Item 7. Management’s Discussion and Analysis
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements, the accompanying notes, and the other financial information included elsewhere in this Report. The following discussion contains forward-looking statements that involve risks, uncertainties,
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and assumptions that could cause actual results to differ materially from those discussed in the forward-looking statements below. Factors that could cause such differences include, but are not limited to, those discussed in “Cautionary Note Regarding Forward-Looking Statements” and “Risk Factors” in this Report.
Overview
We are the second largest independent regional airline in the United States based on total fleet and daily departures. As of December 31, 2025 and 2024, we had an operational fleet of 275 and 208 regional jet aircraft that regularly provides scheduled passenger service on approximately 1,300 and 1,000 daily flights, to approximately 130 and 90 cities, respectively, in the United States, Canada, Mexico, and the Caribbean.
On November 25, 2025, the Company and Mesa Air Group, Inc. (“Mesa Parent”), former parent company of Mesa Airlines, completed the Merger of Republic Airways Holdings Inc. and Mesa Air Group, Inc., whereby the Company merged with and into Mesa Air Group, Inc. (the “Merger”). The legal entity Mesa Air Group, Inc. continued as the surviving corporation; however, upon completion of the Merger, the legal entity was renamed Republic Airways Holdings Inc . The Company, on a pre-Merger basis, is referred to as “Legacy Republic.” The Company includes the operations of Legacy Republic and, beginning on November 25, 2025, also includes the operations, financial position, and cash flows of the former entity Mesa Air Group, Inc. and its wholly-owned subsidiaries. S ee Note 3, Merger with Mesa Air Group, Inc. , in the notes to the audited consolidated financial statements included in this Report.
Substantially all of our flights are operated under multi-year CPAs with our Partner Airlines. We exclusively operate the dual class Embraer E170/175 family of aircraft and are one of the world’s largest operators of that popular aircraft type. Under the CPAs, we provide substantially all of our flight capacity to our Partner Airlines. Our compensation is not materially or directly affected by variations in fares or passenger load factors, nor by variations in the price of fuel, the cost of which is paid directly by our Partner Airlines, effectively providing us with contractual monthly revenues, while reducing our exposure to fluctuations in fuel prices, fare competition, and passenger loads. In 2025 and 2024 , we carried passengers on more than 371,000 and 323,000 flights, generating revenue s of $1,676.5 million and $1,474.0 million and pre- tax income of $113.4 million and $86.9 million , respectively.
We operate under our Partner Airlines’ two-letter flight designation codes, paint our aircraft in the style of our Partner Airlines’ brand requirements, and use our Partner Airlines’ service marks to market ourselves as a carrier for our Partner Airlines. Our Partner Airlines control route selection, pricing, seat inventories, marketing, and scheduling, and provide us with ground support services, airport take-off and landing slots, and gate access, allowing us to focus on operational excellence, positioning ourselves as the regional airline of choice for our Partner Airlines and passengers through the delivery of safe, clean, reliable, and efficient regional service. For the year ended December 31, 2025 , American Airlines, Delta Air Lines, and United Airlines accounted for 43%, 28%, and 29% of our departures, respectively.
During the year ended December 31, 2025, Bryan K. Bedford, our former Chief Executive Officer, was nominated and subsequently confirmed for service as Administrator of the Federal Aviation Administration. In connection with such nomination, Mr. Bedford retired effective July 1, 2025 . We paid a cash payment of $16.0 million related to his employment contract. Upon effectiveness of his retirement, 652,475 shares were considered earned and vested immediately, resulting in additional compensation expense of $9.8 million . We recorded total expense of approximately $20.8 million during the year ended December 31, 2025 related to Mr. Bedford’s separation and retirement, which includes $2.0 million related to subsequent remeasurements of Mr. Bedford’s awards. Matthew Koscal, Executive Vice President and Chief Administrative Officer, was promoted to President and Chief Commercial Officer, and David Grizzle, Chairman of the Board of Directors, began serving as Chief Executive Officer upon Mr. Bedford’s retirement on July 1, 2025 . During the year ended December 31, 2025, we announced that the Board of Directors expects that Mr. Koscal will succeed Mr. Grizzle in the position of CEO during the year ending December 31, 2026, at which time David Grizzle will return to the position of non-executive Chairman of the Board of Directors. Any final succession decision will be determined at a future undetermined date, in the sole discretion of the Board of Directors and publicly announced, as legally required.
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Factors, Trends, and Uncertainties Affecting Republic’s Business
We believe our operating and business performance is driven by various factors that typically affect regional airlines and their markets, including factors and trends which affect the broader airline and travel industries. The following key factors, trends, and uncertainties have affected our historical results of operations and may materially affect our future performance:
Availability and Training of Qualified Pilots . Effective July 15, 2013 , as directed by U.S. Congress, the FAA issued more stringent pilot qualification and crew member flight training standards, which, among other things, increased the required training time for new commercial airline pilots from 250 hours to 1,500 hours of flight time. With these changes, the supply of qualified pilot candidates eligible for hiring by the airline industry has been dramatically reduced in recent years. In addition, the FAA’s mandatory retirement age of 65 is expected to cause a significant number of pilots to retire over the next decade.
To address the expected increasingly diminished supply of qualified pilot candidates, we developed and launched a proprietary flight training school called LIFT Academy in 2018 and continue to develop relationships with flight schools across the country to help fulfill our need for pilots. Since its founding in 2018 in Indianapolis, IN , LIFT Academy expanded its operations with additional flight school locations in Columbia, SC, Myrtle Beach, SC, Galveston, TX, Columbus, IN and at Moton Field in partnership with Tuskegee University in Tuskegee, AL.
We also entered into a partnership with Hyannis Air Service Inc. d/b/a Cape Air and Nantucket Airlines (“Cape Air”) in order to create a pipeline of talent from LIFT Academy to Cape Air and then to Republic to provide additional structured pathways for accumulation of the FAA 1,500 flight hour requirement. This strategic partnership will help us retain talented pilots as they transition from LIFT Academy students to pilots at Republic in less time and with more experience. We also built a state-of-the-art aviation campus that opened in early 2023 . Finally, we have undertaken substantial efforts to generate renewed interest in the industry, including developing partnerships with secondary education institutions to promote the availability of careers in aviation. Our ability to grow and continue to provide safe, clean, and reliable regional airline services to our Partner Airlines will depend on our ability to successfully attract, train, and develop pilots. Furthermore, pilot training and development is constrained by the availability of full motion flight simulation equipment in the marketplace. In order to ensure access to this equipment, we have acquired one flight simulator and have long-term lease agreements in place that guarantee a minimum level of flight simulator availability and provide for potential access to additional flight simulators.
