ExpressJet Reports First Quarter 2008 Results

HOUSTON, May 5 /PRNewswire-FirstCall/ -- ExpressJet Holdings, Inc.
(NYSE: XJT) today reported a first quarter loss of $31.3 million, or $0.61 per
share. Excluding an impairment charge relating to investments in auction rate
securities held by the company, ExpressJet reported a first quarter loss of
$22.6 million, or $0.44 per share.
(Logo: here)
"The first quarter results reflect the increasingly challenging airline
industry environment. Despite these challenges, we continue to make progress
in all lines of business due to the hard work of ExpressJet's employees. They
remain focused on providing first-rate customer service and running an
excellent operation," said President and CEO Jim Ream.
Operational Overview
In the first quarter, ExpressJet operated 215 aircraft under capacity
purchase agreements with Continental Airlines and Delta Air Lines and
generated 2.0 billion revenue passenger miles and 181,161 block hours across
both systems. ExpressJet expects to continue operating 215 aircraft under
these contracts throughout 2008.
For the first quarter, ExpressJet operated nine aircraft within its
charter division. The charter division's revenue almost doubled versus
revenue generated last year, and developing opportunities will require three
additional aircraft in the charter fleet by June 2008.
In the branded segment, which includes operations branded as ExpressJet
Airlines and a pro-rate agreement with Delta, the company ended the first
quarter with 498 million revenue passenger miles and a load factor of 61%. As
ExpressJet gains increased visibility within communities and extends its
brand, booking patterns and results for the ExpressJet Airlines branded
segment are steadily improving. The company is experiencing higher demand
levels and improved market share in short-haul markets, creating opportunities
for ExpressJet to better revenue manage its inventory.
Although improvement continues, in response to higher fuel prices and a
slowing economy, ExpressJet Airlines branded flying will be reduced from 193
average daily departures in the first quarter to 166 by June 2008. The
aircraft removed from branded service will be reallocated to ExpressJet's
charter operation.
Financial Overview
ExpressJet continues to negotiate 2008 rates for its Continental capacity
purchase agreement. Under the current agreement, ExpressJet is reimbursed at
cost plus a 10% operating margin. Continental advised ExpressJet in February
that if the companies were unable to reach agreement by March 14, that
Continental might initiate arbitration proceedings as it did in 2007.
ExpressJet also has the right to initiate arbitration if the company thinks it
necessary. To date, neither party has done so.
ExpressJet ended first quarter 2008 with $191.7 million in cash, cash
equivalents and short-term investments. ExpressJet's cash burn rate for
operating activities, excluding capital expenditures, securities repurchased
and increases in credit card holdback provisions, was $17.5 million in first
quarter 2008. ExpressJet expects continued improvement in second quarter 2008
based on increasing market awareness and cost savings initiatives.
The cash balance above includes $38.4 million in restricted cash and
$65 million in short-term investments before an accounting adjustment to
impair the value of these investments. In its annual report on Form 10-K,
ExpressJet disclosed that it currently holds approximately $65 million in
auction rate securities. Continued unsuccessful auctions for its auction rate
securities could result in ExpressJet holding the securities beyond the next
scheduled auction reset dates, further limiting their short-term liquidity.
If liquidating the securities becomes necessary and their market has not yet
recovered, ExpressJet will explore opportunities to borrow against the
securities or sell them.
As previously announced, during the first quarter, Holdings purchased
$718,000 of its common stock and $3.5 million in convertible notes under its
securities repurchase program. The total remaining in the program, after
accounting for purchases made to date, is $9.7 million. ExpressJet is not
currently purchasing securities under this program, but may do so in the
future.
For the branded segment, including Delta pro-rate and ExpressJet branded
flying, ExpressJet is currently contracted for 87% of its expected second
quarter 2008 fuel needs at $2.40 per gallon.
Capital expenditures totaled $2.8 million for first quarter 2008 compared
to $11.7 million during the same period in 2007. ExpressJet anticipates
capital expenditures for the remainder of 2008 to be approximately $10
million.
In light of the recent announcement concerning the formation of a Special
Committee of the Board of Directors in response to a proposed acquisition of
the company by SkyWest, Inc., as disclosed in the company's report on Form 8-K
dated April 25, 2008, which committee has commenced a full review of strategic
and operational alternatives available to ExpressJet, and the inability of
management to provide any meaningful comment at this early stage of the
special committee's review, ExpressJet will not be conducting its quarterly
telephone briefing this quarter and is cancelling the teleconference
previously scheduled for May 6th. ExpressJet cautions its stockholders and
others considering trading in its securities that there can be no assurance
that any definitive offer will be made, any agreement will be executed, or any
transaction will be approved or consummated. The company does not intend to
disclose developments relating to this review unless and until the Special
Committee and its Board of Directors have approved a specific agreement or
transaction.
CORPORATE BACKGROUND
ExpressJet Holdings operates several divisions designed to leverage the
management experience, efficiencies and economies of scale present in its
subsidiaries, including ExpressJet Airlines, Inc. and ExpressJet Services,
LLC. ExpressJet Airlines serves 166 destinations in North America and the
Caribbean with approximately 1,450 departures per day. Operations include
capacity purchase and pro-rate agreements for mainline carriers; providing
clients customized 50-seat charter options; training services through its
world-class facility in Houston, Texas; and ExpressJet branded flying,
providing non-stop service to markets concentrated in the West, Midwest and
Southeast regions of the United States. ExpressJet Services is the North
American partner to three major European original equipment manufacturers and
provides composite, sheet metal, interior and thrust reverser repairs
throughout five facilities in the United States. For more information, visit
www.expressjet.com.
Some of the statements in this document are forward-looking statements
that involve a number of risks and uncertainties. Many factors could affect
actual results, and variances from current expectations regarding these
factors could cause actual results to differ materially from those expressed
in the forward-looking statements. Some of the known risks that could
significantly impact revenues, operating results and capacity include, but are
not limited to: the company's continued dependence on Continental for the
majority of its revenue; Continental's ability to terminate the capacity
purchase agreement with the company; potential loss of access to aircraft,
facilities and regulatory authorizations, as well as any airport-related
services that Continental currently provides to the company; the company's new
operations are less profitable than historical results; competitive responses
to the company's branded entry into new markets; certain tax matters; reliance
on technology and third-party service providers; flight disruptions as a
result of operational matters; regulatory developments and costs, including
the costs and other effects of enhanced security measures and other possible
regulatory requirements; competition and industry conditions. Additional
information concerning risk factors that could affect the company's actual
results are described in its filings with the Securities and Exchange
Commission, including its 2007 annual report on Form 10-K. The events
described in the forward-looking statements might not occur, or might occur to
a materially different extent than described herein. The company undertakes
no duty to update or revise any forward-looking statements, whether as a
result of new information, future events or otherwise.

