ExpressJet Offering Service to 24 New Cities

Long-time Continental Airlines partner, ExpressJet Airlines, is going out on its own.

The regional carrier announced on Wednesday that it will begin flying its fleet of 44 Embraer 145s to 24 cities. The new service will roll out in April and May.

The carrier has not announced which cities it will service. However, it did say they would be in the West, Midwest and Southeast cities. Furthermore, these 24 markets currently will not have direct flight options.

Many questions surround the new operation, but little information has been released beyond the press announcement. The company said it will begin selling the tickets on the first flights on Feb. 1 and in March travel agents will also begin selling the tickets.

Items found on the Web indicate that ExpressJet has begun advertising in Boise and other cities it currently does not service for station managers.

The natural inclination is that this is another Independence Air, the rechristened Atlantic Coast Airlines that began its own flight schedule in 2004 flying a fleet of 88 Bombardier CRJ 200s. Independence Air filed for bankruptcy a year ago when it ran out of money flying both the RJs and Airbus 319s as a low-fare carrier.

ExpressJet will be not flying solo as Independence Air did, said Doug Abbey, managing partner of the Washington-based Velocity Group. Abbey is a long-time consultant to regional airlines and advised Independence Air on its route scheduled.

ExpressJet will still be flying more than 200 Embraers for Continental as Continental Express. However, ExpressJet and Continental have yet to agree on a 2007 reimbursement rate.

Independence had severed all ties to then bankrupt United Airlines when it launched its stand-alone service. It was forced to also end its relationship with Delta Air Lines when the Airbus 319s arrived.

This will be the first time in a long-time that a carrier with a major partner has tried to set up a separate service, Abbey noted. ExpressJet was formed as a wholly-owned unit of Continental which has gradually been spinning it off. Because of that relationship, ExpressJet has only flown for Continental.

As part of its lease agreement with Continental for 69 Embraers, ExpressJet is precluded for providing service to the Continental hubs: Houston, Cleveland and Newark. Even if it was not shut out of these cities, Abbey said it would be good business sense to avoid them as it could be confusing when marketing to the passengers.

ExpressJet may establish "focus cities" or mini-hubs so that is can amortize its expenses over more flights. Abbey noted that the carrier has not tipped its hand as to how it would be organizing its routes.

FlyI had maintained its hub at Washington Dulles International Airport where it owned its facilities. It used the RJs for some point-to-point, but mostly to funnel traffic to its West Coast or Florida-bound Airbus fleet.

Abbey predicted that if ExpressJet does establish true point-to-point routes then these routes will initially be underwritten by either a corporate sponsor or community incentives. One possible non-stop route, for example, could be between Seattle and Wichita catering to the large number of Boeing employees shuttling between the two cities.

Fresno, for example, this week authorized its airport authority to begin offering subsidies up to $60,000 for 120 days of service to any carrier starting round-trip, non-stop service from that California city to other U.S. cities not currently served by existing carriers. City officials are wishing for non-stop service to San Diego and Chicago. Click here.

One lesson from Independence Air is that there is a market for used 50-seat RJs, Abbey said. ExpressJet should be able to adequately price its service since it is an experienced operator of the Embraer. There is no indication that ExpressJet intends to run its new service as a low-cost carrier, Abbey noted.

The ExpressJet fleet will have a range of about 2,000 miles. The ExpressJet aircraft will be refurbished to include free XM Satellite radio with more than 100 channels of programming, advanced seat assignments with no middle seats and complimentary snacks and meals on longer flights.

The 44 aircraft should become available to ExpressJet over the next six months. Continental has hired Republic Airways' Chautauqua to replace ExpressJet on some routes. Chautauqua will provide the Continental Express service using 44 of its own RJs -- both Embraers and Bombardier CRJs.

Continental subleases to ExpressJet all 274 Embraers that the regional carrier has been flying.

Apart from its new solo service, ExpressJet continues discussions with a prospective U.S. partner to operate 10 Embraer 145XRs under a capacity purchase agreement. ExpressJet expects to complete these negotiations during first quarter 2007 and to make an announcement once definitive agreements are executed.

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