Wed, Dec 28, 2005
Puts Bid Out On Replacements
Continental Airlines announced Wednesday it has given notice it
will withdraw 69 of 274 regional jet aircraft from its capacity
purchase agreement with ExpressJet Holdings, Inc. and ExpressJet
Airlines, Inc. ExpressJet is currently the exclusive operator of
regional jet services for the airline -- but likely won't be for
much longer.
Sources within Continental tell Aero-News the airline 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.
"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."
Continental will now 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withdrawn capacity.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.
Prior to the announcement, Continental and ExpressJet attempted
to negotiate a more competitive long-term contract, but the parties
were unable to reach agreement.
While ExpressJet may
continue to sublease from Continental any of the 69 withdrawn
aircraft, the company will do so at what Continental calls
"significantly increased" lease rates.
Also, ExpressJet 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continue to sublease any of the withdrawn aircraft, according to
Continental.
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