Pilot Attrition and Staffing Base. We experience significant volatility in our attrition as a result of the demand for pilots at mainline, low-cost, and cargo carriers who obtain pilot hires, in part, from regional airlines. Pilot attrition could be a factor impacting our results and ability to acquire new market share in future periods. In addition, the lead-time in acquiring and training new pilots requires that we grow our pilot staffing base in excess of our then-current need when we accept new business and expand our fleet.
Workforce Development. Over the past few years we have expanded our investment in LIFT Academy to address workforce development needs to include a DOL approved maintenance technician apprenticeship program and CFR Part 145 repair station to expand the level of experience and learning opportunities afforded to technicians and other aspiring aviation operations personnel. In addition, we secured a partnership with Cape Air to create a flow program of talented aviators from LIFT Academy to Cape Air to supplement their workforce in exchange for flight hours and valuable experience. We also built a state-of-the-art aviation campus that houses simulators, a cabin trainer, and classrooms to train our pilots, flight attendants, maintenance technicians, dispatchers, and other employees. Our inability to source qualified aviation personnel, whether from LIFT Academy or externally, may adversely impact our ability to operate in a cost-effective manner, expand our fleet, and carry out reliable operations.
The Company also operates Bridge Air with a dedication to helping aviation professionals achieve their dream of becoming a commercial airline pilot as quickly, safely, and inexpensively as possible.
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Labor. The airline industry is heavily unionized. The wages, benefits, and work rules of unionized airline industry employees are determined by our CBAs. As of December 31, 2025 , approximately 71% of our workforce was represented under CBAs. The terms and conditions of our future CBAs may be affected by the results of collective bargaining negotiations at other airlines, regional or otherwise, that may have a greater ability, due to larger scale, greater efficiency, or other factors, to bear higher wage costs than we can. In addition, conflicts between airlines and their unions can lead to work slowdowns or stoppages. A strike or other significant labor dispute with our unionized employees may adversely affect our ability to conduct business.
Competition. The airline industry is highly competitive. We compete principally with other regional airlines. Major airlines typically award CPAs to regional airlines based on the following criteria: (i) ability to fly contracted schedules; (ii) availability of labor resources (including pilots); (iii) low operating cost; (iv) financial resources; (v) geographical infrastructure; (vi) overall customer service and reliability levels such as on-time arrival and flight completion percentages; and (vii) the overall image of the regional airline. Our ability to earn additional flying opportunities in the future will depend, in significant part, on our ability to consistently operate as a safe, clean, reliable, cost-effective, and high-quality regional airline.
Market Volatility. The airline industry is volatile and sensitive to economic cycles and trends. Declining consumer confidence and discretionary spending, fear of terrorism or war, fear of a global pandemic, weakening economic conditions, fare initiatives, fluctuations in fuel prices, labor actions and wage escalation, changes in governmental regulations on taxes, fees and tariffs, weather, and other factors have contributed to a number of reorganizations, bankruptcies, liquidations, and business combinations among major and regional air carriers. The effect of economic cycles and trends may be somewhat mitigated by our reliance on long-term CPAs. If, however, any of our Partner Airlines experience a prolonged decline in the number of passengers served or is negatively affected by low ticket prices or high fuel prices, it may seek rate reductions in future CPAs or materially reduce its scheduled flights in order to reduce its costs. Our financial performance could be negatively impacted by any adverse changes to contracted revenue rates, number of aircraft in the fleet, or utilization under our CPAs.
Maintenance Contracts, Costs, and Timing. Our associates perform routine airframe and engine maintenance along with periodic inspections of equipment at our maintenance facilities. We also use third-party vendors for certain heavy airframe, engine, and other maintenance work, along with parts procurement and component overhaul services for our aircraft fleet.
The average age of our aircraft is approximately 13.0 years. Due to the age of certain aircraft, our aircraft require less overall maintenance now than they will in the future. As our aircraft fleet ages and warranties expire, we expect that our maintenance costs will increase in absolute terms and as a percentage of revenues.
We use the direct expense method of accounting for our maintenance of regional jet engine overhauls, airframe, landing gear, and normal recurring maintenance whereby we recognize expense as maintenance work is completed or over the repair period, if materially different. While we keep a record of expected maintenance events, the actual timing and costs of major engine maintenance expense are subject to variables such as estimated usage, government regulations (including tariffs), the extent of the occurrence of unscheduled maintenance events, and their actual costs. Accordingly, we cannot reliably quantify the cost or timing of future maintenance-related expenses for any significant period of time.
In addition, we have entered into long-term maintenance “power-by-the-hour” service contracts with third-party maintenance providers under which we are charged fixed rates for each flight hour or other measure accumulated by the majority of our engines and some of the major airframe components. The effect of such contracts is to reduce the volatility of aircraft maintenance expense over the term of the maintenance agreement.
Aircraft Leasing and Finance Determinations. We have generally funded aircraft acquisitions through a combination of debt financing, finance leases, and operating leases. Our decision to finance the acquisition of aircraft through leases or secured debt may be influenced by a variety of factors, including the preferences of our Partner Airlines, the strength of our balance sheet and credit profile (and those of our Partner Airlines), the length and terms of the available financing alternatives, prevailing market interest rates, and any lease return condition requirements. Generally, under our
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CPAs, the monthly ownership costs of the aircraft we operate are reimbursed, in whole or in part, by our Partner Airlines. When practical, we prefer to finance aircraft through secured debt rather than with leasing products, due to the accelerated tax depreciation benefits, opportunity to acquire equity in our aircraft, absence of lease return conditions, and greater flexibility in renewing the aircraft under our CPAs with our Partner Airlines at end of term. We currently own or have finance leases on 66% of our existing aircraft and expect to own, rather than lease, a majority of any new fleet acquired. The remaining 34% of our fleet is owned directly by certain of our Partner Airlines, which we refer to as “Partner Controlled Aircraft.” Subsequent to the initial acquisition of an aircraft, we may also refinance the aircraft or convert one form of financing to another (e.g. replacing an aircraft operating lease with debt financing or vice versa) to meet our capital needs at a given time.
As of December 31, 2025 , we ha ve 11 aircraft subject to finance leases. At lease inception, we make certain estimates in order to determine the proper classification of our leased aircraft as either operating leases or finance leases, economic useful lives of subject assets, fair value of the asset under lease, as well as selection of an appropriate discount rate to be used in discounting future lease payments. These estimates also affect the value recorded for the finance lease asset and the corresponding finance lease liability, which is classified as current and long-term debt. Amortization of the finance lease asset is recorded to depreciation and amortization expense. The interest component of a finance lease payment is recorded to interest expense.
Seasonality. Our results of operations for any interim period are not necessarily indicative of those for the entire year, in part because the airline industry is subject to seasonal fluctuations and changes in general economic conditions. A significant portion of our CPAs is based on completing flights as scheduled, and we typically have more scheduled flights during the summer months and concurrently generally experience significant weather cancellations during the summer months, which negatively impacts our revenues during such months.
