Originally Posted by FLYXJT84

Our operations under the Continental CPA may no longer be profitable.We amended and restated the Continental CPA on June 5, 2008. The amendments became effective on July 1, 2008. In contrast to providing for us to earn a 10% margin on our expenses incurred flying as a regional carrier for Continental, the agreement now has fixed block hour rates, which are subject to an annual adjustment tied to a consumer price index (capped at 3.5% per annum). The rates are considerably lower than the pre-amendment rates and will result in lower overall revenues. At this time, it is difficult to quantify the overall financial impact of the changes because the pre- and post-amendment agreement are substantially different, including with respect to the services covered. Our results will depend, in part, on the timing of our fleet changes and how successful we are in reducing our operating costs. We originally derived significant amounts of revenue from the reimbursement, plus the 10% margin, for aircraft rent, fuel and other expenses. Those expenses, and the corresponding revenue, will no longer be reflected on our financial statements as they will be incurred directly by Continental. Moreover, the rates we earn will be fixed and not tied to our expenses; consequently, we could be unprofitable if we do not manage our costs appropriately. We need to aggressively reduce managed expenses under the agreement as aircraft are removed from service and returned to Continental. In addition to reducing volume-related costs as a result of the decrease in our flying, we also need to reduce overhead expenses consistent with the operation of a smaller fleet. Our initial goal is to reduce our annual operating costs by approximately $100 million, which will be necessary for us to be profitable. Although a significant portion of that amount will be volume-driven, we anticipate that overhead reductions will comprise at least 35% of that amount, which we intend to address through a reduction in workforce, wage concessions and other expense reductions. There can be no assurance that we will be successful in reducing our expenses or that we will be profitable in the future.

Our operations outside of the Continental CPA may affect our ability to operate profitably.

The aircraft transitioned last year from the Continental CPA to revenue-risk flying agreement with Delta, ExpressJet branded flying and charter flying have been unprofitable to date. Currently the aircraft deployed outside of capacity purchase agreements and the associated risks relate to 22% of our fleet. The risks affecting our new operations include:

• high fuel costs;

• our ability to obtain and finance any expansion at acceptable rates of return;

• our ability to create a profitable recognized brand;

• the condition of the U.S. economy; and

• competitive responses from other air carriers.