Continental Airlines will withdraw 69 of 274 regional jet aircraft from its capacity purchase agreement with ExpressJet. ExpressJet is currently the exclusive operator of regional jet services for Continental Airlines.

Continental will request proposals from numerous regional jet operators to provide regional jet service to replace the withdrawn capacity.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.

Prior to today’s announcement, Continental and ExpressJet 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ExpressJet can continue to sublease from Continental any of the 69 withdrawn aircraft, although at significantly increased lease rates.

However, 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 ExpressJet has up to nine months to determine whether it will continue to sublease any of the withdrawn aircraft.
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