It has been a long road for the regional carrier ExpressJet, but the recent announcement that ExpressJet would be acquired by United (through a subsidiary) brings the airline right back to where it started. It returns to its roots as a partner-owned regional airline flying only for that partner, Continental’s corporate successor.
ExpressJet began life as many regional airlines did… by rolling up a bunch of different operators into one bigger one. In this case, it was the doing of Frank Lorenzo.
For those who remember Frank Lorenzo (I can’t believe I even have to say that, but time marches on), you’ll remember that he took a bunch of airlines and tried to squeeze financial success out of them at all costs. Eventually what remained of Texas International, Continental, People Express, Frontier, and Eastern were all rolled up into a miserable airline under the Continental name. (It wasn’t until after he was gone that Continental turned itself around under Gordon Bethune and Greg Brenneman.) But through this long, painful, process, Lorenzo also picked up a bunch of regional airlines.
- Britt Airways began in Indiana and flew around the Midwest. It was bought by People Express in 1985.
- Provincetown-Boston Airlines (PBA) had its start in New England, but it also flew around Florida in later days. In early 1986, it was acquired out of bankruptcy by People Express.
- Denver-based Rocky Mountain Airways flew where you’d expect it to fly with a name like that. It was acquired by Texas Air Corporation (Lorenzo’s holding company) in 1986.
- Like PBA, Bar Harbor was also New England-based with some Florida flying. It was partially-acquired by Texas Air Corporation in 1987.
In 1987, Texas Air Corporation completed its purchase of People Express, so all of these airlines came together. Bar Harbor purchased PBA in 1987. In 1991, Britt and Rocky Mountain were merged. During the very early 1990s, when both Continental and Eastern were operating separately, these airlines did double duty. But once Eastern failed, everything was consolidated under the Britt Airways certificate and the whole thing was named Continental Express.
Through the 1990s, Continental Express grew, acquiring dozens of Embraer regional jets and fortifying the Continental hub operations. In 1996, it was spun out into its own company, ExpressJet Airlines, Inc. It remained owned by Continental.
After 9/11, Continental looked to ExpressJet as a way to raise cash. It spun the airline off in 2002, and that’s when things started to get dark.
Within a couple of years, Continental decided to start cutting the ExpressJet-operated Continental Express fleet. It told the airline that it would eliminate 69 airplanes from the contract. ExpressJet made a really poor decision and decided to keep the airplanes and try to branch out. It started flying charters, but then in 2007, it opted to create its own short-lived, branded operation.
ExpressJet announced it would try to become Southwest Airlines with smaller planes on smaller routes. I loved the idea (and the $1 beers). But the airplanes weren’t the right ones to make it work. And the company started the operation just before the fuel spike of 2007 and the Great Recession. Timing could not have been worse.
That same year, ExpressJet branched out and began flying as Delta Connection from Los Angeles. By the summer of 2008, both the branded operation and the Delta Connection flying was gone. ExpressJet had to figure out a plan, but all it could muster on its own was a small contract flying for United around the time it merged with Continental.
Fellow-regional SkyWest had begun sniffing around ExpressJet, and it took two years before the airline was willing to commit. Through its Atlantic Southeast subsidiary that it had bought off Delta during its darkest days in 2005, SkyWest acquired ExpressJet. The airlines were merged under the ExpressJet name that year. (This was after a really terrible idea to rename the combined carrier SureJet was shelved.)
With the merger, ExpressJet now had large contracts with both Delta and United/Continental. It eventually ended up flying for American as well. It might sound like all was well, but there was one minor problem… it was never able to make any money. Every quarter, SkyWest would be optimistic about the airline eventually posting a real, full-year profit. It never happened.
In 2018, both the dwindling Delta contract and the small American one were canceled. By 2019, ExpressJet would again only be flying for United, the corporate successor to Continental.
Meanwhile, United remained the only airline not to have a wholly-owned regional subsidiary. After shutting down its Atlantic Southeast regional when it needed cash in the mid-2000s, and shutting down Comair a few years later, Delta had turned around and picked up Pinnacle (now Endeavor) in 2013. It now operates more than 150 CRJ-family aircraft for Delta.
Meanwhile at American, Envoy, Piedmont, and PSA are all wholly-owned. They operate over 300 regional combined with both Piedmont and PSA seeing rapid growth.
United had been interested in having a wholly-owned subsidiary of its own, but its flight attendant agreement forbid it. It had purchased a piece of Commutair previously, and now, through a complex transaction, it has brought ExpressJet back into the fold as well.
