ExpressJet (XJT)

[~6979~]

Im just gonna sit back and watch this baby fly tommorow.
Maybe even gap up huge.To the shorters reading this...weeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeee

[downsideup]

Not Shareholders Problem

It is NOT directly the shareholders problem or responsibility that the market for auction rate securities is not fully functional... THAT is an issue of market function and liquidity that was and is a risk taken and borne by those who bought those securities rather than common shares.

I do not see how or why it is clearly in the common shareholders interest to seek to extricate holders of illiquid notes from the problems they face with the lack of market liquidity now inherent in the debt market, or why common shareholders should tolerate without comment or action the threatened massive dilution at vastly disproportionate rates relative to the artificially inflated claims re the market value of any such illiquid notes vs. the apparently manipulated value of a highly liquid common share ?

Layer in overlapping concerns with market manipulation in the value of securities, with singular beneficiaries being clearly apparent... and it seems it may be unwise to consider proceeding with any offer to exchange until the issues have been fully considered, if not adjudicated, or until such time as questions related to the market issues, whether of manipulation of share prices, or the market liquidity and value of notes, have been resolved ?

What am I missing ?

Why would seeking to continue this offering, or seeking to alter the period in which it is or will be conducted, without a period of delay, at least, be clearly in the shareholders interest ?

[downsideup]

And these were posted first on Yahoo:

Shareholder Interests

(i) there shall ("not", -ed.) have been instituted, threatened or be pending any action or proceeding before or by any court, governmental, regulatory or administrative agency or instrumentality, or by any other person, in connection with the Offer to Exchange, that is, or is reasonably likely to be, in the reasonable judgment of the Company, materially adverse to the business, operations, properties, condition (financial or otherwise), assets, liabilities or prospects of the Company, or that would or might, in the reasonable judgment of the Company, prohibit, prevent, restrict or delay consummation of the Offer to Exchange;

Given the known circumstances, it seems reasonable to me that shareholders might be successful in obtaining, were they to pursue legal action seeking it, an injunction prohibiting, preventing, restricting or delaying consummation of the Offer to Exchange;

JMHO, IANAL, IANAIA, etc.

[downsideup]

I've cross posted mine posted here over to Yahoo, in series, with minor modifications.

[downsideup]

Another "general condition" not met ?

(vi) there shall have occurred (1) any general suspension of, or limitation on prices for, trading in securities in U.S. securities or financial markets, (2) a material impairment in the trading market for debt securities...

It seems to me that the notes we are discussing converting to shares are auction rate securities ? Is anyone sane willing to claim and argue that there is NOT a problem in the market for auction rate securities ? Why couldn't the company, with less debt than any other airline, simply issue MORE auction rate securities and use the proceeds of those notes, together with cash in hand, to pay off the existing note holders in some combination of cash from new securities, cash from cash on hand, and shares issued... ??? Maybe, because there is "a material impairment in the trading market for debt securities"?

Let's see...

We have an extant threat to the primary business of the company, which apparently was developed under suspicious circumstances and timing ?

We have an apparent irregularity in trading in the company stock which suggests there may be an effort to defraud shareholders of the value of their holdings by artificially lowering the basis on which an exchange for debt would occur ?

And, we have an instance of an illiquid issue of auction rate securities, which would be exchanged for a disproportionate number of highly liquid common shares... in a debt market with "a material impairment in the trading market for debt securities"... that prevent the company from issuing new debt instruments, in spite of its relatively beneficial financial position ?

There is NO WAY they can really consider that the "general conditions" for this offering can be well met...

[~6979~]

exactly...

[RonnieD]

Fundamentals look sound enough to avoid bankruptcy with ease.
Makes me wonder who put out the bk scare.. THE SHORTS !!

good pick going into tomorrow with these PR's.. and Monday.
Nice to see the company pressuring the NYSE specialist for XJT.
I like your chances for rebound on fundamentals and short covering.

[~6979~]

TWO HUGE PR's
Like 90% of everything that I was worrying about has now disapeared.

[~6979~]

I was feeling stupid for not selling a single share.This time patience is about to pay off...

[~6979~]

GAP Tommorow!!!!!!!!!!!!!!!

[~6979~]

SEC will scare shorters from here on out with XJT!Big shorters picking on the airlinhes...
We'll have some real transparency now.What a way for the company to PR the retaliation.

XJT may have just found a way to bounce off this trendline in the right direction after all...glad I held.
Reading this as meaning we'll have a fair market for the next few weeks.

