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ExpressJet Holdings (NYSE: XJT) $52M (MarketCap) Announces Cost Restructuring Initiative

|Includes: ExpressJet Holdings, Inc. (XJT)

ExpressJet Holdings makes strategic aviation related investments and offers a variety of third-party services that include maintenance, repair, and chartering services to its clients, the biggest being Continental Airlines. 

The company has been recording net losses and falling revenues since 2007 as corporate clients shun expensive, private flying and rocketing fuel costs. During the first quarter of 2010 earnings release, the company stressed liquidity and capital resources as a major concern, but confirmed that their current state of conditions were sufficient to pull the company through the rest of the year, thanks to a timely tax refund of $16.5M in March and $5M in auction rate securities offered in April combined with projected annual cash flows. The company stressed the need for a capital restructuring plan that could sustain profitability and provide the company with a sound financial foundation.

The Green Light Plan, developed in coordination with ExpressJet’s management, board of directors, advisors that include Goldman Sachs and Co. and Seabury Securities LLC., an investment banking and consulting firm, is expected to deliver $40 million in run-rate savings by 2012."The first phase of the Plan focuses on initiatives that will stem the losses ExpressJet incurred in the recent quarters”, said Thomas Hanley, chief executive officer at ExpressJet. He added that the second phase of the plan will focus on a competitive cost structure and a stronger balance sheet to support growth and new, profitable opportunities which will include a competitive review of all salaries and benefits.

The key developments of the initial phase of the plan include:

  • Reducing corporate overhead, including implementation of a hiring freeze for all current management openings;
  • Increasing the Company's focus on "safety at work" to reduce worker's compensation claims and lower restricted cash requirements;
  • Collecting revenue-related amounts currently owed under third-party contracts;
  • Improving crew planning procedures to increase productivity and lower related travel expenses;
  • Increasing maintenance productivity while lowering vendor costs.

ExpressJet will provide an overview of its Operation: Green Light at the 2010 Bank of America Merrill Lynch Global Transportation Conference on June 16, 2010 at 8:45 am Eastern. A detailed presentation of the plan, as well as a webcast of remarks will be available on the company’s website.


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