A one-year educational effort by a unit of ExpressJet [XJT] to explore regional jet service in Europe is a diversification program that has yet to pay off.

A year ago, ExpressJet invested an undisclosed sum into an entity now known as ExpressJet Europe with the mission to land a contract to supply regional jets to a European network carrier, said Christy Nicholas, an ExpressJet spokeswoman. "Its game plan is to educate the European market about capacity purchase agreements and how it would be beneficial to them as operators."

While commonplace in the U.S. regional marketplace, the capacity purchase agreement is a new concept in Europe and it has not been tried there, she noted.

European regionals have a variety of relationships with the network or flagship carriers. Some of the regionals are owned or partially owned by the network carriers while in other cases the regionals have "wet lease" pacts. The regional fleets are frequently mixed with aircraft ranging from turboprops to narrowbody aircraft.

The turboprop is still heavily used in Europe compared to U.S. fleets. "There isn't the proliferation of RJs as there is in the United States," Nicholas said. "We think there is an opportunity there for regional jets."

While ExpressJet flies 274 35- to 50-seat Embraer [ERJ] regional jets for Continental Airlines [CAL], Nicholas said ExpressJet Europe is not committed to any specific size or type or RJ.

"We obviously enjoy the fruits of the capacity purchase agreement with Continental and we thought Europe would be the right market to explore the same strategic option," Nicholas said.

At this point, ExpressJet Europe does not have any aircraft, nor does it have an operating certificate. Based in Ireland, its officers are all experienced European airline executives. Its board is composed of both Europeans and executives from the U.S. operation.

Continental late last year served notice to ExpressJet that it would be dropping 69 RJs from the Continental Express fleet because ExpressJet would not reduce its prices for a new long-term operating agreement.

>>Contact: Christy Nicholas, ExpressJet, (713) 324-4755.<<