ExpressJet Holdings Inc. (NYSE: XJT) today announced that it unanimously rejected an all-cash offer by SkyWest Inc. (NASDAQ: SKYW) to acquire the company for $3.50 per share.

ExpressJet said it believes SkyWest's $3.50 per share offer substantially undervalues the company's true value and outlook. "The initial SkyWest offer is inadequate and represents an opportunistic attempt by SkyWest to acquire the company at a price well below the true value that ExpressJet would bring to a combination," ExpressJet said in a statement.

With the difficulty across airline companies reflected in their current trading price - Skywest is trading near its 52 week low and ExpressJet was hovering around its 52 week low prior to this announcement - consolidation has become an attractive option based not only on valuations but long-term survival.

SkyWest's offer represents almost a 70% percent premium over ExpressJet's Thursday closing price of $2.09 per share and values the company at nearly $182 million. SkyWest CEO Jerry C. Atkin said in a letter to ExpressJet that the offer represented a "full and fair price" for the company.

Atkin wrote, "We believe that our proposal would be in the best interests of ExpressJet and its stockholders, particularly given the uncertainty in the airline sector, the high price of oil and, as outlined in your public filings, the risks of your business related to your relationship with Continental."

The risks of ExpressJet's relationship with Continental Airlines (NYSE: CAL) stem from ExpressJet mainly operating regional flights as a contractor for the company rather than having its own routes and name recognition. In other words, the company is largely at Continental's mercy right now.

ExpressJet is going to start a review of its options, but in this climate the reality is SkyWest's offer may be as good as it gets for a small, regional carrier like ExpressJet.

Related Companies
Delta Air Lines, Inc. (DAL)
Pinnacle Airlines Corp. (PNCL)
Republic Airways Holdings Inc. (RJET)

Ford Motor Co. (NYSE: F) shocked most analysts with a first quarter profit of $100 million compared to a loss of $282 million for the same period last year.

CEO Alan Mulally’s turnaround plan for the company is based on heavy cost reductions – such as cutting expensive North American jobs – combined with new vehicle models. In the face of $15.3 billion in cumulative  losses in the last two years, this modest profit may show that Mulally’s plan is working.

Of course profitability is very important but Ford still faces an uphill battle against domestic competitor General Motors Corp. (NYSE: GM) and the world’s top car company (by the only measure that matters – profits) Toyota Motor Corp. (NYSE: TM). Making matters worse with its dependence on trucks, Ford’s vehicle lineup is ill positioned for record-high fuel prices. On the company’s home turf, a soft economy will only worsen demand in the U.S., a market that Detroit-based Ford has lost market share in every year for more than a decade.

Making matters worse, despite recent improvements in initial vehicle quality according to studies commissioned by Ford, the company admits that about half of vehicle shoppers no longer even consider its models.

This surprise profit is certainly good news for Ford – up more than 15% at midday today – but is it too little too late?

Related Companies
Daimler AG (DAI)
Tata Motors Ltd. (TTM)

United Parcel Service Inc. (NYSE: UPS) has seen only a slight increase in their first quarter profit of 7.5%. This lead the company to lower their 2008 earnings forecast.  This is due to the US economic recession that will not make a turn for the better any time soon. The slow retail sales are causing a slow period for UPS and their delivery services, particularly domestic deliveries.  When the US economy is hurting, UPS takes the hurt two-fold.

United Parcel Service Inc. handles an average of 15 million shipments a day world-wide, or roughly 2 to 3% of the U.S. gross-domestic product. With the US economic slump, people are spending less on retail products as they are forced to spend more on inflated gas and food prices.

UPS is not alone.  Major US have tightened spending and taken other cost-cutting measures to withstand the economic slowdown. This has lead to a restraint among US demands for freight deliveries for more than a year with rising fuel costs remaining the unpredictable variable that is squeezing profits. UPS spent $950 million in the quarter for their vehicles, up 54% from the year earlier. The company said its overall fuel costs drove down profit by at least 2 cents to 3 cents a share, or by $30 million to $50 million.

The first quarter reflected write-downs and severance charges in the year-earlier period and strong growth in business outside the U.S. Net income for UPS was $906 million, or 87 cents a share, up from $843 million, or 78 cents a share, from the year earlier.  Revenue climbed 6.5% to $12.68 billion.

The Atlanta-based UPS delivery service is the largest in the world.  International sales have protected UPS from being packed away into the US closet. Revenue from overseas packages jumped nearly 16%. UPS said US export volume growth was "strong, leading to a balanced global performance with Asia, Europe and the U.S. each experiencing a double-digit increase."

Like FedEx, UPS is considered to be a barometer for the U.S. economy as a whole. Fewer deliveries by transport companies are seen as a sign that domestic business is slowing down, while the factors behind the declines provide the supporting thesis. In this case, higher fuel costs are prompting a rise in delivery costs while consumers are likely spending less money.  

Mr. Kuehn, CFO for UPS, said, "At this point we see no immediate signs of economic improvement. We expect the U.S. package market to be flat to down this year. … Domestic margins will be under pressure for rest of year."

Related Companies
FedEx Corporation (FDX)
AirNet Systems, Inc. (ANS)
ABX Holdings, Inc. (ABXA)
Air T, Inc. (AIRT)