ExpressJet Airlines is losing money on the contracts for 300 50-seat regional jet aircraft, says SkyWest Inc chief executive Jerry Atkins.
“Non-contributing 50-seat flying – now that’s just a nice way to say we have quite a few airplanes that are losing money at ExpressJet,” he says at the Raymond James Global Airline Conference in New York today.
The comments are the first by SkyWest management on exactly how many aircraft at its ExpressJet subsidiary are operating under subpar contracts. They disclosed that a number of the regional jets in the carrier’s fleet that fly for United Airlines were operating at below market rates earlier this year.
“We will get the contracts fixed or we will get the aircraft that can’t make money out of ExpressJet,” says Atkins.
The 300 aircraft are split into two batches with the contract on 50 of them ending in three years and the remaining 250 in 2020, he says. SkyWest’s priority is the latter batch as rates on about 25 aircraft can be renegotiated annually but also because the contract has a longer run-off period, he adds.
The rates on the smaller batch resets in two years after which the worst-case scenario is that the aircraft come out of the fleet, says Atkins.
SkyWest has had some success renegotiating these contracts. Atkins says that 20 aircraft have been extended at higher rates and 20 have been removed from the fleet this year.
He declines to comment on whether all of the aircraft are operating for United.
ExpressJet also flies for American Airlines and Delta Air Lines.
The airline operates 449 aircraft with 428 in service, Flightglobal’s Ascend Online database shows. Of those, 357 are 50-seat or smaller regional jets, including the Bombardier CRJ200, Embraer ERJ135 and ERJ145.
Aircraft rates are not the only issue plaguing ExpressJet. It hopes to achieve about $30 million in annual savings from reduced labour expenses once it gets new labour contracts in place, says Atkins.
However, this process has taken a lot longer than SkyWest management expected, he says.
ExpressJet lost money in the third quarter, executives said on 6 November. While they would not elaborate on the amount of the losses, they did say that the carrier is not expected to break even until 2015.
SkyWest reported a $56.2 million operating profit on $850.7 million in operating revenues during the third quarter. Net profit was up more than a quarter to $26.4 million.