Continental Airlines last month accepted a bid from Indianapolis-based Chautauqua Airlines to fly at least 69 regional jets slated for withdrawal from its capacity purchase agreement with long-time Continental Express partner ExpressJet. Continental plans to start the transition in January and finish by the end of next summer.
Now flying 274 Embraer ERJ 145s and 135s, ExpressJet must decide by September 28 whether it will return any or all of the aircraft to Continental or continue to sublease them at higher rates. If ExpressJet chooses to hold onto the airplanes, the interest component of the underlying lease will automatically increase by 200 basis points. Furthermore, Continental may choose to end its relationship with ExpressJet entirely at any time, provided it gives 12 months’ notice. Not coincidentally, the Chautauqua agreement provides for the addition of up to 274 airplanes.