For Those With Enquiring Minds…..Some Great Reading Material on the SKYW/XJT Deal

Dearjohn

Dear John, er, Dear Jim.

Thanks to a reader who sent a note that gave me an excuse to stop writing about earnings.

For those looking for more details on the proposed SkyWest/XJT deal, ExpressJet has filed some information with the SEC concerning the offer from SkyWest, and more importantly, the “other” deal between SkyWest and Continental.

I only thought this was a squeeze play before I read the letter from Continental Airlines’ CFO Jeff Misner. Now– I don’t think there is any doubt.

According to Misner’s letter that was sent to CEO Jim Ream and Chairman George R. Bravante,

“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.”

Hah. Yeah, I guess it was helpful. I’d say.

Here are links to the two pertinent letters.

First letter is from SkyWest CEO Jerry Atkin to ExpressJet CEO Jim Ream and Chairman George Bravante.

Second letter is from Jeff Misner, Continental’s CFO to Jim and George.

Also for you union types, note the request for modification to the current contract between ExpressJet and its pilots. (They are represented by ALPA.)

As for my thinking on all this — it looks pretty clear. Obviously the folks at ExpressJet decided they’d go public with this all in an attempt to get a better deal. From SkyWest or someone. But given the collaboration of Continental, I’m not so sure ExpressJet has that many options.

Technorati Tags: , , , ,