Continental Airlines has tapped Chautauqua Airlines to provide service on regional routes beginning next year using 44 small jets.
Chautauqua, part of Republic Airways, will own and operate the 50-seat jets under the Continental Express brand.
"In selecting Chatauqua, we've identified a regional operator that can uphold our high standards for reliable, quality service, while delivering that service at competitive rates," said Larry Kellner, Continental chairman and chief executive.
Friday's move follows a rift that developed over costs last year between Continental and ExpressJet, which handles most regional flights for the big carrier.
Houston-based Continental said in December it would withdraw 69 of 274 aircraft under its agreement with ExpressJet. To try to cut costs, numerous big U.S. airlines have renegotiated rates with regional partners.
Since ExpressJet said it would continue to lease - at higher rates - the 69 jets that had been used to provide service for Continental, this allows the big carrier to adjust its fleet to make more money, said Calyon Securities analyst Ray Neidl.
"Continental has a very powerful franchise at New York's Newark Liberty International Airport, and the company is taking advantage of its presence there by increasing international flights," Neidl said. "In order to feed Newark and balance the growth at the Liberty airport, Continental will require more domestic capacity. In order to accomplish this goal, the company is substituting larger aircraft, going against the current industry trend of legacy carriers increasing their use of regional jets."
ExpressJet has yet to announce plans for the 69 planes.
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