[3dcg]

Mexican Transport Ministry Lifts Suspension On ExpressJet


DOW JONES NEWSWIRES

MEXICO CITY (Dow Jones)--Houston-based airline ExpressJet (XJT), which provides service in Mexico to Continental Express and Delta Connection, has been given the green light by authorities to continue operating in Mexican airspace, the Communications and Transport Ministry, or SCT, said Thursday.

The SCT said Wednesday in a press release that it had suspended the operations of ExpressJet and Mexican low-cost carrier Aerocalifornia for not paying fees for using Mexican airspace.

The airlines were given a 24-hour grace period, starting Wednesday, to pay the fees, or else the suspensions would take effect.

The ministry said Thursday that ExpressJet was cleared to continue flying after the airline paid 52.5 million pesos ($5.2 million), including monthly fees dating back to 2006 and penalties for late payment.

Aerocalifornia, on the other hand, had its operations suspended starting at 2:00 p.m. local time (1900 GMT), for not paying MXN259.6 million in fees dating back to 2005, the ministry said.

The SCT urged other airlines to offer extra flights so Aerocalifornia's passengers aren't affected by the suspension.

An Aerocalifornia official who wasn't authorized to speak on the record said the company is addressing the issue and expects to resume flying "in a very short time."

[Ogclip ©]

Very interesting..

[~6979~]

YAH!!!!!!!!!!!!!!!!!!!!!!

[downsideup]

Well, there's another "general condition" met...

If they choose to proceed with this offer I will be shocked...

And if they do, I will investigate seeking legal redress...

[learner1156]

NEWS

ExpressJet Requests Review of Unusual Trading Activity


Last update: 5:16 p.m. EDT July 24, 2008
HOUSTON, July 24, 2008 /PRNewswire-FirstCall via COMTEX/ -- ExpressJet Holdings, Inc. (XJT:expressjet holdings inc cl a
News, chart, profile, more
Last: 0.35-0.04-10.18%

3:59pm 07/24/2008


XJT 0.35, -0.04, -10.2%) announced today that in light of unusual trading activity in its common stock shortly before the close of the market yesterday, the company contacted NYSE Regulation, Inc. ("NYSER") to request an immediate review as to whether its stock has been the subject of illegal manipulation, including short selling, and followed-up with an investigative request to the Securities and Exchange Commission. The NYSER agreed to conduct a review of this matter and the company intends to fully cooperate with any investigation as it believes such action is prudent to represent the best interests of all security holders in ExpressJet.
SOURCE ExpressJet Holdings, Inc.
http://www.expressjet.com/

Copyright (C) 2008 PR Newswire. All rights reserved

[downsideup]

On the offer to buy back the notes... whether for shares or cash.

The way I'm reading it... the company has met the requirements they have in doing what they've done thus far in floating the offer to buy back the notes, and they COULD, given the right reasons under the necessary "general conditions", simply choose to pull the plug on the offer and do it again later... or not.

If, for instance, you properly interpret the actions of officials in Mexico that are threatening to end the company right to conduct business there... as meaningful to the future of the business... that would fulfill the conditions necessary under "general conditions" for the company to choose to end the offer to buy the notes.

If, given that threat to the business, and its obvious impact on the stock price, the management DON'T take that step, or otherwise fail to act to meet their fiduciary responsibilities to protect shareholders interests, given that circumstance, then shareholders SHOULD sue NOW to prevent the fraudulent transfer of company ownership to note holders that WOULD result now from conducting the conversion of debt to shares under that cloud. The MARKET certainly thought it was a real issue. Real enough, at least, to rather dramatically alter the value of a share. The cloud on the business is largely outside of the control of XJT's management... the problem that exists is and has been CAL's responsibility, after all... but it is XJT's business that is being held at risk RIGHT NOW. And it is shareholders ownership interest that is or will be fraudulently removed from them IF the offering proceeds now while that threat is extant in the market, while using the impact of that still extant threat to redefine the value that will be transferred, defining how much of MY OWNERSHIP the company note holders will take from me in converting debt to shares.

That we are talking about it here... might be taken to be evidence that there is an undefined and realistic legal risk in proceeding with the offering...

Baring comment from the company, I expect shareholders will be contacting the lawyers tomorrow...

