Is CO dumping XJT?
 

My brother sent me this - it was posted on a pilot's board... no idea if this is authentic or not. Any thoughts?

April 7, 2008

Mr. James B. Ream
Chief Executive Officer and President
ExpressJet Holdings, Inc.
700 North Sam Houston Parkway, Suite 200
Houston, TX 77067


Mr. George R. Bravante, Jr.
Chairman
ExpressJet Holdings, Inc.
700 North Sam Houston Parkway, Suite 200
Houston, TX 77067


Dear Jim and George:

We understand that SkyWest, Inc. (“SkyWest”) has delivered to you an offer to acquire ExpressJet Holdings, Inc. (“ExpressJet”). In connection with your consideration of such offer, we wanted to inform you of our understanding with SkyWest regarding a new capacity purchase agreement (“CPA”) and our intentions regarding our existing contractual relationship.

First, we confirm that we have negotiated a new CPA with SkyWest, which would become effective if SkyWest is successful in acquiring ExpressJet (which, in turn, is subject to due diligence, among other things), and that we would consent to the change of control that would occur upon such an acquisition.

Second, absent our entering into a new CPA with savings of the magnitude we have negotiated with SkyWest, we currently expect to deliver to ExpressJet on June 28, 2008, a notice to withdraw 51 of the existing 205 Covered Aircraft from the current CPA, beginning in December 2009. Further, although we have the right to terminate the existing CPA at any time, we currently anticipate we will not extend the term of the current CPA (which we must do, if at all, by December 31, 2008), and thus the current CPA would simply expire in accordance with its terms beginning on December 31, 2010, with the expectation that all aircraft would be removed from the current CPA by the end of 2012.

We hope this information is helpful to you.

Sincerely,

Jeffrey J. Misner
Executive Vice-President and Chief Financial Officer
Continental Airlines, Inc.

Assuming the authenticity of this letter, if CO is unable to negotiate a more favorable capacity purchase agreement with XJT, CO is gonna put the screws to them.

Previously predicted here.

When did XJT move to north Houston?

I don't know much about a mainline carrier's agreements with regional carriers, but if CO is dumping XJT, will that mean the end of ERJs? It looks like SkyWest only flies CR2s, CR7s an CR9s.

EDIT: Just to clarify, my fleet question only applies to CO switching to SkyWest even if the XJT acquisition falls through. If the acquisition did go through, SkyWest would obviously have XJTs ERJs.

It is authentic and was discussed previously at one point, though I don't remember exactly when. I believe it was in one of the many merger threads.

Basically the SkyWest people went to CO (XJet's largest customer) and made sure that if SkyWest completed the purchase they'd remain a customer. Nothing all that surprising there.

The slightly interesting bit is that CO intends to withdraw 51 ERJs from the COEX fleet. This is not all of the planes - only ~25% - and there's no reason to believe that it isn't just a negotiating ploy at any level.

CO owns the planes and leases them to XJet, IIRC, so they aren't going to look for a way to put XJet out of business when they'd be on the hook for the lease costs.

I have already stated in the AA forums that I think AA/CO talks may be about merging some small market as well because they are totally redundant at this time.
Instead of 50% loads they could be flying out loaded if working together.

They thought the idea they could be discussing this was stupid because "american eagle is already being divested and XJET already has" but that IMO was the strongest reason to think they MAY be working together on this cause

Let's hope so!

CO actually leases the planes (rather than own), and I don't think that CO would hesitate to put XJT out of business. It would then contract with Republic or Skywest or Mesa or someone else to fly them for CO.

Who has the airframes to spare in place of XJT? That's a ton of aircraft, routes, etc. that someone else would have to pick up. (I say boost XJT and dump CHQ, IMHO.)

OK...XJet leases them from CO, which means CO is on the hook to pay for them if XJet goes under, right? I had thought that CO owned them but if CO is leasing from someone else it might be even worse, as the costs to continue the leases or buy them out might be an issue.

Totally agree. CHQ is NOT a substitute for XJT - and would be a terrible mistake if CO thinks they could be.

I hope they do whatever necessary to work things out with XJT. After being banished to weekly COEX routes to fly - it is such a pleasure to get an XJT flight after trudging along with CHQ every week.

I completely agree! ^ Misery is a flight on a CHQ CRJ2. :td: IMHO YMMV

Yep, CO is on the hook for all of the ERJs, since it leases them from someone else and in turn, leases them to XJT. Its leases with XJT permit XJT to walk away from the airplanes that CO withdraws from the CPA. That's what I thought XJT would do with the 69 planes withdrawn last time. Instead, XJT elected to retain them and by doing so, agreed to pay CO a higher lease rate than it had been paying. :eek:

I don't expect XJT to make that same mistake again. ;)