Key Components of Republic’s Results of Operations
Revenue
We operate under the American Eagle, Delta Connection, and United Express brands through our CPAs with American Airlines, Inc. (“American Airlines”), Delta Air Lines, Inc. (“Delta Air Lines”), and United Airlines, Inc. (“United Airlines”), respectively. Under these arrangements, we receive fixed fees, as well as reimbursement of specified costs with additional possible incentives from our Partner Airlines for superior performance. Substantially all of our revenues are earned under our CPAs with our Partner Airlines. The number of aircraft we operate, aircraft utilization, and the rates we charge are the most significant drivers of our revenues. The number of passengers carried and the fares which revenue-generating passengers pay do not affect our revenues. We earn revenues based on aircraft utilization levels under the applicable CPAs with each of our Partner Airlines, subject to minimum utilization guarantees.
Revenues associated with regional jet services are generally derived from (i) a fixed fee per departure, flight hour, and/or block hour of time incurred and a fixed rate for available-to-schedule aircraft, payable on a monthly basis; and (ii) a premium amount, which is earned monthly or quarterly by maintaining minimum aircraft utilization levels and exemplary operating results. To the extent that minimum targets are not achieved, we could be subject to financial penalties. These fixed-fee rates are contractually subject to periodic economic adjustment. We also receive reimbursement from our Partner Airlines for direct expenses incurred such as qualifying maintenance activities, property taxes, and miscellaneous operating expenses. The Company refers to Partner reimbursements as “pass-through charges.” Certain charges such as fuel, landing fees, and certain ownership costs are generally paid directly by the Partner Airlines, although the charges were incurred by the Company in ongoing operations. The Company refers to these charges as “Partner direct charges.” Pass-through charges are primarily recorded to revenues and the corresponding operating expense on a gross basis. Pass-through charges recorded on a net basis are not material.
Amounts recognized as regional jet services revenues are measured at the contractual amount we expect we will be entitled to in exchange for the promised services. We allocate the transaction price as flights are completed with variable consideration that relates specifically to our efforts in delivering each flight recognized in the period in which the individual flight is completed and measured on a monthly basis. We record an estimate for incentive revenue based on our
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expected performance at the end of each period. These estimates are derived under accounting guidance related to variable consideration constraints and based on amounts expected to be collected. We have concluded that allocating the variability directly to the individual flights results in an overall allocation meeting the objectives in Financial Accounting Standards Board (“FASB”) ASC 606, Revenue Recognition . This results in a pattern of revenue recognition that generally follows the variable amounts billed from us to our Partner Airlines.
Operating Expenses
A brief description of the items included in our operating expenses line items are as follows:
Wages and Benefits
This expense includes salaries and wages earned by our pilots, flight attendants, dispatchers, and other employees, as well as expenses associated with various employee benefit plans, stock-based compensation, employee incentives, and payroll taxes. These expenses fluctuate primarily based on our level of operations, changes in wage rates for contract and non-contract employees, and changes in costs of our benefit plans.
Aircraft and Engine Rent
This expense consists of the costs of aircraft and spare engines under operating leases. Leased aircraft (including wing-mounted engines) and spare engines are operated under long-term operating leases and subject to adjustment as costs associated with minimum lease return conditions become probable and able to be estimated, generally coinciding with the last heavy maintenance visit.
Maintenance and Repair
Maintenance and repair expenses include all materials and external labor required to maintain our aircraft and engines. We have entered into long-term maintenance “power-by-the-hour” service contracts with certain third-party maintenance providers under which we are charged fixed rates for each flight hour or departure accumulated by the majority of our engines and certain major airframe components. The effect of such contracts is to reduce the volatility of aircraft maintenance expense over the term of our maintenance agreements. All other maintenance charges are expensed as incurred under the direct expense method of accounting. Certain maintenance and repair activities, such as engine overhauls and heavy maintenance, qualify for reimbursement from our Partner Airlines under the pass-through provisions of our CPAs.
Depreciation and Amortization
This expense includes depreciation expense of all owned aircraft, property, and equipment which includes aircraft under debt obligations and finance leases, spare engines, flight equipment, general aviation aircraft, and ground equipment as well as amortization expense on leasehold improvements. Effective January 1, 2024, we revised the estimated useful lives of regional jet aircraft, spare engines, and flight equipment from 22.0 to 26.0 years in an effort to more closely align with market data impacting our fleet usage pattern.
Executive Separation and Merger-related Items
We classify certain operating expenses as executive separation and Merger-related items due to their nonrecurring or infrequently occurring nature.
Executive separation and Merger-related items are principally composed of transaction-related expenses incurred for the ongoing integration of Mesa Airlines into the legacy operations of the Company, post-employment benefit costs, and costs incurred for the consolidation of the airline operating certificates (“AOCs”) of Mesa Airlines, Inc. and Republic Airways, Inc., among others. The Company does not expect to incur costs of this nature following completion of Merger-related integration activities.
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Other Operating Expense
Costs of crew training, crew travel, facilities and administrative lease expenses, professional fees, software, and all other administrative and operational overhead expenses are recorded to other operating expense. Additionally, to the extent that these charges are incurred, we record expenses related to gains and losses on asset disposals, impairment charges, and bad debt expense to other operating expense.
Other Expense, net
Other expense, net is comprised of interest expense on secured and unsecured debt obligations, realized and unrealized gains and losses on fair value adjustments to marketable securities and non-current investments, warrants, and put options held with EVE Holdings, Inc. (“EVE”), and our minority interest in Cape Air and our proportionate share of income or losses of Cape Air. Additionally, we have a strategic partnership with EVE for the development of electric vertical takeoff and landing (“eVTOL”) aircraft.
Results of Operations
Year ended December 31, 2025 compared to the year ended December 31, 2024
The following table sets forth information rega rding our operating results for the year ended December 31, 2025 compared to the year ended December 31, 2024 :
(in millions) 2025 2024 $ Variance % Variance
Revenues $ 1,676.5 $ 1,474.0 $ 202.5 13.7 %
Operating expenses:
Wages and benefits 762.6 677.2 85.4 12.6
Aircraft and engine rent 0.7 3.6 (2.9) (80.6)
Maintenance and repair 320.9 311.2 9.7 3.1
Depreciation and amortization 126.3 117.0 9.3 7.9
Executive separation and Merger-related items 47.1 3.2 43.9 NM
Other operating expense 250.6 224.8 25.8 11.5
Total operating expenses 1,508.2 1,337.0 171.2 12.8
Operating income 168.3 137.0 31.3 22.8
Total other expense (54.9) (50.1) (4.8) 9.6
Income before income taxes 113.4 86.9 26.5 30.5
Income tax expense 37.2 22.3 14.9 66.8
Net income $ 76.2 $ 64.6 $ 11.6 18.0 %
Net income % (1)
4.5 % 4.4 % NM 0.1 pts
Adjusted EBITDA (2)
$ 341.7 $ 257.2 84.5 32.9 %
Adjusted EBITDA % (2)
20.4 % 17.4 % NM 3.0 pts
Adjusted EBITDAR (2)
$ 342.4 $ 260.8 81.6 31.3 %
Adjusted EBITDAR % (2)
20.4 % 17.7 % NM 2.7 pts
(1) Net income % is net income expressed as a percentage of revenues.
