ExpressJet inks new seven-year agreement with Continental, continues to review alternatives

By Lisa Kerner

Charlotte, N.C., June 6 - ExpressJet Holdings, Inc. announced a new seven-year capacity purchase agreement with Continental Airlines, Inc.

The agreement, which becomes effective July 1, allows ExpressJet to continue flying the 205 aircraft currently flown for Continental "for the foreseeable future," according to an ExpressJet news release.

Continental has the right after one year to withdraw up to 15 aircraft under the new agreement but is not able to terminate the agreement without cause.

According to Continental, rates under the new agreement are lower than rates under the current agreement and more competitive than those offered by other regional service providers.

ExpressJet noted that the new agreement "significantly changes" Continental's governance rights by:

• Easing change-in-control limitations on ExpressJet;

• Reducing restrictions on ExpressJet flying into Continental's hub airports; and

• Removing the most-favored-nation clause, allowing ExpressJet to actively pursue flying for other carriers and to consider other strategic alternatives.

ExpressJet and Houston-based Continental also entered into a settlement agreement and release of all the parties' claims relating to payments under the original capacity purchase agreement, the companies said.

"While this new agreement with Continental reduces uncertainty around the core aspect of our company, it certainly reflects the current operating environment and the evolution of the relationships between mainline and regional airlines," ExpressJet president and chief executive officer Jim Ream said in the release.

On June 3, ExpressJet said it will continue to explore strategic alternatives in response to the unsolicited nonbinding merger proposal from SkyWest, Inc. announced in April.

It was previously reported that ExpressJet rejected the $3.50-per-share cash offer, which it called "opportunistic" and said did not adequately reflect the inherent value of the company.

Houston-based ExpressJet operates as a regional airline under the name Continental Express.

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