EXPRESSJET HOLDINGS, INC. AND SUBSIDIARIES

FINANCIAL SUMMARY
(In thousands, except per share data)

Three Months Ended
March 31, Increase/
2008 2007 (Decrease)
Operating Revenue
Passenger $437,029 $ 404,973 7.9%
Ground handling and other 11,139 7,585 46.9%
448,168 412,558 8.6%
Operating Expenses:
Wages, salaries and related
costs 114,606 104,983 9.2%
Aircraft rentals 86,758 84,583 2.6%
Aircraft fuel and related
taxes 97,986 53,586 82.9%
Maintenance, materials and
repairs 55,646 48,553 14.6%
Other rentals and landing fees 29,687 28,377 4.6%
Ground handling 26,011 24,224 7.4%
Outside services 16,719 14,892 12.3%
Marketing and distribution 11,891 2,920 nm
Depreciation and amortization 8,638 6,512 32.6%
Other operating expenses 35,209 29,588 19.0%
483,151 398,218 21.3%
Operating Income / (Loss) (34,983) 14,340 nm

Nonoperating Income / (Expense):
Impairment charge on
investment (13,661) - nm
Interest expense (2,355) (1,800) 30.8%
Interest income 2,363 3,894 (39.3%)
Capitalized interest 400 175 nm
Equity investments loss, net (685) (98) nm
Other, net 80 (58) nm
(13,858) 2,113 nm
Income / (Loss) before Income Taxes (48,841) 16,453 nm
Income Tax Benefit / (Expense) 17,534 (6,286) nm

Net Income / (Loss) $(31,307) $10,167 nm

Basic Earnings / (Loss) per Common
Share $(0.61) $0.19 nm

Diluted Earnings / (Loss) per
Common Share $(0.61) $0.18 nm

Shares Used in Computing Basic
Earnings / (Loss) per Common Share 51,278 53,956 (5.0%)

Shares Used in Computing Diluted
Earnings / (Loss) per Common Share 51,278 61,713 (16.9%)

EXPRESSJET HOLDINGS, INC. AND SUBSIDIARIES
PRELIMINARY STATISTICS

Three Months Ending March 31, 2008 Contract(1) Branded System

Revenue Passenger Miles (millions) 2,012 498 2,531

Available Seat Miles (ASM)(millions) 2,618 813 3,475

Passenger Load Factor 76.9% 61.3% 72.8%

Block Hours 181,161 47,666 231,856

Departures 93,663 24,402 120,124

Stage Length (miles) 577 669 593

(1) Excludes charter since statistics on charter aircraft do not provide
meaningful load factor data because pricing is based on operating cost
versus expected passenger count.

Non-GAAP Financial Measures
Three Months Ended
March 31,
2008 2007

Net Income Reconciliation:
Net income / (loss) $(31.3) $10.2
Adjustments for special charges / (gains)
net of tax:
Add: Impairment charge on investment (1) 8.7 --
Net income / (loss) excluding special
charges (2) $(22.6) $10.2

Earnings / (Loss) Per Share Reconciliation:
Diluted earnings / (loss) per share $(0.61) $0.18
Adjustments for special items, net of tax 0.17 --

Diluted earnings / (loss) per share,
excluding special charges (2) $(0.44) $0.18

(1) In February 2008, ExpressJet invested in $65 million of auction rate
securities which are classified as short-term securities and reflected
at fair value. During first quarter 2008, auctions for these
securities failed. At March 31, 2008, the company continued to hold
these investments, as they have continued to fail. Since the company
cannot predict when the market will recover and needs to allow for the
flexibility to sell these securities in the next 12 months, including
at a discount, if necessary, ExpressJet has evaluated and classified
them, in accordance with accounting guidance, as current assets and
recognized an impairment charge, net of taxes, of $8.7 million.

(2) By excluding special non-recurring items, these financial measures
provide management and investors the ability to measure and monitor
ExpressJet's performance on a consistent year-over-year basis.

SOURCE ExpressJet Holdings, Inc.

Kristy Nicholas, Investor Relations of ExpressJet Holdings, Inc.,
+1-832-353-1409