After years of bouncing around, hopelessly trying to create a sustainable, profitable model, ExpressJet is right back where it began in the 1990s.
24 comments on “The Circle is Complete: ExpressJet’s Long Journey Ends Where It Began”
Comair wasn’t spun out of Delta. It was shut down while delta still owned them.
I think it is quite amazing you could decipher all of that. Great job!
You know those Sankey diagrams they use for bank nd airline mergers? This would be a really confusing one.
I remember when ExpressJet briefly offered service from MRY to ONT and SAN. I had some classmates that went to the Claremont Colleges and it would have been really useful for them. While confirming this memory online just now, I learned that they were supposed to offer MRY-SMF service, although I’m not sure it ever happened before the branded airline shut down. My screen name here would have finally come true (grew up in the Monterey area now live in the Sacramento area).
I’d disagree with your assesment that xjt made a “poor decision” keeping the 69 airplanes. Had Jim Ream (sp?) allowed cal to give those planes to republic/chq that would’ve been the beginning of the end also. I think you could’ve explained the personality war between Ream and Larry Kelner a little and that would’ve explained what really happened.
I remember flying Express Jet as its own airline out of Reno to Long Beach for a cruise back in 2006. I still have the ticket envelope!
There stand alone operation tried to do to much. A bunch of routes out west is one thing, but stretching all the way coast to coast wasn’t a good idea. They should have started out in one section of the USA (say west coast) and then try and grow from there moving east as the years went by.
I remember flying ExpressJet at the beginning of their standalone flying experiment in 2007. First job out of college, four round trip flights RDU-MCI. I don’t think there was ever a flight with more than 15 people on it!
Foolish statement about only 15 passengers each flight. I worked for XJT, and load factor was better than expected. Fuel cost was leading reason for failure. Towards the end, I watched flights going out full, but still operating the flight at a loss due to the cost of fuel
I didn’t realize you flew on the four flights I mentioned from RDU to MCI in July/August 2007 where I had the back half of the plane to myself – would love to chat and compare memories!
Ah, ExpressJet. One of the stranger financial stories in airline history. I remember when Continental got almost $500 million for spinning this off. At the time, there was this short-lived mania for “regional airlines.” I thought the investors were nuts, since ExpressJet’s “profits” were completely dependent on what Continental paid them to operate the routes. And there wasn’t much to prevent Continental from paying them less or hiring someone else. Which is why things quickly went south for ExpressJet. There’s a lot of foolishness on Wall Street when it comes to valuing airlines, but ExpressJet stands out as perhaps Wall Street’s most foolish airline moment.
Expressjet was not spun off in 1996.
You’re right Blake. It was still Continental Express until it spun off in 2002. That is when the company name changed to ExpressJet Airlines, but still operated as CoEx. The branded operation made profits within tge first few months in operation, which is unheard of with most start up companies of any kind. This article is full if inaccuracies. But what do you expect from a site titled “crankyflyer”? I just hope those who read it are smart enough not to believe everything they read. (BTW, I started my airline career with Eastern and have been around for all these changes. )
CoEx-XJT – I’d suggest actually doing research before throwing grenades, because you are incorrect.
From the airline’s S1 filing:
https://www.sec.gov/Archives/edgar/data/1144331/000095012901501833/h88893s-1.txt
“ExpressJet Holdings, Inc. is a holding company, which was incorporated in
Delaware in August 1996 as a wholly owned subsidiary of Continental Airlines.
Our principal subsidiary is ExpressJet Airlines, Inc. (formerly Continental
Express, Inc.), which currently operates as a regional airline under the name
Continental Express.”
Further, from the airline’s 10-K for 2007
https://www.sec.gov/Archives/edgar/data/1144331/000114433108000019/xjt10k123107final.htm
“ExpressJet Brand. We have not yet been profitable in our Branded Flying operation and do not anticipate that we will be profitable in 2008 as we continue to establish our ExpressJet brand.”
Any other “inaccuracies” you’d like to point out?
Loved the ExpressJet COS – SAN route. No longer did I have to make a connection to get to SAN. Planes were full the several times I flew them. The best part was the flights went in SAN’s commuter terminal so it was so easy.
I couldn’t believe when they decided when the price of fuel went up. They stopped flying under their own name way too quick. I think they should have just raised prices and kept flying. Even if I had to pay double the ticket price, I would have kept flying with them. Didn’t the fuel price go up for all the airlines? Miss the service. Frontier did the same route over the last two summers, but it is poor substitute in so many ways. I miss ExpressJet.