[~6979~]

Earnings next wednesday...a perfect time to straighten things out publicly with good news.I wouldnt mind being bought out right now especially with airlines so cheap and consolidating...all that money coming out of big oil ultimately making it easier for the airlines.IMO, this is the best conditions for an airline consolidation,our chances are great.Is there an airline with less debt that would make a better candidate than ~XJT~
wonder where the share price would be then...

[downsideup]

I'm not thinking there is reason to be too worried about a decision to hold, here. The news of the day and the reactions to it both seem fully contrived.

The thing I'm going to focus on now is still the market contest... but at this point seem it is good mostly for the entertainment value. I could be wrong, but it looks to me like the can filled with trading opportunities based on volatility may already have been kicked down the road. If holding long and worried, all you have to do now is try to ignore prices below $0.40 and just wait it out until next Wednesday to see what happens then ?

The market contest for conversion price / dilution limits / control is a driver of volatility... but it is not an honest market function based on real differences in company valuation.
The fight is being deliberately staged at a price level from which all results will tend to be good results. At some point, the issue with debt conversion and dilution will be resolved, one way or the other, and at that point the interests aligned in opposition now will again find far more common interest in having shares reflect their intrinsic value, when variation in the common share price isn't determining who will get what from a particular security.

[fenian32]

Pull the plug on what ??

[~6979~]

Its hard for me to hold.I am holding though.Just wish I couldve got more shares...a +20% profit turned into a +30% loss in one day.

We need a fierce drop in oil to make shorters finally cover.There is major resistance at these levels. Were going against the tide here but I knew that coming aboard.One thing I do know is that there was serious front loading before the first news.And major selling before yesterdays news.Guess thats how Ill be able to tell when a PR is about to comes out. LOL

[downsideup]

Actually, XJT is trading in line with most of the other airlines today... right dead center in the middle of the pack, in fact.

The deviation from the market occurred yesterday, on the news of the Mexican problems. By my reading, that event alone would allow the company to pull the plug on the offer. Also, a shareholder lawsuit that addressed the ability to complete the exchange would empower the company to pull the plug...

Given the level of manipulation going on, I would EXPECT the company would either pull the plug themselves, or should expect a shareholder lawsuit trying to force them to pull the plug... which could require them to pull the plug... and would enable them to do so if they wanted to. Not clear what would happen if they did pull the plug... but, given where in the market we are, I wouldn't expect doing that would hurt shareholders... but shorts and note holders would likely get whacked hard... even if the company were to pull the plug today... and then announce tomorrow that it is all back on, only with a one week delay... etc. Read the terms, and you see the company has a lot of ability to play games... which I don't see them doing, yet...

[TikiGal]

It's being driven down on purpose and it's really sad. IMO!

Awlful amount of selling today and my question is whose doing it?

[downsideup]

Conditions of the Offer to Exchange are on page 22 and 23 of the circular:

http://www.sec.gov/Archives/edgar/data/1144331/000119312508145970/dex99a1a.htm

Conditions of the Offer to Exchange

Notwithstanding any other provision of the Offer to Exchange, the Company will not be required to accept for purchase, or to pay for, Notes tendered pursuant to the Offer to Exchange and may terminate, extend or amend the Offer to Exchange and may (subject to Rule 14e-1 of the General Rules and Regulations under the Exchange Act, which requires that an offeror pay the consideration offered or return the securities deposited by or on behalf of the Holders thereof promptly after the termination or withdrawal of the offer) postpone the acceptance for purchase of, and payment for, Notes so tendered if, on or prior to the Expiration Date, any of the General Conditions shall not have been satisfied.

For purposes of the foregoing provision, all the “General Conditions” shall be deemed to be satisfied on the Expiration Date, unless any of the following conditions shall occur on or after the date of this Offer to Exchange and prior to 5:00 P.M., New York City time, on the Expiration Date:

(i) there shall have been instituted, threatened or be pending any action or proceeding before or by any court, governmental, regulatory or administrative agency or instrumentality, or by any other person, in connection with the Offer to Exchange, that is, or is reasonably likely to be, in the reasonable judgment of the Company, materially adverse to the business, operations, properties, condition (financial or otherwise), assets, liabilities or prospects of the Company, or that would or might, in the reasonable judgment of the Company, prohibit, prevent, restrict or delay consummation of the Offer to Exchange;

(ii) there shall have occurred any development that would, in the reasonable judgment of the Company, materially adversely affect the business of the Company;