(2) Adjusted EBITDA represents net income before executive separation and Merger-related items, interest expense, investment income, and other, net, income taxes, and depreciation and amortization expense. Adjusted EBITDAR represents net income before executive separation and Merger-related items, interest expense, investment income, and other, net, income taxes, depreciation and amortization expense, and aircraft and engine rent. Adjusted EBITDA % and EBITDAR % are non-GAAP measures that represent Adjusted EBITDA and Adjusted EBITDAR, respectively, expressed as a percentage of revenues. Republic’s management uses these metrics, and it believes these metrics are also useful to investors to understand Republic’s financial performance. Adjusted EBITDA, Adjusted EBITDA %, Adjusted EBITDAR, and Adjusted EBITDAR % are included as supplemental disclosure because Republic’s management believes that they are well recognized valuation metrics in the airline industry that are
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frequently used by companies, investors, securities analysts, and other interested parties in comparing companies in Republic’s industry. Adjusted EBITDA and Adjusted EBITDAR have limitations as analytical tools. Some of the limitations applicable to these measures include:(i) Adjusted EBITDA and Adjusted EBITDAR do not reflect the impact of certain cash charges resulting from matters Republic considers not to be indicative of its ongoing operations; (ii) Adjusted EBITDA and Adjusted EBITDAR do not reflect Republic’s cash expenditures for capital expenditures or contractual commitments; (iii) Adjusted EBITDA and Adjusted EBITDAR do not reflect changes in, or cash requirements for, Republic’s working capital needs; (iv) Adjusted EBITDA and Adjusted EBITDAR do not reflect the interest expense, or the cash requirements necessary to service interest or principal payments, on its debts; (v) although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future and Adjusted EBITDA and Adjusted EBITDAR do not reflect any cash requirements for such replacements; and (vi) other companies in Republic’s industry may calculate Adjusted EBITDA and Adjusted EBITDAR differently than Republic does, limiting their usefulness as comparative measures. Because of these limitations, Adjusted EBITDA and Adjusted EBITDAR should not be considered in isolation or as a substitute for performance measures calculated in accordance with GAAP. In addition, Adjusted EBITDAR should not be viewed as a measure of overall performance because it excludes aircraft and engine rent, which is a normal, recurring cash operating expense that is necessary to operate Republic’s business. For the foregoing reasons, each of Adjusted EBITDA, Adjusted EBITDA %, Adjusted EBITDAR, and Adjusted EBITDAR % has significant limitations which affect its use as an indicator of Republic’s profitability. Accordingly, readers are cautioned not to place undue reliance on this information.
The following table presents the reconciliation of net income to Adjusted EBITDA and Adjusted EBITDAR for the periods presented below:
(in millions) 2025 2024
Net income $ 76.2 $ 64.6
Plus:
Depreciation and amortization 126.3 117.0
Executive separation and Merger-related items 47.1 3.2
Interest expense 60.6 57.7
Investment income and other, net (5.7) (7.6)
Income tax expense 37.2 22.3
Adjusted EBITDA 341.7 257.2
Plus:
Aircraft and engine rent 0.7 3.6
Adjusted EBITDAR $ 342.4 $ 260.8
The following table summarizes certain operating data that we believe are useful indicators of our operating performance for the years ended December 31, 2025 and 2024 . We believe block hours, departures, and average daily utilization of each aircraft are our primary measures in evaluating aircraft production, incurrences of revenues and operating expenses, and efficiency of the Airline.
Operating Highlights
2025 2024 % Variance
Aircraft under operation for the Partner Airlines at period end (1)(2)
275 208 32.2 %
Block hours (3)
699,313 591,677 18.2 %
Departures
371,205 323,807 14.6 %
Average daily utilization of each aircraft (hours) (4)
9.7 8.5 14.1 %
Average length of aircraft haul (miles)
493 489 0.8 %
(1) Excludes five spare aircraft as of December 31, 2025.
(2) Excludes 31 aircraft that have been leased to another airline as of December 31, 2025 and 2024.
(3) Reflects hours of aircraft movement from gate to gate (including taxi time before takeoff and after landing) until the aircraft comes to rest at the next point of landing.
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(4) Reflects average daily utilization in block hours (aircraft movement from gate to gate, including taxi time) for the greater of actual in-service aircraft or minimum contracted scheduled aircraft, if applicable.
Revenues
Revenues increased $202.5 million, or 13.7%, to $1,676.5 million for the year ended December 31, 2025 compared to $1,474.0 million for the year ended December 31, 2024, primarily related to a $188.3 million increase in variable revenue year-over-year due in part to the increase in flying compared to the prior year. This included a 18.2% increase in block hour production and a 14.6% increase in departures due to increased daily utilization and contribution of additional flying under the new CPA with United Airlines resulting from the Merger, beginning November 25, 2025.
Operating expenses
Wages and benefits expense increased $85.4 million, or 12.6%, to $762.6 million for the year ended December 31, 2025 from $677.2 million for the year ended December 31, 2024. The increase was primarily attributable to a $67.3 million increase in salaries and wages due largely to the 18.2% increase in block hour production.
Maintenance and repair expense increased $9.7 million, or 3.1%, to $320.9 million for the year ended December 31, 2025 from $311.2 million for the year ended December 31, 2024. The increase was due to a $28.2 million increase primarily in engine, rotable, landing gear, and auxiliary power unit repairs driven by a 18.2% increase in block hours, partially offset by a decrease in heavy check maintenance events and LLP contract expenses of $18.3 million during the year ended December 31, 2025.
Depreciation and amortization expense increased $9.3 million, or 7.9%, to $126.3 million for the year ended December 31, 2025 from $117.0 million for the year ended December 31, 2024. The increase was due to the addition of new E175 aircraft delivered throughout 2024 and 2025, offset by the sale of six E175 aircraft during the year ended December 31, 2024.
Executive separation and Merger-related items expense increased $43.9 million to $47.1 million for the year ended December 31, 2025 from $3.2 million for the year ended December 31, 2024. The increase was due primarily to cash and share based compensation expenses related to the modification and acceleration of restricted stock awards upon Mr. Bedford’s retirement of $20.8 million, coupled with an increase in professional fees of $16.5 million year-over-year from the increased work scope and expenses related to the Merger, as well as an increase of $6.5 million in Merger-related compensation.
Other operating expense increased $25.8 million, or 11.5%, to $250.6 million for the year ended December 31, 2025 from $224.8 million for the year ended December 31, 2024, primarily due to a $12.3 million increase in crew hotel and other travel expense caused by increased flying. Additionally, professional fees, software costs, and freight increased by $10.2 million, combined with a reduction of $3.6 million in gain from asset disposals, primarily related to the sale of aircraft year-over-year.
