Deutsche Bank Downgrades Republic Airways, Slashes Price Target To $9

In a report published Monday, Deutsche Bank analyst Michael Linenberg downgraded the rating on Republic Airways Holdings, Inc. RJET from Buy to Hold, while lowering the price target from $15 to $9, following the uncertain and lowered earnings outlook of the company.

The company is struggling with pilot shortfall due to regulatory changes, including a much longer time required for pilots to qualify to become first officers, as well as increased restrictions on pilot duty and flight times. In addition, the ongoing dispute with the International Brotherhood of Teamsters, who represent Republic Airways' pilots for more than five years.

Teamsters has been "negotiating over an amended contract for more than five years. The union has advised its pilot membership against bidding for additional time to help the company alleviate its staffing challenges," Linenberg said.

According to the Deutsche Bank report, "Turning to risks, consolidation among the major carriers, which has resulted in fewer hubs, and therefore, a need for fewer regional jets to feed those hubs has negatively impacted aggregate demand for the smallest regional jets, particularly 37-50 seaters."

The EPS estimate for 2015 has been reduced from $1.05 to $0.35 "due to 5 percent reduction in block hours for the June, Sep, and Dec Qs as the company struggles with pilot staffing issues," Linenberg added.