(iii) an order, statute, rule, regulation, executive order, stay, decree, judgment or injunction shall have been proposed, enacted, entered, issued, promulgated, enforced or deemed applicable by any court or governmental, regulatory or administrative agency or instrumentality that, in the reasonable judgment of the Company, would or might prohibit, prevent, restrict or delay consummation of the Offer to Exchange, or that is, or is reasonably likely to be, materially adverse to the business, operations, properties, condition (financial or otherwise), assets, liabilities or prospects of the Company;

(iv) there shall have occurred or be likely to occur any event affecting the business or financial affairs of the Company, that, in the reasonable judgment of the Company, would or might prohibit, prevent, restrict or delay consummation of the Offer to Exchange;

(v) the Trustee shall have objected in any respect to or taken any action that could, in the reasonable judgment of the Company, adversely affect the consummation of the Offer to Exchange, or shall have taken



22

any action that challenges the validity or effectiveness of the procedures used by the Company in the making of the Offer to Exchange or the acceptance of, or payment for, the Notes; or

(vi) there shall have occurred (1) any general suspension of, or limitation on prices for, trading in securities in U.S. securities or financial markets, (2) a material impairment in the trading market for debt securities, (3) a declaration of a banking moratorium or any suspension of payments in respect to banks in the United States, (4) any limitation (whether or not mandatory) by any government or governmental, administrative or regulatory authority or agency, domestic or foreign, or other event that, in the reasonable judgment of the Company, might affect the extension of credit by banks or other lending institutions, (5) a commencement of a war or armed hostilities or other national or international calamity directly or indirectly involving the United States, or (6) in the case of any of the foregoing existing on the date hereof, a material acceleration or worsening thereof.

The conditions to the Offer to Exchange are for the sole benefit of the Company and may be asserted by the Company in its reasonable discretion regardless of the circumstances giving rise to such conditions or may be waived by the Company, in whole or in part, in its reasonable discretion, whether or not any other condition of the Offer to Exchange also is waived. The Company has not made a decision as to what circumstances would lead it to waive any such condition, and any such waiver would depend on circumstances prevailing at the time of such waiver. Any determination by the Company concerning the events described in this section shall be final and binding upon all persons.

Although the Company has no present plans or arrangements to do so, the Company reserves the right to amend, at any time, the terms of the Offer to Exchange. The Company will give Holders notice of such amendments as may be required by applicable law.

Expiration Date; Extension; Amendment; Termination

The Offer to Exchange will expire at 5:00 P.M., New York City time, on July 31, 2008, unless extended by the Company. The Company expressly reserves the right to extend the Offer to Exchange on a daily basis or for such period or periods as it may determine in its sole discretion from time to time by giving oral (confirmed in writing) or written notice to the Paying Agent and by making a public announcement by press release prior to 9:00 A.M., New York City time, on the next business day following the previously scheduled Expiration Date. During any extension of the Offer to Exchange, all Notes previously tendered and not accepted for exchange will remain subject to the Offer to Exchange and may, subject to the terms and conditions of the Offer to Exchange, be accepted for exchange by the Company.

To the extent it is legally permitted to do so, the Company expressly reserves the absolute right, in its sole discretion, to (i) waive any condition to the Offer to Exchange, (ii) amend any of the terms of the Offer to Exchange and (iii) modify the consideration offered hereby. Any waiver or amendment to the Offer to Exchange will apply to all Notes tendered, regardless of when or in what order such Notes were tendered. If the Company makes a material change in the terms of the Offer to Exchange or if it waives a material condition of the Offer to Exchange, the Company may disseminate additional Offer to Exchange materials and may extend the Offer to Exchange, in each case to the extent required or permitted by law. See “—Withdrawal of Tenders; Absence of Appraisal Rights.”

The Company expressly reserves the right, in its sole discretion, to terminate the Offer to Exchange if the satisfaction of the General Conditions set forth above under “—Conditions of the Offer to Exchange” shall not have occurred. Any such termination will be followed promptly by public announcement thereof. In the event the Company shall terminate the Offer to Exchange, it shall give immediate notice thereof to the Paying Agent, and all Notes theretofore tendered and not accepted for exchange will be returned promptly to the tendering Holders thereof. In the event that the Offer to Exchange is withdrawn or otherwise not completed, the consideration will not be paid or become payable to Holders of the Notes who have validly tendered their Notes in connection with



23

[downsideup]

It seems to me that what happened in XJT trading yesterday and the day before was "only" normal market action... for the period of the five days, the controls keeping share prices down were taken off...