Other expense, net
Other expense, net increased $4.8 million, or 9.6%, to $54.9 million for the year ended December 31, 2025 from $50.1 million for the year ended December 31, 2024. The table below shows the (increase) decrease related to the changes in other expense, net:
(in millions)
Unrealized gains from marketable securities
$
3.0
Interest expense
2.8
Other, net
(1.0)
Total
4.8
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Income tax expense
We recorded income tax expense of $37.2 million for the year ended December 31, 2025, compared to income tax expense of $22.3 million for the year ended December 31, 2024 at an effective tax rate of 32.8% and 25.7%, respectively. Our effective tax rates differ from the federal statutory rate of 21.0% primarily due to state income taxes and valuation allowances on net operating losses. During the year ended December 31, 2025, we recorded additional income tax expense of $8.1 million related to non-deductible items. We expect an effective tax rate of 29% in 2026.
Year ended December 31, 2024 compared to the year ended December 31, 2023
The following table sets forth information regarding our operating results for the year ended December 31, 2024 compared to the year ended December 31, 2023:
(in millions) 2024 2023 $ Variance % Variance
Revenues $ 1,474.0 $ 1,429.1 $ 44.9 3.1 %
Operating expenses:
Wages and benefits 677.2 654.8 22.4 3.4
Aircraft and engine rent 3.6 6.1 (2.5) (41.0)
Maintenance and repair 311.2 285.3 25.9 9.1
Depreciation and amortization 117.0 159.4 (42.4) (26.6)
Executive separation and Merger-related items
3.2 0.3 2.9 NM
Other operating expense 224.8 187.9 36.9 19.6
Total operating expenses 1,337.0 1,293.8 43.2 3.3
Operating income 137.0 135.3 1.7 1.3
Total other expense (50.1) (47.3) (2.8) 5.9
Income before income taxes 86.9 88.0 (1.1) (1.3)
Income tax expense 22.3 33.2 (10.9) (32.8)
Net income $ 64.6 $ 54.8 $ 9.8 17.9 %
Net income % (1)
4.4 % 3.8 % NM 0.6 pts
Adjusted EBITDA (2)
$ 257.2 $ 295.0 (37.8) (12.8) %
Adjusted EBITDA % (2)
17.4 % 20.6 % NM (3.2) pts
Adjusted EBITDAR (2)
$ 260.8 $ 301.1 (40.3) (13.4) %
Adjusted EBITDAR % (2)
17.7 % 21.1 % NM (3.4) pts
(1) Net income % is net income expressed as a percentage of revenues.
(2) Adjusted EBITDA represents net income before executive separation and Merger-related items, interest expense, investment income, and other, net, income taxes, and depreciation and amortization expense. Adjusted EBITDAR represents net income before executive separation and Merger-related items, interest expense, investment income, and other, net, income taxes, depreciation and amortization expense, and aircraft and engine rent. Adjusted EBITDA % and EBITDAR % are non-GAAP measures that represent Adjusted EBITDA and Adjusted EBITDAR, respectively, expressed as a percentage of revenues. Republic’s management uses these metrics, and it believes these metrics are also useful to investors to understand Republic’s financial performance. Adjusted EBITDA, Adjusted EBITDA %, Adjusted EBITDAR, and Adjusted EBITDAR % are included as supplemental disclosure because Republic’s management believes that they are well recognized valuation metrics in the airline industry that are frequently used by companies, investors, securities analysts, and other interested parties in comparing companies in Republic’s industry. Adjusted EBITDA and Adjusted EBITDAR have limitations as analytical tools. Some of the limitations applicable to these measures include:(i) Adjusted EBITDA and Adjusted EBITDAR do not reflect the impact of certain cash charges resulting from matters Republic considers not to be indicative of its ongoing operations; (ii) Adjusted EBITDA and Adjusted EBITDAR do not reflect Republic’s cash expenditures for capital expenditures or contractual commitments; (iii) Adjusted EBITDA and Adjusted EBITDAR do not reflect changes in, or cash requirements for, Republic’s working capital needs; (iv) Adjusted EBITDA and Adjusted EBITDAR do not reflect the interest expense, or the cash requirements necessary to service interest or principal payments, on its debts; (v) although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future and Adjusted EBITDA and Adjusted EBITDAR do not reflect any cash requirements for such replacements; and (vi) other companies in Republic’s industry may calculate Adjusted EBITDA and Adjusted EBITDAR differently than Republic
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does, limiting their usefulness as comparative measures. Because of these limitations, Adjusted EBITDA and Adjusted EBITDAR should not be considered in isolation or as a substitute for performance measures calculated in accordance with GAAP. In addition, Adjusted EBITDAR should not be viewed as a measure of overall performance because it excludes aircraft and engine rent, which is a normal, recurring cash operating expense that is necessary to operate Republic’s business. For the foregoing reasons, each of Adjusted EBITDA, Adjusted EBITDA %, Adjusted EBITDAR, and Adjusted EBITDAR % has significant limitations which affect its use as an indicator of Republic’s profitability. Accordingly, readers are cautioned not to place undue reliance on this information.
The following table presents the reconciliation of net income to Adjusted EBITDA and Adjusted EBITDAR for the periods presented below:
(in millions) 2024 2023
Net income $ 64.6 $ 54.8
Plus:
Depreciation and amortization 117.0 159.4
Executive separation and Merger-related items 3.2 0.3
Interest expense 57.7 49.1
Investment income and other, net (7.6) (1.8)
Income tax expense 22.3 33.2
Adjusted EBITDA 257.2 295.0
Plus:
Aircraft and engine rent 3.6 6.1
Adjusted EBITDAR $ 260.8 $ 301.1
The following table summarizes certain operating data that we believe are useful indicators of our operating performance for the years ended December 31, 2024 and 2023 . We believe block hours, departures, and average daily utilization of each aircraft are our primary measures in evaluating aircraft production, incurrences of revenues and operating expenses, and efficiency of the Airline.
Operating Highlights
2024 2023 % Variance
Aircraft under operation for the Partner Airlines at period end (1)(2)
208 213 (2.3 %)
Block hours (3)
591,677 561,905 5.3 %
Departures
323,807 308,314 5.0 %
Average daily utilization of each aircraft (hours) (4)
8.5 7.6 11.8 %
Average length of aircraft haul (miles)
489 484 1.0 %
(1) Excludes one spare aircraft as of December 31, 2023.
(2) Excludes 31 and 25 aircraft that have been leased to another airline as of December 31, 2024 and 2023, respectively.
(3) Reflects hours of aircraft movement from gate to gate (including taxi time before takeoff and after landing) until the aircraft comes to rest at the next point of landing.
