CAL negotiates CPA with Skywest, will let XJT CPA expire

[Clocks]

Closely related to the Skywest buyout news, but important in it's own right.

http://www.sec.gov/Archives/edgar/da...042408e993.htm

EX-99.3 4 xjt8k042408e993.htm EXPRESSJET HOLDINGS, INC. EXHIBIT 99.3

Exhibit 99.3

[Continental Airlines Logo]
CONFIDENTIAL
April 7, 2008
Mr. James B. Ream
Chief Executive Officer and President
ExpressJet Holdings, Inc.
700 North Sam Houston Parkway, Suite 200
Houston, TX 77067

Mr. George R. Bravante, Jr.
Chairman
ExpressJet Holdings, Inc.
700 North Sam Houston Parkway, Suite 200
Houston, TX 77067

Dear Jim and George:
We understand that SkyWest, Inc. (“SkyWest”) has delivered to you an offer to acquire ExpressJet Holdings, Inc. (“ExpressJet”). In connection with your consideration of such offer, we wanted to inform you of our understanding with SkyWest regarding a new capacity purchase agreement (“CPA”) and our intentions regarding our existing contractual relationship.
First, we confirm that we have negotiated a new CPA with SkyWest, which would become effective if SkyWest is successful in acquiring ExpressJet (which, in turn, is subject to due diligence, among other things), and that we would consent to the change of control that would occur upon such an acquisition.
Second, absent our entering into a new CPA with savings of the magnitude we have negotiated with SkyWest, we currently expect to deliver to ExpressJet on June 28, 2008, a notice to withdraw 51 of the existing 205 Covered Aircraft from the current CPA, beginning in December 2009. Further, although we have the right to terminate the existing CPA at any time, we currently anticipate we will not extend the term of the current CPA (which we must do, if at all, by December 31, 2008), and thus the current CPA would simply expire in accordance with its terms beginning on December 31, 2010, with the expectation that all aircraft would be removed from the current CPA by the end of 2012.
We hope this information is helpful to you.
Sincerely,

Jeffrey J. Misner
Executive Vice-President and Chief Financial Officer
Continental Airlines, Inc.

[surreal1221]

Wow!

[meyers9163]

hmmm.... damn.... more DAL flying for xjet then?

[Clocks]

lol.

Hey Delta...you wouldn't happen to need like...205 50 seat RJs?

[surreal1221]

Originally Posted by meyers9163

hmmm.... damn.... more DAL flying for xjet then?

XJT will need more flying from somewhere. . .that's for sure. Not sure if it'll be Delta flying, as Delta marketing is already reducing monthly lines through the summer months out of all domestic markets.

[Clocks]

All this really confirms is that XJT will fold to CAL's demands, or will be bought out by someone who will fold to CAL's demands.

Unless there is another regional that can get 205 airplanes by XJT's 2010-2012 phase out of existence.

[meyers9163]

Originally Posted by Clocks

All this really confirms is that XJT will fold to CAL's demands, or will be bought out by someone who will fold to CAL's demands.

Unless there is another regional that can get 205 airplanes by XJT's 2010-2012 phase out of existence.

Well with this release now.... Maybe the SKW deal was something XJT should have accepted? Interesting how it turns from Airways to CAL...... Is Skw trying to do both? More flying for xjet and airways... or strictly buying out Xjet? Damn.... SKW/ASA/XJET all under the SKW name..... that'd be huge.....

[Clocks]

Wild guess: There will be a counter offer from SkyWest that will be accepted at some point in the future. I don't know enough about stocks/buyouts/etc to know what that might be ($3.75, $4, higher?).

[Kristie]

sounds like it to me.

[Kingairer]

SkyWetron.

[Chris_Ford]

Originally Posted by meyers9163

Well with this release now.... Maybe the SKW deal was something XJT should have accepted? Interesting how it turns from Airways to CAL...... Is Skw trying to do both? More flying for xjet and airways... or strictly buying out Xjet? Damn.... SKW/ASA/XJET all under the SKW name..... that'd be huge.....

XJT will accept it in a few weeks or so...

[meyers9163]

Originally Posted by Chris_Ford

XJT will accept it in a few weeks or so...

Sweet... lets hope it all works out..... Especially if what others have said with Atikins saying they will be hiring indef. if the deal goes through... puts you xjet guys into a good situation hopefully (better situation then the current one).

[ladder360]

I read this as CAL's official way of saying, "Just so you know, we HEAVILY urge you to accept SkyWest's offer." Which it will. Maybe for a nickel or dime more per share. Just to save face.

[Baradium]

Guys, re-read that letter.


CAL is saying "Skywest said they can do it cheaper than we're paying you. Either agree to do it at their price or we give it to them when the term is up."

That's all it says.

Skywest undercut Expressjet on the flying and CAL is going to use it to pressure Expressjet. CAL isn't neccessarily saying they care one way or another whether they accept the Skywest offer, just that they want the cheaper costs.


This sentence is very important:

Second, absent our entering into a new CPA with savings of the magnitude we have negotiated with SkyWest

They just want the rate cuts.

[drl5555]

Originally Posted by meyers9163

Sweet... lets hope it all works out..... Especially if what others have said with Atikins saying they will be hiring indef. if the deal goes through... puts you xjet guys into a good situation hopefully (better situation then the current one).

