Continental Airlines (CAL) today announced that it has received notice from ExpressJet, that they will keep the 69 regional jets that Continental recently elected to remove from the capacity purchase agreement between the two companies. Continental will continue to sublease the aircraft to ExpressJet, but at significantly increased lease rates.The aircraft will be withdrawn from the capacity purchase agreement over a six-month period beginning in December 2006 and ending in June 2007.
Continental expects to replace some or all of the capacity currently provided by the 69 regional jets. Continental believes that there are ample regional jets and other aircraft available to Continental to replace this capacity at a lower cost.
"We have the time and flexibility to pursue a number of options for our future regional flying needs," said Larry Kellner, Continental Airlines chairman and CEO. "Continental has a broad and diverse network, and we will make decisions about our future regional capacity needs based on what we feel is best for our customers and employees."
Here is the latest company update from Bryan Bedford, the CEO of all Republic Associates (AKA Chautauqua et all).
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Good afternoon. So much for the exceptional weather pattern we've been enjoying. And the forecast for the next week looks pretty gloomy too. The big news this week is the recent announcement by XJT management that they intend to retain possession of the 69 aircraft that will be withdrawn from their Continental agreement. The announcement is consistent with what they have been saying all along that they won’t give CO back their aircraft; rather they will attempt to redeploy them in a variety of unspecified means. From purely emotional perspective, I completely understand why they are acting this way. The removal of the aircraft will have a material, negative impact on their company and its employees. Having said that, some negative impact was unavoidable as the airline simply has too high operating costs. Either management engaged with labor on reducing those costs (ala Comair) and also reduced overheads, or they would shrink. Atlantic Coast was faced with this same choice when United was in bankruptcy. Like XJT, they too chose to avoid the difficult choice and instead remove aircraft and go at it alone. History has shown, not only was that the wrong course of action, but it clearly shows the negative impact to their employees was dramatically higher than what would have been had they only worked to preserve their business relationship with United. Yet strangely XJT management and labor seem to be walking, arm in arm, down the same path but hoping for different results? I am afraid they won't find what they are looking for. Not only was Atlantic Coast's actions devastating for their airline, employees and shareholders, but in an ironic way it was bad for all regional airlines. By implementing a reckless business plan they also fueled an artificial demand for 50 seat regional jets to replace their former United flying. With Atlantic Coast in liquidation and their old aircraft now floating around the market of displaced RJ's, that glut is now coming home to hurt the entire industry. To once again artificially remove 69, 50 seat RJs which Continental will surely replace in some form or fashion, is harmful to XJT, its employees and shareholders and the rest of us working in this industry. For our part, our agreement with Continental remains in effect and I feel we are well positioned to assist CO in replacing some quantity of the withdrawn aircraft; although we will do so with the knowledge that this was not the best outcome for any of us involved in this situation.
Posted by: Chad McJannett | May 16, 2006 7:53 PM | Permalink to Comment