The result was XJT performance in line with the market, which had XJT performing in line with airline stocks yesterday... right up until the impact of the Mexican news... which took it off the "in line" performance which would have had it close around $0.53.

That leaves a huge open question, in my mind, about the sources of the Mexican news, the drivers of it, etc. It seems a clear case of an effort to drive the share price down... posing a bit of "potential" news re CAL having a fee dispute with Mexico as if it were a done deal that was a critical threat to XJTs survival.

I will be shocked if lawsuits don't result... and if there ARE lawsuits... or even legitimate THREATS of shareholder or other lawsuits... you need to read the terms that govern the conduct of the company effort in conducting the tender offer...

Otherwise, the longer the clock ticks on averaging the price over 5 days, the more incentive there is for the company to drive the price DOWN... and the more incentive there is for the note holders to drive the share price UP... but, I expect it is easier to move the stock down with the market than up and against it, at least today ????

[~6979~]

I agree with what you said about the market shifting gears although I wouldnt go as far to say that the battle is over. Question I ask is...how much longer?
They can make the shorts pay if they want...do they?I expect nothing less that an attempt at one dollar.

This is definitely the ground where the winner will be exposed
in terms of the bulls vs. bears...

[downsideup]

We've already had that news... Ogclip posted it on Yahoo. The Mexican issue is a dispute with the government on what is owed, and whatever it is owing, is owed by CAL. XJT and CAL put out a joint statement saying they'll pay it in cash before it is due if that becomes necessary... apparently it isn't even DUE yet... which makes the news all the more questionable in its timing ?

If we don't see any upmove in the next few minutes, designed to have it CLOSE higher, I expect it will mean that that market contest has shifted gears... and that the company will then do what it takes, perhaps including coordinated dilution fostered through share distribution agreements with their financial advisers, to keep the 5 day average prices below $0.40 instead of trying to run it up.

Still expect we may see a quick run up before the close... expecting that the note holders will try to force the average price up...

I am at a disadvantage here not knowing who was doing what yesterday. Possible it was run up with covering only in order to profit from new short positions on the way back down... and the winner in the market power contest will likely be the one making the most profits on the "trades" the last two days... which will allow recycling the $ into buying/selling power as necessary over the next three days... to either have it close below $0.40... or much higher? Only the noteholders benefit from a low price that is above $0.40.

My own take on the market action, thus far, is that if the company does intend to use the numbers generated in th emarket yesterday in the computation, there ought to be shareholder lawsuits seeking to prevent that choice... The company has all they need to pull the plug on the current effort... and probably should do that, given the various questionable elements related to non-market elements impacting the market.

[clairmontasap]

I'm red, but I don't think it will last. The vol that was there yesterday just disappeared yesterday late. I assume we'll see a bounce here before too long.

[~6979~]

I agree.Wonder what the shorts would do if management comes out with a PR that the Mexico fees are paid in cash? Or if we get a PR stating the Mexico fees are not even ~XJT~'s responsibility?
Heres a link to my analysis and chart.Your welcome to my board.
http://investorshub.advfn.com/boards/read_msg.aspx?message_id=30950759

[TikiGal]

I have the velocity& Forces up and running. If I start seeing more buys than sells I may add more. Right now is the first time today that it's showing more buys than sells.

[clairmontasap]

Looks like the bottom just dropped out of it. Would be nice to see a PR on Mexico to get some confidence back in people's trigger fingers.

[TikiGal]

Yikes what the heck happen here? They diluting? I am showing more sells then buys today.

[downsideup]

Looks like there is still interest in having it not go down below $0.40. Something like a quarter million on the bid between $0.38 and $0.40 at least makes a statement.

[downsideup]

Seems to me the market objectives of the note holders are being fully met. They took it up on Monday enough to bias the average share price up above the $0.40 minimum. Yesterday it closed at $0.43. If it just sits here around $0.40 for the next few days, they'll get maximum dilution.

The company interest is best served by either pulling the plug on the effort based on the news, which was about a dispute that is actually outside their control, or driving prices DOWN to drop the average price below $0.40, or taking it much higher to try and log CLOSING prices that bring the average up in a meaningful way. Yesterday, assuming the company does want the share price higher, they were sandbagged with the news from Mexico... which controlled the closing price. Perhaps today, if the company is seeking higher prices, we will see the move timed to have maximum impact AT the close ?

[Ogclip ©]

Yeah. It would be nice if ExpressJet put out a formal press release regarding that matter.

