SkyWest Inc. sells unprofitable ExpressJet Airlines to United joint venture
St. George-based SkyWest Inc. has announced a deal to sell its ExpressJet Airlines Inc. subsidiary to ManaAir — a joint venture of United Continental and KAir Enterprises, an airline investment company — for $70 million in cash and the assumption of the liabilities of ExpressJet.
The transaction is expected to close in early 2019, subject to customary closing conditions, SkyWest said in a release. SkyWest will retain ownership of the Canadian Regional Jet aircraft currently in service in the ExpressJet fleet and will lease them to the new owner for up to five years.
The sale will allow SkyWest to shed the regional carrier that has lost money every year since it acquired it in 2010. Unloading the money-losing unit could help SkyWest stock resume a multiyear rally that saw it climb from single-digit territory in late 2014 to a peak of more than $60 in early 2018, according to investment website Motley Fool.
SkyWest said in 2010 that it acquired ExpressJet with the intention of merging it with Atlantic Southeast Airlines, its existing unionized subsidiary. The integration process itself went smoothly enough, but the combined operation never reached profitability.
“Today’s announcement provides further clarity and focus for the future,” said Chip Childs, SkyWest Inc. president and CEO. “We want to thank the employees of ExpressJet for their valued contributions and we look forward to continuing to strengthen our partnership with United.”
SkyWest’s airline companies provide commercial air service in North America with more than 2,500 daily flights carrying approximately 50 million passengers annually. It operates through partnerships with United Airlines, Delta Air Lines, American Airlines and Alaska Airlines, while ExpressJet operates regional jets through partnerships with United and American, with its arrangement with the latter due to come to an end in April.
ExpressJet posted a loss of $32.5 million in 2017, although that was an improvement upon the prior year’s figure of $302 million. In the third quarter of 2018 it reported a relatively low loss of $230,000, compared to nearly $10 million in the equivalent period a year earlier.