(4) Reflects average daily utilization in block hours (aircraft movement from gate to gate, including taxi time) for the greater of actual in-service aircraft or minimum contracted scheduled aircraft, if applicable.
Revenues
Revenues increased $44.9 million, or 3.1%, to $1,474.0 million for the year ended December 31, 2024 compared to $1,429.1 million for the year ended December 31, 2023, primarily related to a $83.8 million or 9.0% increase in Carrier-Controlled Revenue year-over-year due in part to the increase in flying compared to the prior year. This included a 5.3% increase in block hours, a 5.4% increase in flight hours, and a 5.0% increase in departures. This was offset by a $40.0
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million, or 13.1% decrease in aircraft ownership revenue due to fleet changes that occurred throughout the year ended December 31, 2024.
Operating expenses
Wages and benefits expense increased $22.4 million, or 3.4%, to $677.2 million for the year ended December 31, 2024 compared to $654.8 million for the year ended December 31, 2023. The increase in wages and benefits expense was primarily due to the 5.3% increase in block hour production.
Maintenance and repair expense increased $25.9 million, or 9.1%, to $311.2 million for the year ended December 31, 2024 compared to $285.3 million for the year ended December 31, 2023. The increase in maintenance and repair expense was primarily due to the 5.3% increase in block hour production.
Depreciation and amortization expense decreased $42.4 million, or 26.6%, to $117.0 million for the year ended December 31, 2024 compared to $159.4 million for the year ended December 31, 2023. Effective January 1, 2024, we revised the estimated useful lives of regional jet aircraft, spare engines, and flight equipment from 22.0 years to 26.0 years in an effort to closely align with our expectation of utilization of the aircraft, including engine life limited parts replacement (“LLP”). The change in accounting estimate on the then-current fleet assets decreased depreciation and amortization expense by $50.5 million for the year ended December 31, 2024. This was offset by an increase in depreciation and amortization expense of $7.4 million due to the delivery of six and 13 new aircraft during the years ended December 31, 2024 and 2023, respectively, and further offset by additional depreciation for building assets put into service in the year ended December 31, 2024.
Executive separation and Merger-related items expense increased $2.9 million to $3.2 million for the year ended December 31, 2024 from $0.3 million for the year ended December 31, 2023. The increase was primarily due to an increase in professional fees of $2.9 million year-over-year caused by increased work scope related to the Merger due diligence.
Other operating expense increased $36.9 million, or 19.6%, to $224.8 million for the year ended December 31, 2024 compared to $187.9 million during the year ended December 31, 2023. During the year ended December 31, 2024, we recognized a $2.5 million gain on the sale of six E175 aircraft compared to a $11.4 million gain on the sale of six E175 aircraft during the year ended December 31, 2023. This was coupled with a $7.0 million increase in professional fees and software costs, and a $5.2 million increase in travel expenses caused by a 5.3% increase in block hour production when compared to the year ended December 31, 2023.
Other expense, net
Other expense, net increased $2.8 million, or 5.9%, to $50.1 million for the year ended December 31, 2024 from $47.3 million for the year ended December 31, 2023. The table below shows the (increase) decrease related to the changes in other expense, net:
(in millions)
Unrealized gains from marketable securities
$
(5.2)
Interest expense
8.6
Other, net
(0.6)
Total
2.8
Income tax expense
We recorded income tax expense of $22.3 million for the year ended December 31, 2024, compared to income tax expense of $33.2 million for the year ended December 31, 2023 at an effective tax rate of 25.7% and 37.7%, respectively. Our effective tax rates differ from the federal statutory rate of 21% primarily due to state income taxes, valuation allowances on state net operating losses, and certain non-deductible expenses. During the years ended December 31, 2024
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and 2023, our effective state income tax rate increased due to increased operations in higher income tax jurisdictions, resulting in $1.2 million and $12.2 million of additional income tax expense, respectively.
Liquidity and Capital Resources
We require cash to fund our operating expenses and working capital requirements, including outlays to fund capital expenditures, aircraft pre-delivery deposit payments, maintenance expenses, aircraft rent, and debt service obligations, including principal and interest payments. Our cash needs vary from period to period, primarily based on the timing and costs of significant maintenance events and capital expenditures. Our principal sources of liquidity are cash on hand and liquid investments, including investments in marketable securities, cash generated from operations, and funds raised from external borrowings or offerings. In the near term, we expect to fund our primary cash requirements through cash generated from operations, cash, and cash equivalents on hand (including our investments in marketable securities), and funds from new borrowings on aircraft deliveries and our aviation campus. There is no assurance that we will be successful in securing any additional liquidity from third-party creditors. We believe that cash flow from operating activities coupled with existing cash, cash equivalents, and marketable securities will be adequate to fund our operating and capital needs through at least the next 12 months.
As of December 31, 2025 , we had a working capital deficit of $33.6 million . The airline industry is highly capital intensive due to the nature and financing methods for its fleet assets used to generate operating cash flows. If we fail to generate sufficient funds from operations to repay such obligations, we may need to raise capital through the issuance of equity or obtain or refinance borrowings to meet our existing obligations. There can be no assurance that such equity transactions or borrowings will be available or, if available, will be at terms, rates, or prices acceptable to us.
The following table summarizes our total cash and marketable securities as of December 31, 2025 and December 31, 2024 as well as our operating, investing, and financing cash flow activities for the years ended December 31, 2025 and 2024 :
(in millions) 2025 2024 $ Variance % Variance
Cash, cash equivalents, and restricted cash
$ 157.7 $ 131.9 $ 25.8 19.6 %
Marketable securities
162.2 191.5 (29.3) (15.3)
Total
$ 319.9 $ 323.4 $ (3.5) (1.1) %
(in millions) 2025 2024 $ Variance % Variance
Net cash provided by operating activities
$ 322.0 $ 226.1 $ 95.9 42.4 %
Net cash used in investing activities
(350.9) (105.5) (245.4) NM
Net cash provided by (used in) financing activities
54.7 (102.2) 156.9 NM
During the year ended December 31, 2025 , total cash, cash equivalents, restricted cash, and marketable security positions decreased $3.5 million, or 1.1%, to $319.9 million as of December 31, 2025 from $323.4 million as of December 31, 2024.
Net cash provided by operating activities increased $95.9 million, or 42.4%, to $322.0 million during the year ended December 31, 2025 from $226.1 million during the year ended December 31, 2024. The increase was attributable to the increase in earnings excluding non-cash expenses, coupled with changes in working capital accounts from the timing of collection of receivables and settlement of liabilities when compared to the year ended December 31, 2024.
Net cash used in investing activities increased $245.4 million to $350.9 million net cash used during the year ended December 31, 2025 from $105.5 million net cash used during the year ended December 31, 2024. We purchased $176.2 million and redeemed $212.5 million in marketable securities and investments during the year ended December 31, 2025, compared to purchases of $187.3 million and redemptions of $255.3 million in marketable securities and investments during the year ended December 31, 2024. Additionally, we acquired 12 E175 regional aircraft and sold no E175 regional
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aircraft resulting in proceeds during the year ended December 31, 2025, compared to the acquisition of six E175 regional aircraft and the sale of six E175 regional aircraft resulting in proceeds during the year ended December 31, 2024. We also received $22.8 million during the year ended December 31, 2025 in connection with the Merger.