We've been making a steady climb all morning so far, and I think once the charts get back on track we'll climb faster.. I'm watching the 15 minute chart, and its making a nice turn around.. Once it swings up the price should reflect it..

Slow and steady..

[downsideup]

Market isn't being kind to airlines today... with XJT and GOL being the only ones I see that are up at all. Perhaps XJT will run again on a good day for airlines stocks. Odd that Yahoo doesn't have any of the Mexico news, or its rebuttal in their "news" column ? Clearly it had the intended impact...

[Ogclip ©]

+10%.. Good start.. Once the charts recover we should continue to push..

[Ogclip ©]

Gapping up Pre-market.. Looks like the Rebuttal news will fare well for us.

[DTS2468]

Why the spike in volume yesterday?

[Ogclip ©]

Sweet! Whoever it was that dumped those 400K shares at the eod may be pissed..

This should help to get us back to where we were in the AM yesterday..

[3dcg]

July 23, 2008, 10:41PM
Continental says tax dispute on the mend
Mexico had threatened to halt about 70 flights


By BILL HENSEL JR.
Copyright 2008 Houston Chronicle

Continental Airlines said it expects to resolve a tax dispute this morning with the Mexican government, which is threatening to suspend about 70 Continental Express flights.

The dispute is over a $4.5 million tax bill the Mexican government says ExpressJet, which flies to Mexico for Continental under the Continental Express brand using regional jets, has failed to pay.

Houston-based Continental Airlines and ExpressJet issued a joint statement late Wednesday saying operations should not be affected by the international conflict.

"If necessary to ensure no operational impact, the disputed tax liability will be paid at the start of business on Thursday, July 24, and prior to any payment or suspension deadline," they said.

The bigger airline's mainline operations to Mexico are not involved, they said.


Back to 2006?
The carriers called the possible suspension of service a "disagreement" with Mexico's Department of Communications and Transportation.

The department said in a prepared statement issued Wednesday that the unpaid taxes involving ExpressJet date back to 2006.

The department said it recognized that it is a difficult time for airlines because of increasing fuel costs, but it is not permissible for some airlines to fail to meet their tax obligations while most others do.


40-year relationship
Continental noted that its 40-year relationship with the Mexican government has produced a system of more than 30 routes and almost 600 flights a week.

The vast majority of those routes are flown by Continental Express.

ExpressJet also flies to Mexico on behalf of Delta Air Lines as a Delta Connection carrier, and those flights are not expected to be affected, either, the statement said.

Cities where ExpressJet flies for Continental from Houston include Querétaro, a manufacturing center with many businesses dedicated to serving the automobile industry, and Loreto, which is on Mexico's Baja California Peninsula and is an ecotourism destination.

Continental and ExpressJet recently entered into a new seven-year deal.

[e-mail]

[Dual]

Just a heads up they are at risk for getting delisted.

http://www.forbes.com/feeds/ap/2008/07/23/ap5247061.html

[novicetrader]

Got this from Yahoo.Looks like some clarification has been issued by Expressjet.
http://ap.google.com/article/ALeqM5jJles...
...In a news statement, Houston-based ExpressJet said the grounding was a "misunderstanding" and that if necessary it would pay US$4.5 million by early Thursday to avoid any flight cancellations.

[downsideup]

Just sent...

[e-mail]

Paul -

I noted a couple of items in your piece today that caused me considerable wonder.

First, in housekeeping, it seems you did not include a dollar denominated number for the American carrier, ExpressJet, for the amount claimed as owed to the Mexican authorities, but you did include a dollar denominated number for the Mexican airline?

Second, I note there apparently was not an attempt to contact the company for comment, or at least no disclaimer about whether or not they had been contacted, or an attempt had been made ?

Third, you quote: "In this difficult situation for commercial aviation due to increasing jet fuel costs, it's the authorities' duty to take care that airlines compete in equal circumstances," the SCT said. "It's not permissible that while the vast majority of airlines comply with all their payment obligations, some companies do not." I do find the authorities' reference to competitiveness based on fuel costs simply astounding. Since when do the Mexican authorities know, and care deeply about, the competitive inequalities that may be resulting from changing fuel costs, and use that as a basis, not for any public effort in collections on back taxes, but, without notice, to suspend the operations of the carrier ? I'm sure it is purely coincidental that Continental, recently involved both in an effort to take over XJT, and in contract negotiations with them, had a problem with their contracted responsibility to cover fuel costs under prior XJT contracts... a fact that will be made all the more interesting, if in fact, as seems likely, Continental was contractually obligated to make these tax and user fee payments ? My own brief review of the issue shows that the airspace that XJT used in their flights of Continental aircraft into Mexico was likely a use undertaken on flights directly contracted by and flown for either Continental or United, which are likely responsible for the payments of "other taxes" due to Mexico for their operations performed under contract by XJT ?

