SkyWest, Inc. subsidiary Atlantic Southeast Airlines (ASA) will begin operating as a United Express carrier in the first quarter of 2010 as part of a deal that sees SkyWest lending United Airlines $80 million and agreeing to let United defer up to $49 million it owes the Utah-based regional airline operator.
Until now purely a Delta Connection franchise operator for Delta Air Lines (and a Delta subsidiary until bought by SkyWest), ASA will operate 13 Bombardier CRJ regional jets on United Express service, with all 13 expected to be in UEX service by May 2010. SkyWest expects ASA will be operating the 13 regional jets under a capacity purchase agreement with United for five years, and anticipates that the airline will be compensated in similar fashion to United’s current agreement with SkyWest Airlines.
In addition to providing $80 million in operational funding to United, the deal between United and SkyWest ― documented in a series of agreements signed on October 20 ― extends the existing code-sharing relationship between Skywest, Inc. subsidiary SkyWest Airlines and United. SkyWest has long operated a United Express franchise and now flies a large number of Bombardier CRJ regional jets and some Embraer EMB-120 Brasilia turboprops on United Express services.
The agreements executed between SkyWest Airlines and United extend SkyWest Airlines’ existing rights to operate 40 regional jet aircraft on United Express service until the end of their current lease terms. The lease termination dates are at an average of 8.4 years from now.
Under the terms of the agreements executed between SkyWest Airlines and United, SkyWest Airlines has extended to United a secured term loan for $80 million. The term loan bears interest at a rate of 11 per cent, with a 10-year amortization period. The loan is secured by ground equipment and airport slot rights held by United.
SkyWest Airlines has also agreed to defer amounts payable to SkyWest Airlines under its existing United Express agreement. The maximum deferral amount is $49 million and any amounts deferred will accrue a deferral fee of 8 per cent, payable weekly. United’s right to defer payments is scheduled to terminate in 10 years.