
SkyWest Inc. reached an agreement to acquire ExpressJet Holdings for $6.75 per share in cash or approximately $133 million and plans to merge the Houston-based regional with its Atlanta-based subsidiary Atlantic Southeast Airlines.
"The definitive merger agreement has been unanimously approved by the SkyWest and ExpressJet boards of directors," SkyWest said in a statement. It still must be approved by the US Dept. of Justice and ExpressJet stockholders. Separately, SkyWest reported a 28.6% decline in second quarter net income (see item below).
The deal comes a little more than two years after ExpressJet rejected an unsolicited buyout offer from SkyWest valued at around $180 million, dismissing it as an "opportunistic attempt to acquire the company" below its true value (ATW Daily News, June 10, 2008). Last month, in an unrelated transaction, Delta Air Lines sold two of its regional subsidiaries, Mesaba Aviation and Compass Airlines, to Pinnacle Airlines Corp. and Trans States Holdings, respectively (ATW Daily News, July 2).
SkyWest Executive VP and CFO Bradford Rich told analysts that the accord announced yesterday "is a very different deal than the one we were contemplating in 2008." He declined to speculate on how long the DOJ approval process would take, but said the companies are aiming to close the transaction in the 2010 fourth quarter and have ASA and ExpressJet operating under a single certificate 12-14 months after closing.
The new ASA/ExpressJet will be based in Atlanta and headed by ASA President and COO Brad Holt. In conjunction with the merger agreement, ASA negotiated the principal terms of a new, 10-yr. capacity purchase agreement with Continental Airlines to become effective upon the merger's closing. Noting that 86% of ExpressJet's capacity is operated on behalf of CO, Rich said, "Continental has not only consented to the ownership change but we've negotiated a new agreement with them" to make the acquisition more attractive.
He emphasized that SkyWest sees real value in ExpressJet. "This is in no way a fixer-upper transaction," he said. "We can bring stability [to ExpressJet]. We can position ExpressJet to grow. We have access to capital that will be needed for re-fleeting."
The combined ASA/ExpressJet will operate a fleet of 404 aircraft. St. George, Utah-based SkyWest Inc., which also owns SkyWest Airlines, will have a fleet of 696 aircraft upon the deal's closing. "We think this gets us positioned to really create value from the size and breadth of the SkyWest portfolio." Rich said.
The merger agreement comes just over three months after industry veteran Thomas Hanley took over as president and CEO of ExpressJet, replacing Jim Ream, who left the regional to become senior VP-maintenance and engineering at American Airlines (ATW Daily News, April 20).
Discuss this news 13
Skywest is becoming
By DaiSkywest is becoming monopolistic in the Regional biz. It'll be interesting to see just how many concessions the 'big' airlines will now be able to squeeze out of them. In the past, those 'big' airlines were able to (and did) put Regionals out of business.
It's a whole new world out there!
Skywest is becoming
By DaiSkywest is becoming monopolistic in the Regional biz. It'll be interesting to see just how many concessions the 'big' airlines will now be able to squeeze out of them. In the past, those 'big' airlines were able to (and did) put Regionals out of business.
It's a whole new world out there!
I used to think that allowing
By Anja GenselI used to think that allowing foreign carriers access to our domestic market was a terrible idea. With each competition-reducing merger, like the impending UA/CO trainwreck and the disasterous pairing of Frontier and Midwest( two different service formats), I look forward to the opportunity to fly the likes of Cathay Pacific or BA from Chicago to Atlanta.
It will certainly put US air travel back on track, and likely kill off the lumbering dinosaurs like AA and UA that need to just go away and free up slots around the country for airline companies that will use them properly.
United/Continental merger a
By AvantiUnited/Continental merger a driver
I didn't see it specifically mentioned in the article, but I presume that a key driver for this move to consolidate regional skies by Skywest was the proposed merger between United and Continental. It may also have forced ExpressJet's hand this time round. Skywest is already very well positioned at UAL; now it has moved to ensure it will provide the majority of regional feed for the new, merged entity in the future.
UAL/CO get the comfort of a certain stability which has been lacking in recent years at ExpressJet - but they are now dealing with a very powerful regional airline that can better dictate terms. In terms of planes operated, I believe Skywest is now the No. 3 US airline (after UA/CO and Delta) with a fleet of 696.
