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NEW YORK (TheStreet) -- Shares of Republic Airways (RJET) were falling 8.5% to $5.74 on Wednesday after Delta Air Lines (DAL) sued the regional airline for failing to supply a full schedule of flights.

Delta claimed Republic was unable to fulfill an unspecified number of flights for its Delta Connection regional operation, according to the Indianapolis Business Journal.

Delta alleged that it had to find replacement flights, occasionally re-book customers, and issue refunds totaling more than $1 million due to Republic's failure to supply the full schedule of flights.

In a statement, Republic said that it is aware of the complaint, but said it has not received the full complaint and cannot comment further. The airline added that it can confirm it is "not in breach of any of its capacity purchase agreements with any of its mainline partners, including both Delta Connection Agreements."

TheStreet Recommends

TheStreet Ratings team rates REPUBLIC AIRWAYS HLDGS INC as a Hold with a ratings score of C-. TheStreet Ratings Team has this to say about their recommendation:

We rate REPUBLIC AIRWAYS HLDGS INC (RJET) a HOLD. The primary factors that have impacted our rating are mixed - some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its reasonable valuation levels and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including unimpressive growth in net income, generally higher debt management risk and disappointing return on equity.

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • Regardless of the drop in revenue, the company managed to outperform against the industry average of 7.3%. Since the same quarter one year prior, revenues slightly dropped by 1.6%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • 39.19% is the gross profit margin for REPUBLIC AIRWAYS HLDGS INC which we consider to be strong. Regardless of RJET's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, RJET's net profit margin of 1.27% is significantly lower than the industry average.
  • The debt-to-equity ratio is very high at 3.54 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Along with this, the company manages to maintain a quick ratio of 0.49, which clearly demonstrates the inability to cover short-term cash needs.
  • The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. In comparison to the other companies in the Airlines industry and the overall market, REPUBLIC AIRWAYS HLDGS INC's return on equity is significantly below that of the industry average and is below that of the S&P 500.
  • You can view the full analysis from the report here: RJET