Manufacturing Industry
Continental withdraws aircraft from ExpressJet
Airline Industry Information, Dec 29, 2005
AIRLINE INDUSTRY INFORMATION-(C)1997-2005 M2 COMMUNICATIONS LTD
Continental Airlines (NYSE: CAL) has given notice that it will withdraw 69 of 274 regional jet aircraft from its capacity purchase agreement with ExpressJet Holdings Inc (NYSE: XJT) and ExpressJet Airlines Inc.
ExpressJet is currently the exclusive operator of regional jet services for Continental Airlines. Continental also said that it will request proposals from numerous regional jet operators to provide regional jet service to replace the withdrawn capacity. The transition of service from ExpressJet to a new operator is expected to begin in January 2007 and be completed during the summer of 2007.
Continental is withdrawing the 69 aircraft under its capacity purchase agreement with ExpressJet, as permitted under that agreement, because Continental believes the rates charged by ExpressJet to Continental for regional capacity are above the current market. The two parties have attempted to reach an agreement prior to the withdrawal but have been unable to do so.
ExpressJet can reportedly continue to sublease from Continental any of the 69 withdrawn aircraft, although at significantly increased lease rates and cannot operate any aircraft into Continental's hubs except under its agreement with Continental. Should ExpressJet elect to retain aircraft, those aircraft may be replaced by a new operator. ExpressJet has up to nine months to determine whether it will continue to sublease any of the withdrawn aircraft.
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