It will also make re-fleeting decisions more interesting in the future - Skywest started out as a major Embraer operator (with the Brasilia), switched over to Bombardier for CRJs (hundred of them!) and through this purchase, now has a foot in each camp.
Who is going to buy American
By AnonymousWho is going to buy American Eagle? We all know that one is next! AMR is kicking them out of the nest.
However, UA/CO will account
By AnonymousHowever, UA/CO will account for well over half of SkyWest's flying as together they will have over 400 aircraft between SkyWest, ASA and ExpressJet. And that is a lot to lose come bidding time.
Well, AA Eagle has been up
By JLWell, AA Eagle has been up for sale for quite some time now.....but, so far, no takers. I think AA will have to significantly lower the price for Eagle if they really want to sell it.
Seriously? What makes you
By pacmanSeriously? What makes you believe that BA or Cathay would even want to enter the US market (even today when fares are finally rising to more sustainable levels). To think that any foreign carrier would dedicate the resources to compete against UA, AA, DL or any of the LCCs is a fantasy. It's also laughable to suggest the current BA isn't without significant labor and operational challenges (just like their US counterparts).
I'm also not in agreement with your statement that Midwest and Frontier have different service formats; they are both low-cost, leisure-focused, single-class operations operating from a single hub city. I think you're thinking back to the glory days when Midwest offered 2-2 seating, excellent food, etc. -- those days are long gone.
Not only do the likes of SQ,
By civet fiveNot only do the likes of SQ, CX, EK, etc not want to enter the US, I have serious doubts about any airline being able to run a multi-hub operation that would be required in the US to capture any significant traffic flows and international feed. LH proper is dual hub (OS, LX and SN maintain separate cost structures, etc, and so flow over their respective hubs is managed differently from LH proper FRA/MUC flow), AF-KL appears to have figured out how to dual hub due to big yield deltas ex CDG v AMS, and QF and AC have to multi-hub due to geography but would prefer to consolidate at 1 if they could - just compare their networks at SYD/YYZ and elsewhere. For the EK/SQ/CX model to work in the US, with that level of service standards, you would need a high yield city, like NYC, CHI or MIA, but located in Kansas, and with TACA's costs.
You really must be drinking a
By AnonymousYou really must be drinking a lot of the company juice to say what you are saying. Anyone/thing aligned with UAL will have their work cut out for them.
Good luck!
By Anja Gensel "I used to
By 3 x Union FurloughedBy Anja Gensel
"I used to think ..."
Well try to get back to it sometime soon Anja. I love Emirates service, their first class is amazing for a government run airline, and they are trying to take over the world but if we give away are airline indusrty "so falls rome." We already let Virgin America jump in to lower the fares further below where they should be. Our majors do a great job with what the FAA & ATC gives them. Let's privatize the FAA & ATC and hold them accountable for something.
By Anja Gensel "I used to
By 3 x Union FurloughedBy Anja Gensel
"I used to think ..."
Well try to get back to it sometime soon Anja. I love Emirates service, their first class is amazing for a government run airline, and they are trying to take over the world but if we give away are airline indusrty "so falls rome." We already let Virgin America jump in to lower the fares further below where they should be. Our majors do a great job with what the FAA & ATC gives them. Let's privatize the FAA & ATC and hold them accountable for something.
What makes me think that the
By Anja GenselWhat makes me think that the likes of BA or CX would want to fly in a domestic US market??? The EU transport minister has consistantly brought this to the table in the recent Open Skies agreement negotions with the Bush administration. European airlines (and yes, CX IS European!) want access to the still largest market on earth.
When they do come, and I am certain that they will, they may come in the form of a LCC subsidiary, or an accross-the-board acquisition of a US company.
Of course BA has operational challenges....who doesn't??? But they certainly aren't humping the bunk like our carriers have been.
Have you flown outside of the country lately??? BA and LH aren't suddenly adopting the People Express "Unbundled Service" format. They are full-service carriers, charging full fares.
It's appropriate when Ryanair or Wizzair charges for extras because you are likely paying less than 50 quid for your transportation.
And as far as competing against AA, UA or DL???
European airlines have been operating in an environment in a high cost operating environment for the last 3 decades. They have adapted. Topping most of our domestics in operational effeciency and customer service would not be difficult at all.
In fact, to top AA, all you would have to do is not charge for a bag or assigned seat, and operate a flight with something other than a 25 year old MD80!
Time will tell.
Post new comment