Comments on: Express Jet (XJT) http://iamamazing.wordpress.com/2007/03/14/express-jet-xjt/ Insights into Investing, Economics, and Politics Sat, 02 Aug 2008 21:06:06 +0000 http://wordpress.com/ hourly 1 By: Charlie http://iamamazing.wordpress.com/2007/03/14/express-jet-xjt/#comment-2204 Charlie Fri, 16 Mar 2007 21:19:19 +0000 http://iamamazing.wordpress.com/2007/03/14/express-jet-xjt/#comment-2204 I think there are a couple of issues around the leases. One issue is that Continental has reduced the number of planes they are leasing from XJT as part of their code share. This is about 1/4 of their flights vs 2006. While this will be painful, the contract with Continental is a cost plus contract meaning XJT will still make 8.5%-11.5% on the remaining 3/4 of flights. In the meantime, XJT will be ramping up some of their own business plans (independent their own brand) so the airline should be able to compensate (unlike Atlantic Coast Airlines which became Independence Air in one fell swoop and couldn't make the transition from code share to branded airline). It is also a good time to make this transition while airlines are becoming very profitable. It is also worth pointing out that Continental can't reduce planes again until 12/28/09 although they could scrap the whole plan with 12 months notice, but it would be 15 planes per month after 1 year (unwound around end of 2009). The other leases would be from the aircraft manufacturers. Since XJT was carved out of Continental, I think Continental's name is on the lease, but if they reduce flights as done recently, XJT still gets the planes. As planes become more scarce, I see this as good. Even trhough the loss of the Continental flights will hurt XJT some, it should be noted that XJT has reduce debt by a net of $200M in the past three years while simultaneously increasing cash $100M. Not bad for a company with a market cap barely above $300 Million. I think there are a couple of issues around the leases. One issue is that Continental has reduced the number of planes they are leasing from XJT as part of their code share. This is about 1/4 of their flights vs 2006. While this will be painful, the contract with Continental is a cost plus contract meaning XJT will still make 8.5%-11.5% on the remaining 3/4 of flights. In the meantime, XJT will be ramping up some of their own business plans (independent their own brand) so the airline should be able to compensate (unlike Atlantic Coast Airlines which became Independence Air in one fell swoop and couldn’t make the transition from code share to branded airline). It is also a good time to make this transition while airlines are becoming very profitable. It is also worth pointing out that Continental can’t reduce planes again until 12/28/09 although they could scrap the whole plan with 12 months notice, but it would be 15 planes per month after 1 year (unwound around end of 2009).

The other leases would be from the aircraft manufacturers. Since XJT was carved out of Continental, I think Continental’s name is on the lease, but if they reduce flights as done recently, XJT still gets the planes. As planes become more scarce, I see this as good.

Even trhough the loss of the Continental flights will hurt XJT some, it should be noted that XJT has reduce debt by a net of $200M in the past three years while simultaneously increasing cash $100M. Not bad for a company with a market cap barely above $300 Million.

]]> By: NetJetter http://iamamazing.wordpress.com/2007/03/14/express-jet-xjt/#comment-2200 NetJetter Thu, 15 Mar 2007 01:49:42 +0000 http://iamamazing.wordpress.com/2007/03/14/express-jet-xjt/#comment-2200 Are you considering the leases on the jets? Are you considering the leases on the jets?

]]>