Continental Airlines to withdraw 69 aircraft from ExpressJet

Continental Airlines plans to withdraw 69 of 274 regional jet aircraft from its capacity purchase agreement with ExpressJet Holdings and ExpressJet Airlines (ExpressJet). ExpressJet is currently the exclusive operator of regional jet services for Continental Airlines.

Continental is to request proposals from numerous regional jet operators to provide regional jet services to replace the withdrawn capacity.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 said it is withdrawing the 69 aircraft under its capacity purchase agreement with ExpressJet because the airline believes the rates charged by ExpressJet to Continental for regional capacity are above the current market.

Continental and ExpressJet had previously attempted to negotiate a more competitive long-term contract, but the parties were unable to reach agreement.

“We didn’t want to take this action, but we were not able to reach an agreement with ExpressJet to lower our cost,” said Continental’s Senior Vice President of Asia Pacific & Corporate Development Mark Erwin. “Continental will continue to take the difficult actions necessary to remain competitive and protect the jobs and retirement security of our 42,000 employees.”

ExpressJet is able to continue to sublease from Continental any of the 69 withdrawn aircraft, although at significantly increased lease rates. However, ExpressJet will not be able to 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 ExpressJet has up to nine months to determine whether it will continue to sublease any of the withdrawn aircraft.

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