St. George, Utah-based SkyWest has agreed to lend United Airlines $80 million as part of a deal announced today that extends SkyWest Airlines’ code-sharing relationship with UAL and calls for SkyWest subsidiary Atlantic Southeast Airlines to launch United Express service during next year’s first quarter.
The agreements signed between SkyWest and United extend SkyWest Airlines’ existing rights to operate 40 regional jets under the United Express agreement until the end of their current lease terms, which average 8.4 years.
Meanwhile, the proposed agreement involving ASA calls for 13 jets to fly as United Express by next May. SkyWest expects ASA to operate the aircraft under a capacity purchase agreement for five years. Now flying 112 Bombardier fifty-seat CRJ200s, 38 seventy-seat CRJ700s and 10 CRJ900s configured in a 76-seat layout, Atlanta-based ASA would fly the 13 airplanes under a compensation program with United similar to that now in effect at SkyWest Airlines, said the regional. However, it didn’t identify the source or type of airplanes it plans to assign to ASA’s United Express agreement.
SkyWest said it will answer questions and provide more detail during its third-quarter conference call, scheduled for November 5.
Under the terms of the various agreements, the loan bears interest at a rate of 11 percent, with a 10-year amortization period, and is secured by certain ground equipment and airport slot rights held by United. SkyWest Airlines also agreed to defer certain amounts otherwise payable to SkyWest Airlines under the existing United Express agreement. The maximum deferral amount totals $49 million and any amounts deferred accrue a fee of 8 percent, payable weekly. United’s right to defer such payments ends in 10 years.