Net cash provided by (used in) financing activities changed $156.9 million to $54.7 million net cash provided for the year ended December 31, 2025 compared to $102.2 million net cash used for the year ended December 31, 2024. During the year ended December 31, 2025, we obtained secured borrowings resulting in cash inflows of $299.4 million, compared to obtaining secured borrowings resulting in cash inflows of $177.3 million during the year ended December 31, 2024. Additionally, there were no accelerated payments and early debt extinguishments for aircraft-related notes during the year ended December 31, 2025, compared to the accelerated payment and early debt extinguishment for aircraft-related notes of $37.4 million during the year ended December 31, 2024.
Our credit agreements require that we comply with customary affirmative and negative covenants. We believe we are in compliance with all of our financial covenants as of December 31, 2025 and 2024.
Letters of Credit
As we enter new markets, increase the amount of maintenance space we lease, or add leased aircraft, we are often required to provide airport authorities and lessors with letters of credit. We also provide letters of credit for our workers’ compensation insurance, construction activities, and student loans. As of December 31, 2025 and 2024 , we had cash collateralized letters of credit totaling $22.8 million and $21.4 million, respectively . Cash collateralized against our letters of credit is recorded in restricted cash on our consolidated balance sheets.
Aircraft and Other Leases
Our lease obligations consist of aircraft, spare engines, flight training equipment, terminal space, operating facilities, and office space, which expire through 2038 . All of our leases are classified as operating leases and finance leases with contractual terms extending up to 13 years . For operating leases with terms greater than 12 months, we record an operating lease liability and the related right-of-use asset at the present value of remaining lease payments at the measurement date, taking into consideration rental escalation provisions, when applicable. Lease obligations expected to be paid within 12 months represent current maturities and are classified within the current portion of operating lease liabilities to our consolidated balance sheets. Lease obligations with expected repayment extending beyond 12 months are recorded to operating lease liabilities—less current portion to our consolidated balance sheets in our accompanying consolidated financial statements. We record our finance lease assets, current liability, and noncurrent liability to property and equipment, net, current portion of long-term debt and finance leases, and long-term debt and finance leases—less current portion, respectively. Amortization of the finance lease asset is recorded to depreciation and amortization expense. The interest component of the lease payment is recorded to interest expense. With the exception of our CPAs and some operating facilities, we do not separate lease and non-lease contractual components. Provisions for residual value guarantees are not material. See Note 7 , Leases , in the notes to the audited consolidated financial statements included in this Report.
Components of operating and finance lease costs for the years ended December 31, 2025, 2024, and 2023, are as follows:
Years Ended
(in millions)
December 31,
2025
December 31,
2024
December 31,
2023
Operating lease cost
$ 21.4
$ 24.5
$ 29.3
Finance lease cost (1)
9.6
12.7
17.3
Variable and short-term lease cost
4.2
2.8
2.8
Total lease cost
$ 35.2
$ 40.0
$ 49.4
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(1) Finance lease costs include depreciation and amortization costs and interest costs.
Off-Balance Sheet Arrangements
We have guaranteed certain obligations of LIFT Academy and certain third parties related to LIFT Academy. Expected losses from guaranteed obligations are derived from total commitments outstanding to third parties coupled with the probability of repayment. Total guaranteed obligations as of December 31, 2025 were $21.1 million . Losses expected to be incurred from guaranteed obligations were $7.3 million as of December 31, 2025 .
Commitments and Obligations
From time to time, we enter into purchase commitments for future aircraft and engine deliveries. We regularly make pre-delivery deposit payments (“PDP”) to support aircraft and engines on order. PDPs are retained until scheduled aircraft or engine delivery occurs or when deposit amounts are no longer expected to be returned by the manufacturer. Interest costs associated with PDPs are capitalized as a portion of the overall historical cost of the related aircraft or engine and are depreciated over the estimated useful life of the asset. During the years ended December 31, 2025, 2024, and 2023, we recorded $2.1 million, $1.6 million, and $1.1 million, respectively, in capitalized interest costs to property and equipment, net, in our consolidated balance sheets.
The following table sets forth our future contractual obligations as of December 31, 2025 :
(in millions)
Total
Less than
1 year
1 – 3 years
3 – 5 years
More than
5 years
Current and long-term debt obligations
$ 1,025.4 $ 196.0 $ 292.5 $ 186.4 $ 350.5
Interest on debt obligations (1)
261.9 57.9 90.8 55.2 58.0
Operating lease obligations
176.0 24.5 48.2 43.9 59.4
Finance lease obligations
72.6 9.5 19.0 39.5 4.6
Aircraft and spare engines under purchase obligations
837.1 83.5 630.3 123.3 —
Aviation Campus purchase commitment
28.3 28.3 — — —
Total
$ 2,401.3 $ 399.7 $ 1,080.8 $ 448.3 $ 472.5
(1) Interest calculated for fixed rate debt and estimated for variable rate debt based on current interest rates as of December 31, 2025. 84.2% of Republic’s debt is fixed rate debt.
We have an order for 29 Embraer regional jets (E175), and expect three aircraft to be delivered during the three months ended March 31, 2026, with the remaining deliveries beginning in 2027 through 2029.
During the year ended December 31, 2025, we executed an amendment to an existing financing arrangement to finance contractually scheduled aircraft deliveries during the year ending December 31, 2026, which provides funding for a portion of the total aircraft cost, is secured by the related aircraft, and is funded upon each delivery. Additionally, we entered into a new credit facility secured by spare engines. As of December 31, 2025, the remaining maximum borrowings allowable under the agreements is $115.6 million.
During the years ended December 31, 2024 and 2023, we completed the initial phase of three phases of a new flight aviation campus and corporate headquarters in Carmel, Indiana (the “Aviation Campus”). The Aviation Campus includes a training center that will be used to perform substantially all of our training activities for pilots, flight attendants, maintenance technicians, and dispatchers and houses eight full motion simulators along with flat panel simulators, cabin trainers, and classrooms. Additionally, the Aviation Campus includes overnight accommodations that will be used exclusively by associates in training and a parking garage. In January 2026, the second phase of the Aviation Campus was completed, including a new corporate headquarters. As of December 31, 2025 and 2024 , we recorded $2.9 million and $1.3 million, respectively, in capitalized interest costs to property and equipment, net, in the consolidated balance sheets associated with the construction of the Aviation Campus.
