The proposed expanded code-share agreement between SkyWest Airlines [Nasdaq: SKYW] of St. George, Utah, and United Airlines [OTC: UALAQ] has been finalized.

The Memorandum of Understanding (MOU) SkyWest signed with United on May 30 is definite now that the SkyWest board of directors, United officials and the U.S. bankruptcy court have approved the agreement [CRAN, June 16]. SkyWest was the first regional airline to sign an MOU for growth aircraft with United, and the carrier became the first regional airline to complete a court-approved agreement.

Under terms of the 11-year, fixed-rate-adjustment contract, SkyWest will operate a fleet of 140 aircraft as a United Express carrier under its code-share with United. The fleet will include the 55 turboprops currently used in United Express service, 55 Bombardier [Toronto: BBDb.TO] CRJ200 regional jets (RJs) that are scheduled to be in service by year end, and 30 70-seat CRJ700s that are to arrive by summer 2005 (CRAN, Aug. 11).

Deliveries of the new 70-seat RJs are to begin in January. It is anticipated that deliveries of these aircraft will begin in January and will continue through May 2005. The current delivery schedule provides for 15 deliveries in 2004 and 15 in 2005. The contract includes a number of options, which could include a mix of 50- and 70-seaters.

The agreement includes multi-year fixed rate adjustments for SkyWest's United Express service. The agreement is similar in nature to the two carriers' previous agreement and provides for a base margin and performance based incentives.

The agreement will allow SkyWest to more than double its regional jet fleet over the next five years, which SkyWest management believes will represent the largest growth opportunity afforded any regional airline currently doing business with United.

"The agreement represents the culmination of many cooperative efforts between SkyWest and United since United entered bankruptcy protection in December 2002," said Bradford Rich, executive vice president, chief financial officer and treasurer of SkyWest. "In addition, we believe this agreement is unprecedented in our industry and offers us significant long-term growth opportunities that will greatly benefit SkyWest and our shareholders."

Bombardier confirmed that SkyWest placed a firm order for 30 70-seat CRJ700s, adding that the carrier also took options on an additional 80 CRJ700s.

The value of the firm order is about $862 million, Bombardier officials said. If SkyWest exercises the 80 options, the value of the transaction would grow to $3.35 billion.

SkyWest is one of the original launch customers for the Bombardier CRJ and has placed firm orders for 100 of the 50-seat aircraft, the manufacturer said.

"The 50-seat Bombardier CRJ has been the driving force behind our growth over the past decade and we are confident that the 70-seat Bombardier CRJ700 will help us continue that growth," said Jerry Atkin, chairman, president and CEO of SkyWest. "The Bombardier CRJ700 aircraft's exceptional seat-mile costs and its family commonality with the 50-seat CRJ will help us maintain our low-cost structure while providing more efficient jet services to United Airlines."

"This order is evidence that the CRJ revolution is continuing and that the Bombardier CRJ has become an indispensable tool in the arsenal for many airlines," said Steven A. Ridolfi, president of Bombardier Aerospace's regional aircraft division. "Bombardier Aerospace was first to the market with 70- and 90-seat regional jets and as [of] July 31, there were already 112 CRJ700/CRJ900 aircraft in revenue service with nine operators around the world."

As of July 31, firm orders for the Bombardier CRJ family stood at 1,261, the manufacturer said.

Half of the new jobs created by the SkyWest-United agreement must be offered to furloughed United pilots. Under the new contract, SkyWest anticipates its revenues will top $1 billion next year. The airline also operates as a code-share partner with 56 CRJs for Delta Air Lines [NYSE: DAL] and 16 turboprops for Continental Airlines [NYSE: CAL].

SkyWest now operates more than 670 daily flights to 63 cities as United Express out of hubs in Denver, Colo., Los Angeles, Calif., Portland, Ore., San Francisco, Calif., and Seattle, Wash. The contract will provide SkyWest with new opportunities in United's Chicago, Ill., hub as well as expanded service in the Denver market.

>>Contact: Phil Gee, SkyWest, 435-634-3547; Bert Cruickshank, Bombardier, 416-375-3546.<<