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Republic Airways Holdings Objection Filed

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Republic Airways Holdings’ ad hoc equity security holders’ committee filed with the U.S. Bankruptcy Court an objection to the Debtors’ motion, pursuant to Section 365(a) of the Bankruptcy Code and Bankruptcy Rules 6006 and 9019, for authorization to (i) assume amended codeshare and related agreements with United Airlines and (ii) settle claims between United Airlines and the Debtors.

The objection asserts, “The Debtors seek to assume various executory contracts with United under section 365(a) of the Bankruptcy Code and to settle certain alleged pre-petition disputes with United pursuant to Bankruptcy Rule 9019(a). If that were the extent of the relief sought, it would be a garden-variety request. The Motion goes much further, however, because the Debtors aim to compensate United with a newly created pre-petition general unsecured claim in exchange for various modifications to the assumed contracts. Simply put, the Bankruptcy Code does not contemplate or permit the allowance of pre-petition claims as currency for a chapter 11 debtor’s post-petition business transactions.”

The objection continues, “Compensating United with an allowed pre-petition claim for post-petition contract modifications is improper under the Bankruptcy Code because allowed pre-petition claims are only available for ‘creditors’ actually holding ‘claims’ as of the date of the bankruptcy filing. See 11 U.S.C. sections 501, 502. United was not a creditor as of the petition date with respect to the contract modifications because it had no claim (i.e., a ‘right to payment’) with respect thereto. Because the Debtors are not paying with cash or granting post-petition administrative expenses, they are willing to be far more generous in providing value (in the form of an unsecured claim) to their long-term business partners. The requested relief is legally improper and cannot be approved.”

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