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Chautauqua Airlines won the right to dance with Continental Airlines when the Houston-based carrier awarded Chautauqua the rights to fly up to 69 regional jets in the Continental Express family.

Chautauqua, part of the Indianapolis-based Republic Airways Holdings, specializes in flying the Embraer 135-145 aircraft, which can carry 35 to 50 passengers. Continental owns 274 Embraer 145s, the largest operator to this class of small regional jets. Continental had assigned its fleet to ExpressJet Airlines as the sole provider of regional jet feed in the Continental Express family. ExpressJet was once a wholly-owned unit of Continental.

Unable to get ExpressJet to reduce its fees for flying the planes, Continental in December served notice on ExpressJet of its intent to pull 69 planes from the ExpressJet operation. Under the terms of their contract, Continental could not pull more than 69 planes at one time and must give a year’s notice.

Continental then solicited bids from other regional airlines to take over the 69 Embraers. Under the terms of its agreement with Republic, Chautauqua will begin flying up to 69 planes next January.

ExpressJet is required to notify Continental by Sept. 28 whether it will return any or all of the aircraft to Continental. It has the option to continue to sublease the aircraft, but at a higher lease rates from Continental and then fly them outside of Continental's hubs using a different brand name. ExpressJet has established a European unit more than a year ago, but it has yet to sign an agreement to provide regional jets within the European Union.

ExpressJet currently flies only for Continental and only the small regional jet. To diversify its revenue stream, it not only created the European unit but it has also invested in three maintenance operations, its own ExpressJet Services, Texas-based Wing Aviation and the new Saltillo Jet Center in Monterrey, Mexico.

Chautauqua will be the second Continental Express carrier at each of Continental's domestic hubs -- Newark, Houston and Cleveland. Continental will continue to schedule and market all its regional jet service as it does today.

Chautauqua currently flies its own fleet of small Embraers for American Airlines, Delta Air Lines, United Airlines and US Airways.

"We are proud to announce our selection of Chautauqua Airlines," said Mark Erwin, Continental's senior vice president-corporate development. "Chautauqua is a very high quality operator, and we look forward to working with them."

"We are very pleased to be joining the Continental team," said Bryan Bedford, CEO of Republic Airways. "Chautauqua Airlines has a long tradition of quality service and we look forward to delivering our award winning service to Continental customers."