Regionals Update: Frustrated ACA reaches terms with Bombardier on CRJs

 - July 30, 2008, 9:13 AM

Atlantic Coast Airlines in late May reached terms with Bombardier Aerospace on a revised delivery schedule for the remaining 42 CRJ200s on firm order after code-share partner United Airlines won a restraining order to prevent the Sterling, Va.-based regional from terminating its United Express contract. The agreed-upon schedule called for the immediate delivery of six airplanes, two more during this year’s fourth quarter, another six during next year’s fourth quarter and the final 28 in 2005.

ACA arranged financing for the eight aircraft scheduled for delivery this year from a mix of “traditional and nontraditional” sources. ACA expects to become the equity owner of at least six of the airplanes. The arrangement with Bombardier also grants ACA further flexibility for the deliveries scheduled after this year, depending on the outcome of negotiations with United. ACA said it also plans to remove six of its Jetstream 41 turboprops “in the coming months.”

In a statement released May 23, ACA called United’s legal action “unnecessary since the company has not sought to terminate its United Express agreement over this matter at this time.” Nevertheless, ACA showed a willingness to use the courts for its own purposes just months earlier, when it petitioned a U.S. Bankruptcy Court judge to force United to reveal whether it planned to reject or affirm its current contract, which calls for adjustments this year based on changes in ACA’s aircraft use rates and cost structure. Although Judge Eugene Wedoff rejected ACA’s petition, the regional airline alleges that because United has refused to address the guaranteed adjustments, it stands in material breach of the contract.

On May 29 the parties’ lawyers reached a deal to set a new trial schedule and continue the cure period on the contract. Under the agreement, the trial would begin on July 28, though Wedoff could have ruled on the dispute at UAL’s omnibus hearing scheduled for last month.