Atkins = Diet guru

Atkin = SkyWest CEO

[meyers9163]

Originally Posted by drl5555

Atkins = Diet guru

Atkin = SkyWest CEO

Ah how would I forget the ', atkin's statement

[kellwolf]

From: Pinnacle Management
To: Pinnacle Pilots

Re: Recent Continental Developments

Dear Pinnacle Pilots. Recently Continental Airlines announced they were giving ExpressJet notice on 51 aircraft and moving that contract to Skywest. Through our contracts with Colgan Airlines, we believed we could develop a healthy relationship with Continental and secure more flying. Unfortunately, Continental did not feel this was a good move, and cited the lack of a pilot contract as a direct reason for not entering into an expanded flying agreement. Once again, the pilots have cost us another flying contract by not agreeing to our more than generous terms.



.....or something like that. I expect a letter of some similar wording to arrive via FedEx any day now.

[meritflyer]

Originally Posted by Chris_Ford

XJT will accept it in a few weeks or so...

I agree for a few reasons..

SkyWest has computed their offer based on losses and/or the probability of a reduction in XJT's capacity. The dollar amount isn't solely being derived from a XJT's market cap. It's a forecast per se of what XJT can/will/not do.

Essentially, SkyWest is basing this offer on the probable future outcome of XJT's business plan, namely their respective relationship with CAL. I've seen these types of deals unfold several times in my business.

Given the fact that CAL will put back 51 aircraft to XJT withing the specified time frame, XJT needs to either accept the offer (although shareholders will not be thrilled) or get serious about alternative business plans and opportunities.

Ironically enough, this is a very similar move MAG made for ACAI years ago although it was obviously under some slightly different circumstances. If XJT forgoes this opportunity to move under SKYW's banner, I fear they'll ultimately fall victim to mother CAL's wrath.

XJT management likes to play poker with CAL (or chicken rather). Last time they did, it nearly crushed their business. In fact, it did crush their business as they're still dealing with the unfortunate ramifications today with the mistakes made in '05.

[Alchemy]

I would find it very difficult to vote yes on any proposal that weakens the XJT ALPA CBA. However, I think xjet may be looking at extinction if they don't make this happen. That letter from CAL to Ream is the fear grenade equivalent of a tactical nuke. I will let my MEC make a decision if they need to and will probably follow their reccomendation. They are undoubtedly more informed on the correct course of action to take than I am. As it stands today, the MEC hasn't been approached about any changes to the xjt contract. Let's face it, the EMB-135/145 is a great airplane. They are safe, reliable, and comfortable (even for longer flights) when outfitted properly (like xjet branded has done), but they're increasingly uneconomical to operate in today's environment.

One thing's for sure, this will be very interesting to watch. I like this job but it's not the end of the world if I have to find a new one.

[H46Bubba]

Originally Posted by surreal1221

XJT will need more flying from somewhere. . .that's for sure. Not sure if it'll be Delta flying, as Delta marketing is already reducing monthly lines through the summer months out of all domestic markets.

We got an increase and are not going to have to park any 50 seaters now. As of June, 50% of Comair's operations will be in the Northeast. Yeah I'm wating to see how that will work out of JFK.

[surreal1221]

Originally Posted by H46Bubba

We got an increase and are not going to have to park any 50 seaters now. As of June, 50% of Comair's operations will be in the Northeast. Yeah I'm wating to see how that will work out of JFK.

Good luck with D-0. . .

You guys have ACARS + w&b + performance data?

[H46Bubba]

Originally Posted by surreal1221

Good luck with D-0. . .

You guys have ACARS + w&b + performance data?

Nope! Old school paperwork baby!
There's a plan in the works for RJ flights in JFK. We'll just have to see if it makes it from the planning stages to reality.

[PCL_128]

Originally Posted by Alchemy

I would find it very difficult to vote yes on any proposal that weakens the XJT ALPA CBA. However, I think xjet may be looking at extinction if they don't make this happen.

Please don't even consider thinking about concessions. Concessions at a regional are just ridiculous. Your CBA has nothing to do with any of this, and don't let the management goons convince you otherwise.

[Alchemy]

Originally Posted by PCL_128

Please don't even consider thinking about concessions. Concessions at a regional are just ridiculous. Your CBA has nothing to do with any of this, and don't let the management goons convince you otherwise.

I think the CBA has something to do with this....the xjt scope clause as it stands would force them to merge the lists in the event of a buyout. Amending the scope is one of the coditions which must take place for the buyout to occur. While I agree that the lists should be merged if this buyout went forward, I don't think skywest would even consider doing it. It would likely mean the unionizaton of skywest pilots, and apparantly that's something that their pilots and obviously their management do not want to occur.

Like I said previously though, I have only a passing second hand knowledge of what's transpiring, and I will *probably* go with the reccomendation of my MEC if/when it comes to that. I'm sure they will make a fine decision.

[PCL_128]

Originally Posted by Alchemy

I think the CBA has something to do with this....the xjt scope clause as it stands would force them to merge the lists in the event of a buyout.

As it should. That language was negotiated with exactly this sort of situation in mind. Why would you then give up that language when exactly that planned-for situation comes to be reality? The language is there for a reason. A merger must occur. Allowing separate operations would be a disaster.