ExpressJet loses dispute, must charge Continental less

ExpressJet lost a contract dispute with Continental Airlines, so it will be paid less than it sought to provide regional jet service.

An arbitration panel ruled that ExpressJet must reduce its 2007 rates it charges Continental to fly for it by $14.2 million, the company said Thursday.

Continental and ExpressJet, both Houston-based, went to arbitration earlier this year because they were at odds over how much the smaller carrier charged Continental for the service.

ExpressJet flies regional jets for Continental as Continental Express, and those often can serve as feeder flights to the bigger carrier's routes.

ExpressJet on Thursday put a positive spin on the decision.

"We are pleased to resolve the 2007 rate negotiation," Jim Ream, ExpressJet's chief executive, said in a statement. "With the rates set, we can focus on furthering our strategic partnership with Continental."

The cut reflects "changing staffing levels and overhead expenses" related to its agreement with Continental, ExpressJet also said.

When it reported lower first-quarter earnings in May than a year ago, ExpressJet said while the arbitration was ongoing it was still being paid under its 2006 rate structure, but incurring costs at 2007 rates.

Those costs, ExpressJet said, included higher-than-expected pilot training expenses not reimbursable under its agreement with Continental.

ExpressJet reports its second-quarter earnings next week.

The carrier's stock price was unchanged Thursday from the day before, closing at $5.18 per share.

Continental used to own ExpressJet but has since sold all but a small amount of stock in it.

In late 2005, Continental announced it was withdrawing 69 jets from its contract with ExpressJet, saying the rates it charged were too high. But the carrier still flies 205 jets for it.

The smaller carrier opted to use the 69 jets it had used for Continental in a separate venture it started earlier this year. That involves offering service to what it considers underserved cities.

It can't operate out of Houston because of its contract with Continental.

ExpressJet also offers corporate charters.

A spokeswoman for Continental did not comment on the decision announced Thursday, other than to say ExpressJet does a good job.

"ExpressJet is an excellent regional partner, and we are pleased the issue has been resolved," spokeswoman Julie King said.


Loading