SkyWest sell ExpressJet Airlines to United

Lauren Eldershaw
By Lauren Eldershaw December 19, 2018 09:39

SkyWest sell ExpressJet Airlines to United

SkyWest has sold ExpressJet Airlines to United Airlines joint venture ManaAir. The transaction is expected to close in early 2019, subject to customary closing conditions.

The deal was settled for approximately $70 million in cash for the majority of the assets and the assumption of liabilities of ExpressJet, subject to a working capital adjustment. The ExpressJet assets excluded from the transaction will be utilised or liquidated by SkyWest. The expected realizable value to SkyWest of the remaining inventory is estimated to approximate the value of the working capital adjustment. SkyWest will retain ownership of the CRJ aircraft currently in service at ExpressJet.

The transaction also includes certain protections around existing SkyWest Airlines flying, as well as priority position to add 25 new dual-cabin aircraft with United should those opportunities arise. As part of the transaction, SkyWest has also agreed to lease 20 CRJ200s to ExpressJet for up to five years.

“Today’s announcement provides further clarity and focus for the future,” said Chip Childs, SkyWest, President and Chief Executive Officer. “We want to thank the employees of ExpressJet for their valued contributions and we look forward to continuing to strengthen our partnership with United.”

Analysts have welcomed the more. Cowen & Company states that the sale removes a “significant overhang for SkyWest as ExpressJet has been a drag on profitability for since the acquisition”, adding that United will now have an in-house regional airline “which allows for more control of their regional traffic”. Overall, the company views the transaction as neutral for United shares and positive for SkyWest shares.

Meanwhile, the M&A Activity continues in the aviation sector, with an announcement from The Carlyle Group that is has agreed to acquire aircraft engine MRO provider, StandardAero, from Veritas Capital. The transaction is subject to customary regulatory conditions and is expected to close by the end of the first quarter of 2019. Financial terms were not disclosed.

Russell Ford, CEO of StandardAero, said, “We are excited to partner with The Carlyle Group, and we thank Veritas Capital for its support and partnership. We look forward to working with Carlyle to further our aggressive growth trajectory as we continue providing world-class services to our customers as one of the world’s best and largest independent MRO service providers.”

Adam J. Palmer, Managing Director and Global Head of Aerospace, Defense and Government Services for The Carlyle Group, said, “Russell Ford and the StandardAero team have built a reputation for industry-leading capabilities and customer service. StandardAero is well positioned in an attractive market and we look forward to building on its strong foundation by helping it grow and meet evolving customer needs.”

Ramzi Musallam, CEO and Managing Partner of Veritas Capital, said, “We have enjoyed our successful partnership with StandardAero. Russ and the StandardAero team have generated robust growth while consistently delivering outstanding services to customers through a relentless commitment to excellence. The StandardAero partnership underscores Veritas’ commitment to growing and adding lasting value to businesses in the aerospace and defense industries. We wish the StandardAero management team all the best in their next phase of growth.”

Founded in 1911, StandardAero offers extensive MRO services and custom solutions for commercial aviation, business aviation, military and industrial power customers.

Equity for the investment will come from Carlyle Partners VII, an $18.5 billion fund that focuses on buyout transactions in the United States.

Credit Suisse, RBC Capital Markets and Macquarie Capital served as financial advisors to Carlyle, and Latham & Watkins served as legal advisor. Credit Suisse, Goldman Sachs Merchant Banking Division, RBC Capital Markets, Macquarie Capital, Barclays, Jefferies, Nomura Securities and Goldman Sachs have agreed to provide debt financing for the transaction. Goldman Sachs served as lead financial advisor to StandardAero, and Morgan Stanley also acted as a financial advisor on the transaction, and Skadden, Arps, Slate, Meagher & Flom served as legal advisor.

Lauren Eldershaw
By Lauren Eldershaw December 19, 2018 09:39