest Airlines.

The article Take a Look At This Regional Airline originally appeared on Fool.com.

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