SkyWest Airlines [Nasdaq: SKYW] will expand its United Express operations, as well as its fleet, under a proposed agreement with United Airlines [OTC BB:UALQB].

The two carriers have signed a memorandum of understanding that calls for a long-term, 11-year contract for SkyWest to fly as a United Express carrier. Under the terms of the yet-to-be signed contract, SkyWest will be paid on a "cost plus" bases, covering all costs plus a base margin and performance-based incentives. The final contract requires the approval of both companies boards of directors and the U.S. bankruptcy court.

Along with extending SkyWest's operation as a United Express carrier, the contract calls for SkyWest to operate a total of 140 aircraft for United Express. These include 55 turboprops the airline already flies and 85 regional jets. The regional jets will include fifty-five 50-seat and thirty 70-seat regional jets.

Phil Gee, a spokesman for SkyWest, told C/R News that the airline already operates 56 Embraer EMB-120 Brasilias and 39 Bombardier CRJ200s. That means that one EMB-120 will have to be disposed of, either by being sold off or allocating it to another SkyWest operation, Gee said. The 39 CRJ200s will be included in the 50-seat category, to be followed by 16 additional CRJ200s. However, no decision has been made yet regarding which manufacturer will be chosen for the 70-seat aircraft. Both Bombardier and Embraer build 70-seat RJs, to include the CRJ700 and Embraer 700, respectively.

Gee also noted that SkyWest has 85 options on the CRJ200.

The additional aircraft will be used to expand the United Express route structure, Gee said. The airline is hoping to increase its presence in Denver as well as start operations into Chicago O'Hare. It currently has 57 daily departures out of Denver International and none out of O'Hare. SkyWest currently operates more than 650 departures a day to 63 cities under the United Express brand.

>>Contact: Phil Gee, SkyWest; tel: 435-634-3547<<