Finally, whoever is responsible for making the Mexican tax and fee payments for Continental and United's contracted flights, I note it seems an unlikely coincidence that after some years of non-payment, the Mexican authorities would randomly choose today to make this news. Certainly it is sheerly coincidence that this happened during a critical period in which XJT share prices are a subject of a market contest, while being tracked to determine the exchange ratio that will apply in conversion of convertible notes into XJT shares ?

I trust that Dow Jones, having broken the story, will have a disproportionate interest in ensuring all aspects of the story are covered correctly, and presented with a proper element of context to enable readers to fully understand the situation and the news? It appears to me that the coverage undertaken thus far barely begins to address what it seems is happening in Mexico, much less how it relates to what it seems is happening in this market contest ?

[downsideup]

Another look: in the bit from Dow Jones it says the issue is "since 2006" and it is about "pending payment of outstanding fees for use of Mexican airspace" which should allow me to narrow my focus a bit. XJT wasn't allowed to fly branded to the same destinations as CAL... and I don't think they flew branded into Mexico ? Has to be CAL and UAUA... but will need ot check each separately ?

Looks to me like the "other taxes" in the CAL agreements section covers this, with CAL being on the hook... but some Ya-hoo in the government down there didn't bother to check and see that XJT isn't operating as a separate airline when they are flying CAL's jets on CAL's routes ??? ...or they just didn't care... which still makes it CAL's problem. Or, someone slipped them some $$$ to make a mistake, right now...

This will pretty obviously make the math done for computing the share price wholly unreliable... which, it seems to me, under the terms outlined in the policy on the notes, is sufficient grounds for XJT to simply pull the plug on the entire deal... or change it however they want to... including changing the dates to be used in computation, or the dates during which the offer will remain open. They could unilaterally make the same decision based on market instability recently, or on the war jitters re Iran, IF they wanted to. JHMO...

Should be interesting to see what comes next...

[3dcg]

thanks. Interesting stuff.

I wonder if .40 is the line in the sand again. Sure was blown away with volume. Need to maintain the pps appreciation next go-around :)

[downsideup]

What that says to me is both that the taxes and landing fees were CAL's responsibility, and that they were fully covered and to be fully reconciled under the terms of the agreement.

What that means to me: If these costs were fully reconciled between CAL and XJT with the understanding XJT made the payments... then XJT is on the hook. If, instead, as seems to be the purpose and intent of the agreement, they were reconciled AS IF paid by CAL, but they were not... then CAL is on the hook for the $... AND for the liability related to the issue, in spite of mutual indemnifications... particularly if CAL failed to make payments on purpose in order to facilitate just this sort of maneuver...

IF these terms were altered in subsequent agreements... that might change things...

I'll keep looking...

[downsideup]

Below is a link to the offering document back from 2002, which outlines the terms of the capacity purchase agreement with CAL.
The relevant parts are on page 48 and 58. These terms could have changed some in 2004, or later, but at least at the start the operative language seems pretty clear. These are costs covered by CAL, or directly adjusted for in the guaranteed operating returns:

on page 48:

- in addition to providing that specified costs, including fuel costs, costs associated with fluctuations in pilot training volumes, aircraft rentals, airport rent and landing fees, will be reconciled for differences between actual costs and expected costs, our capacity purchase agreement provides a floor on our operating margin if specified future costs exceed our expectations; and

Also, on page 58

Reconciliation payment, including 10%
margin, to the full extent our actual costs
differ from estimated costs.

