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Emerging Growth Looks At Republic Airways Holding Inc.

|Includes: AAL, American Airlines Group (AAL), RJETQ

It's no longer news that AMR Corporation (OTCQB: AAMRQ), the parent company of American Airlines will merge with US Airways Group (NYSE: LCC) to create one of the biggest carriers in the world. The resulting airline will have a total equity value of about $11 billion. Carrying out business under the American Airlines name, the new airline will have one of the most customer-friendly and effective fleets in the industry. The merger will offer benefits to all concerned parties. Customers will have better service across the combined company's global network. With orders for over 600 aircraft, the new airline will provide a strong foundation for investment in numerous sectors. However, while it is too early to know whether the combined airline will meet the expectations of stakeholders, it may be smart to consider an emerging growth company that is making strides in its own way.

Republic Airways Holding Inc. (NASDAQ: RJET) has a market cap of $468.94 million and trades at about $10 per share. It was in the news recently when it reached agreement with Brazilian aircraft manufacturer Embraer SA (NYSE: ERJ) on a program that will provide support for Republic's fleet of Embraer jet aircraft. The initiative is designed to decrease the airline's investment on inventories and resources. Over 400 repairable part numbers will be covered under the agreement. According to the arrangement, Republic will sell certain parts to Embraer and then lease them back.

However, there is a downside to this stock. Its earning per share is -1.75 and it recorded a net loss last year. But this is misleading. This company has been showing promise for some time. For instance, the company's total cash balance increased $46.6 million to $417.3 million as of September 30, 2012. It reported net income of $25.8 million for the quarter ended September 30, 2012. This compares to net income of $9.0 million for the same period last year.

In its recent fourth quarter report, the company reported full year 2012 net income of $51.3 million, a $203.1 million improvement from its full year 2011 net loss of $151.8 million. The company also reported fourth quarter 2012 net income of $12.6 million, a $136.1 million improvement over the fourth quarter 2011 net loss of $123.5 million.

"We're pleased with the solid financial improvement we experienced in 2012," said Republic Airways Holdings Chairman, President and CEO Bryan Bedford. "Our restructuring efforts in 2011 laid the foundation for Frontier to return to profitability in 2012, despite higher fuel costs."

The company is presently doing better than its rivals. AMR Corporation with a market cap of 844.88 million has an EPS of -5.60. Delta Air Lines Inc. (NYSE: DAL) with a market cap of $8 billion has an EPS of -2.18. Republic Airways Holding Inc has shown improved financial performance in the past few quarters due to ongoing restructuring efforts and the continued network and fleet optimization. An upswing in the industry will put it on the path to profitability. Sure, the stock carries certain risks, but the reorganization of Republic Airways is improving its margins, and low valuation provides reason for enterprising investors to put it on their watch list.