ExpressJet reports Third Quarter 2006 Earnings

On Wednesday, ExpressJet Holdings reported third quarter net income of US$22.7 million, or US$0.38 diluted earnings per share. During the quarter, the company’s ExpressJet Airlines subsidiary operated at its highest utilization levels year-to-date and continued to achieve a 99.8% controllable completion factor, which excludes cancellations due to weather and air traffic control.

“Our employees continue to focus on reliability, efficiency and great customer service. Their efforts continue to position ExpressJet well for future opportunities,” said ExpressJet President and CEO Jim Ream.

Third quarter operating revenue increased 8.8% to US$428.6 million, versus US$393.8 million in the third quarter of 2005. Compared to the same period last year, the company’s ExpressJet Airlines subsidiary grew its capacity 12% to 3.5 billion available seat miles. Revenue passenger miles were up 14.1%, resulting in a 1.5 point year-over-year increase in load factor to 78.1%. The airline operated at a 99.8% controllable completion factor during the third quarter, and an overall completion rate of 98.4%.

At the National Business Aviation Conference, ExpressJet announced its entry into the corporate aviation market with a new division – ExpressJet Corporate Aviation. Due to increasing interest in this division, ExpressJet intends to dedicate an additional 5 aircraft to this fleet, bringing the total corporate aviation fleet count to 15. ExpressJet continues to evaluate other opportunities for the remaining aircraft that will be withdrawn from the company’s capacity purchase agreement with Continental Airlines, including flying aircraft on behalf of either a U.S. carrier or foreign carrier and branded flying.

During the quarter, ExpressJet began negotiating with Continental on its 2007 block hour rates. Under the current agreement, ExpressJet receives payment for each scheduled block hour in accordance with a formula designed to provide it with a target operating margin of 10%. The companies hope to complete 2007 rate negotiations by December 1, 2006. In August, ExpressJet flight attendants, represented by the International Association of Machinists, ratified the tentative agreement for the contract that became amendable December 2004. The new contract becomes amendable August 1, 2010. ExpressJet also recently reached a tentative agreement with the Air Line Pilot Association on a contract extension. If ratified, the extension will add two years to the contract and make it amendable December 1, 2010.

ExpressJet’s third quarter 2006 operating income reflected an 8.1% operating margin, as compared with an operating margin of 9.6% for the third quarter 2005. For the third quarter 2006, ExpressJet Airlines performed better than its agreed rates under its capacity purchase agreement with Continental Airlines and rebated US$2.6 million back to Continental to meet its contractual operating margin of 10%. Additional expenses were incurred in the third quarter 2006, mainly for items related to the company’s strategic diversification, building out backoffice infrastructure and headquarters relocation.

ExpressJet ended the third quarter 2006 with US$283.6 million in cash and cash equivalents, including US$9.6 million in restricted cash. Capital  expenditures totaled US$5.8 million for the third quarter 2006 compared to US$7.2million during the same period in 2005. ExpressJet anticipates expenditures totaling approximately US$22.2 million for the full year 2006.

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