Keb – If they could have raised fares, they would have. The fuel spike did impact everyone (except Southwest which was very heavily hedged). The combination of thin routes and expensive airplanes was not a good one, unfortunately. Some of the airline’s routes have found homes with other airlines (like Reno to Long Beach, for example). But others probably only work with a smaller, inexpensive aircraft. And good luck finding pilots to fly that these days, if you could even find the right airplane.
It can’t come full circle until there are 20 express jets lined up at the now shuttered terminal D in CLE!
Actually, full circle would be having 8 EMB-120’s parked in the C-2 and C-4 gates at Hopkins. This times back then in 1990. I hung with the company for 27 years, but after taking a pay cut and no raises for over 10 years, I didn’t see much future in staying any longer and headed to greener pastures at Flexjet. Good luck to all my fellow mechanics who decided to stick out out. I hope it all works out for you.
Expressjet is not being acquired by United through a subsidiary. United only owns a minority stake in that subsidiary. If anything this is just a corporate way of shuttering the expressjet operation and eliminate all work unions they can. To think United itself is buying them is looking at it with very rose colored glasses. If Skywest couldn’t get them to turn a profit why would anyone think United would be in the business to buy a airline losing money?
I was there in 2008 when XJT went south financially. Most employees on the payroll didn’t know the real story from 2008. Fuel prices in 2008 were the PUBLIC reason given for XJT’s branded operation being shutdown. Skywest negotiated a cpa with CAL before making a bid for XJT to be implemented upon successful acquisition of XJT. When the deal was blocked by the XJT pilot’s scope, the cpa was thrust upon XJT by an angry CAL under threat of being shut down. After the XJT BOD accepted the cpa, XJT began losing money and never made a profit going forward. Not long after accepting the cpa, XJT announced the shutdown of it’s branded flying and it’s Delta flying. The 69 airplanes XJT had retained were then returned to CAL. Furloughs and contract concessions at XJT followed by the fall of 2008. The cpa that Skywest negotiated with CAL was a money losing cpa from the start. When CAL stuck XJT with that cpa (negotiated by Skywest) the eventual end of XJT was assured. When Skywest (through ASA) acquired XJT in 2010, XJT was operating under the cpa that Skywest negotiated with CAL. Follow this to it’s conclusion. XJT would never make a profit under the cpa that Skywest negotiated with CAL. Once branded and Delta were shuttered, CAL got it’s 69 airplanes back. Kellner was happy again (BTW, a story is told of him being extremely unhappy when he learned that he had lost 69 airplanes of regional feed, especially the 44 XRs). Also, if the XJT Alpa MEC had given up scope in 2008, Skywest was going to take those 69 airplanes and fly them themselves with their non-union pilot group. Guess where 700 of our (XJT) pilots would be? Furloughed.
Skywest was very clever in it’s strategy back in 2008. Create a money-losing CPA with a new partner (CAL) that could be mitigated over time, OR lose the deal with a financial kick-back for playing (from CAL) and watch XJT slowly die as it’s new money losing CPA was implemented. Come 2010, XJT was ripe for the picking.
This
Frank Lorenzo is mentioned a number of times in a book I read recently, “Born to Fly”, which was written by a former Eastern captain, Paul Misencik (full disclosure, he’s my cousin). The references to Frank do not reflect praise from Paul. It’s a very interesting and entertaining read overall which provides an insight into the making of a pilot and events that took place in his varied career in aviation, up until he joined the NTSB as an accident investigator.
Enjoyed the article, its good historical overview painted with a broad brush. But the title caught my eye for a different reason, as I initially thought it was referring to Atlantic Southeast Airlines (ASA) last flight, which was also a story of full circle closure for ASA.
As mentioned in the article, ASA was merged with ExpresssJet, but the pilots flying under original ASA side of the house still identified themselves as ASA until the end, which was an ATL-CSG-ATL flight this past November. Since ASA’s first ever revenue flight was a DCI (Delta Connection) route of ATL-CSG-ATL, they symbolically decided to bring the Delta operation to a close flying this route for one last time. It was a sad occasion, covered well by the social media of ASA, bring to a close 29 years of ASA flying under the DCI brand name.
Of course, the real winner here was SkyWest, who was able to take over the entire DCI operation from ASA as they slowly whittled them down to the one last flight mentioned above. SkyWest was able to shred their money losing Express operation and gained a huge network of DCI flying from ASA side.
As others have mentioned, the details of the transactions and people involved could easily fill a book, this article barely touches the surface, if only someone were so inspired to write such a book, it would be a good addition other volumes on the history of the airline industry.
Great synopsis- I remember most if it all too well!