FULLY-RECONCILED COSTS:
- Fuel
- Aircraft rent
- Terminal facility rent
- On-time bonuses, profit-sharing and
401(k) company match under current
plans
- Taxes (other than income taxes)
- Passenger liability insurance
- Hull insurance
- War risk insurance
- Landing fees
- Administrative services provided by
Continental Airlines
- Ground handling services provided by
Continental Airlines
- Third party security and screening
expenses
- Substantially all regional jet engine
expenses under current long-term
third-party contracts
- Depreciation and amortization
- Pilot training volumes

Here's the link, along with a cut and paste of the above from page 48 in proper context:
http://www.sec.gov/Archives/edgar/data/1144331/000095012902001993/h93526b4e424b4.txt


OUR CAPACITY PURCHASE AGREEMENT

We currently derive all of our revenue under a capacity purchase agreement with Continental Airlines. Under this agreement, we operate flights on behalf of Continental Airlines, which controls and is responsible for scheduling, pricing and seat inventories and is entitled to all revenue associated with the operation of the aircraft. Under the agreement, we are entitled to receive a payment for each scheduled block hour calculated

48
<PAGE>

using a formula that will remain in place through December 31, 2004. The formula is designed to provide us with an operating margin of approximately 10% before taking into account variations in some costs and expenses that are generally
controllable by us. Under the formula, a substantial portion of our costs, including those relating to fuel, aircraft ownership and financing, substantially all regional jet engine maintenance, passenger-related facility rent, administrative fees and ground handling expenses paid to Continental
Airlines, but not including most labor, other maintenance or general administrative costs, are reconciled for differences between our actual costs and the expected costs included in our block hour rates, and our payments from Continental Airlines are adjusted to reflect these actual costs plus a 10%
margin. In addition, a reconciliation payment is made by Continental Airlines to us or by us to Continental Airlines, as applicable, if the operating margin calculated as described below in any fiscal quarter is not between 8.5% and
11.5%. As a result, if this operating margin exceeds 11.5%, then a reconciliation payment will be made by us to Continental Airlines in an amount sufficient to reduce it to 11.5%. If it is less than 8.5%, then a reconciliation payment will be made by Continental Airlines to us in an amount sufficient to
raise the margin to 8.5%. For purposes of calculating this operating margin, we do not take into account unanticipated changes in most of our labor costs, any performance incentive payments, controllable cancellations (including all
cancellations other than weather or air traffic control cancellations), litigation costs and other costs that are not included in our block hour rates (or covered by any adjustments to them) and are not reasonable and customary in the industry. If these excluded costs are higher than those anticipated in our block hour rates, then our operating margin, taking these costs into effect, could be lower than 8.5% even after any reconciliation payment is made. On the other hand, if these costs are lower than those anticipated in our block hour
rates, then our operating margin, taking these costs into effect, could be higher than 11.5% even after any reconciliation payment is made. For a discussion of our capacity purchase agreement with Continental Airlines, please
read "Business -- Our Capacity Purchase Agreement with Continental Airlines."

We believe the capacity purchase business model (in which a major airline buys the capacity of aircraft operated by a regional airline at fixed rates) is preferable to a revenue-sharing model (in which a regional carrier and a major
airline share the revenue from passengers who connect between the two carriers).

We believe the benefits to regional airlines of the capacity purchase model over the revenue-sharing model include:

- the major carrier typically assumes the risk of revenue volatility associated with fares and passenger traffic on each operated flight, allowing the regional airline to focus on executing its flight operations;

- the major carrier often assumes price volatility for specified expense items such as fuel; and

- the major carrier assumes the cost of all distribution and revenue-related expenses, such as commissions, central reservation system fees and advertising.

We believe that, as a result of the benefits they provide, the trend in the industry for publicly owned regional carriers is toward using capacity purchase rather than revenue-sharing arrangements.

We believe that our capacity purchase agreement with Continental Airlines can be differentiated from the capacity purchase arrangements of one or more of our principal competitors by, among other things, the following several
provisions that reduce our financial risk:

- Continental Airlines has substantially assumed the risk of weather and air traffic control cancellations;

- the formula used to compute the rates for each scheduled block hour that we receive from Continental Airlines has been determined through December 31, 2004;

- in addition to providing that specified costs, including fuel costs, costs associated with fluctuations in pilot training volumes, aircraft rentals, airport rent and landing fees, will be reconciled for differences between actual costs and expected costs, our capacity purchase agreement provides a floor on our operating margin if specified future costs exceed our expectations; and...etc.,

[Ragincajun]

Scare tatics....

From delisting to Mexican pesos. That's the reason I have about given up on trading. There is no accountability or regulation of the "real" markets any more. It's the wild, wild, west out there! That's alright, this pup will be over $2 bucks before long.

[3dcg]

maybe the Mexican government is unhappy that they are terminating service?

http://www.airlineinfo.com/ostpdf70/836.pdf