*Regional carriers' competition heating up

*Shares ended up 2 cents

NEW YORK- The contract with UAL Corp's United Airlines could boost ExpressJet Holdings Inc's revenue by 10 percent, the regional airline's outgoing CEO said on Tuesday.

Jim Ream, who is leaving ExpressJet at the end of this month, said the contract he signed will leave the company in a more competitive position. [ID:nN0151000]

It gives us (ExpressJet) an opportunity to really diversify what we do for a living, he said in a telephone interview.

Last month, ExpressJet, once a subsidiary of Continental Airlines (CAL.N), announced a deal with United to fly 22 planes under the United Express banner starting in May 2010.

Such contracts are the bread and butter for regional, or commuter, airlines and can offer between 5 percent and 12 percent operating margins.

Ream said on a run-rate basis, revenue could increase 10 percent due to the United contract.

When all the aircraft are in place and flying, if you look at that point in time and if you look at where we were in the previous year, that would be a 10 percent increase, he said.

ExpressJet had revenue of $179.2 million in the third quarter ended Sept. 30.

Six other carriers were vying for the United contract, underscoring the growing competitiveness of the industry, he said.

These agreements...are going to be few and far between and they're going to be very competitive in trying to win that business, Ream said.

He will be starting at AMR Corp's (AMR.N) American Airlines on Jan. 1 as head of global maintenance operations. ExpressJet has named one of its board members, T. Patrick Kelly as interim CEO.

ExpressJet was also dealt a blow when a flight it was operating for Continental sat on a tarmac loaded with passengers for seven hours in an airport in Rochester, Minn. on Aug. 8. The incident sparked the ire of U.S. transportation officials and passengers alike.

Last month, ExpressJet and Continental were fined $100,000 for the incident. [ID:nN24308284]

The announcement of the United deal also boosted ExpressJet's stock and prompted on analyst to upgrade its shares and project a profitable 2010.

Ream struck a more measured tone about the regional carrier's profit outlook, projecting a return to profit by mid-2010.

Buried in that analysis is an assumption that the majors are flying back to the (prior) utilization levels, Ream said. I'm going to wait to see how 2010 is going to be.

ExpressJet shares closed at $3.95 on the New York Stock Exchange during Tuesday trading. (Reporting by Deepa Seetharaman; editing by Leslie Gevirtz)

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