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We have long-term agreements relating to our maintenance costs associated with engines, auxiliary power units (“APUs”), avionics, and other aircraft equipment. The following agreements comprise our long-term maintenance agreements for various airframe and engine components as of December 31, 2025 :
Maintenance Agreement
Termination
APUs
December 2034
Avionics
December 2029
Engines
December 2037
Wheels and Brakes
September 2030
Certain fixed agreements include a guaranteed minimum payment amount based on flight hours, departures, or other measures. Aggregate payments under long-term maintenance agreements were $154.0 million, $149.4 million, and $150.8 million for the years ended December 31, 2025, 2024, and 2023 , respectively.
Taxes
We recorded income tax expense o f $37.2 million, $22.3 million, and $33.2 million, during the years ended December 31, 2025, 2024, and 2023, respectively, at an effective tax rate of 32.8%, 25.7%, and 37.7%, respectively. We utilize Federal NOLs against our current period taxable income. Our Federal NOL deferred tax assets are largely generated from the accelerated tax depreciation on aircraft and other significant asset acquisitions. Based on our expected utilization and expiration of our NOL deferred tax assets as well as anticipated aircraft deliveries, we do not expect to become a cash tax-paying entity until at least 2028. See Note 11, Income Taxes , in the notes to the audited consolidated financial statements included in this Report.
The One Big Beautiful Bill Act , enacted on July 4, 2025, has introduced changes to the United States Federal tax laws. We do not expect that this legislation will have a material impact to our income tax expense and deferred tax balances.
Critical Accounting Policies and Estimates
The discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amount of assets and liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities at the date of our financial statements. Actual results may materially differ from these estimates under different assumptions and conditions.
Some of those estimates and judgments can be subjective and complex. Consequently, actual results could differ from those estimates. We consider an accounting estimate to be critical if: (i) the accounting estimate requires us to make assumptions about matters that are highly uncertain at the time the accounting estimate is made; and (ii) we reasonably could have used different estimates in the current period , or changes in these estimates are reasonably likely to occur from period to period as new information becomes available, and a change in these estimates would have a material impact on our financial condition, results of operations, the price of our common stock, or cash flows.
We continually evaluate the estimates and judgments used to prepare our consolidated financial statements. Our estimates are based on historical experience, information from third-party professionals, and various other assumptions that we believe are reasonable. There are other items within our financial statements that require estimation but are not deemed critical based on the criteria above. Changes in estimates used in these and other items could have a material impact on our financial statements in any one period.
Significant estimates include but are not limited to (i) estimated useful lives and residual values of aircraft and equipment, (ii) provision for income taxes, and (iii) accounting for business combinations. Actual results could materially differ from our initial estimates.
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Estimated useful lives and residual values of aircraft and equipment — We record property and equipment at historical cost, less accumulated depreciation, which is charged to expense on a straight-line basis over the estimated useful life of the related asset. Effective January 1, 2024, we adjusted the estimated useful life of certain aircraft, rotable spare parts, and engines from 22.0 to 26.0 years to more closely align with market data impacting our fleet usage pattern, including LLP. Estimated useful lives and residual values for each asset class are as follows:
Asset Class
Current Useful
Life Effective
January 1, 2024
(Years)
Previous Useful Life Effective December 31, 2023 and Prior (Years) Residual Value
Building
39.0 39.0 —
Regional jet aircraft
26.0 22.0 0.0% – 10.0%
General aviation aircraft, engines, and flight equipment
10.0 – 26.0
10.0 – 22.0 0.0% – 50.0%
Office equipment and leasehold improvements
3.0 – 20.0
3.0 – 20.0 —
Income taxes — We have generated significant NOLs for U.S. federal income tax purposes primarily from accelerated depreciation on owned aircraft. As of December 31, 2025, we had estimated NOLs of approximately $300 million for U.S. federal income tax purposes, which begin to expire in 2036.
The future use of NOLs is limited to the extent that the utilization of deferred tax assets and other carry forwards becomes uncertain in future years. If such conditions exist, we will be required to record a valuation allowance for deferred tax assets not expected to be utilized at the time that it becomes more likely than not that we will not generate sufficient taxable income to reali ze our NOL deferred tax assets and establish or adjust our valuation allowance if such conditions exist. In evaluating the likelihood of utilizing our net deferred income tax assets, significant judgments include limitations on utilization, our recent history of profitability, forecasts of our taxable income trends, and future impacts of taxable temporary differences.
The Company cannot conclude that it is more likely than not that the benefit from certain Federal and state NOL carryforwards will be realized. In recognition of this uncertainty, the Company has provided a valuation allowance of $82.7 million and $36.4 million as of December 31, 2025 and 2024, respectively, on the deferred tax assets related to these NOL carryforwards. During the year ended December 31, 2025, there was an adjustment of $58.7 million to the valuation allowance as a result of IRC Sec 382 limitation due to the ownership change caused by the Merger, and the unlikelihood of fully utilizing the deferred tax assets. If or when recognized, the tax benefits related to any reversal of the valuation allowance on deferred tax assets will be recognized as a reduction of income tax expense.
Accounting for the Merger with Mesa Air Group, Inc — The Merger is accounted for as a reverse acquisition under provisions of FASB ASC 805, Business Combinations , using the acquisition method of accounting. Legacy Republic is designated the accounting acquirer and legal acquiree for financial reporting purposes on the basis that, immediately following consummation of the Merger, (i) shareholders of Legacy Republic hold a substantial majority of the voting interest in the Company, (ii) Legacy Republic designated six of seven director positions on the Company’s Board, and (iii) senior management of Legacy Republic retained all named executive officer positions within the Company following the Merger. The accounting for the Merger as a reverse acquisition resulted in the issuance and relinquishment of 11.9% of the pre-Merger voting interest in Legacy Republic as consideration in exchange for certain net assets of Mesa, which is measured at the acquisition date fair value of the consideration exchanged. To record the assets acquired and liabilities assumed as a result of the Merger with Mesa Parent, we performed a purchase price allocation utilizing the best information available to management. We recognized the identifiable assets acquired and the liabilities assumed at their estimated fair values on the acquisition date. Any excess Merger consideration exchanged over the fair value of net assets acquired was recorded to goodwill. Determining the fair value of these items requires management’s judgment, and more often than not the utilization of independent valuation specialists. Additionally, the determination of what is a part of and separate from the business combination requires management’s judgment in the application of FASB ASC 805, Business Combinations . The valuation of these tangible and identifiable intangible assets and liabilities is subject to further review from management and may change between the preliminary allocation and end of the purchase price allocation period. Management will continue to evaluate these estimates and assumptions should new information become available, and
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adjustments may be recorded to the fair value of the assets acquired and liabilities assumed as soon as practicable, but no later than November 25, 2026. For more information on our acquisitions and application of the acquisition method, see Note 3, Merger with Mesa Air Group, Inc. in the notes to the consolidated financial statements.
Recent Accounting Pronouncements
S ee Note 2, Summary of Significant Accounting Policies , included in the notes to the consolidated financial statements included in this Report.
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