Delta Air looking to end Mesa agreement

PHOENIX, Ariz. » Mesa Air Group Inc. said Delta Air Lines Inc. wants to end a flight agreement that covers almost one-fifth of Mesa's fleet.

Delta intends to terminate a contract under which Mesa's Freedom Airlines unit flies ERJ-145 aircraft for the larger carrier, Mesa said Tuesday.

Mesa said it would challenge Delta's assertion that Freedom failed to meet required completion rates.

That contract involves 19 percent of Mesa's aircraft and won't be easily replaced, Standard & Poor's equity analyst Jim Corridore said today in a note. He cut Mesa to "sell" from "hold" and lowered his share-price target to $2, from $3.

"Delta has notified Freedom Airlines of its intention to terminate its 50-seat contract due to performance," Betsy Talton, a spokeswoman for Atlanta-based Delta, said today. "We expect the operational pull-down to take several months to complete. It will have minimal, if any, impact to customers."

That contract covers 34 Embraer 50-seat aircraft, Talton said. The dispute doesn't affect Delta's other agreement with Mesa for flights by as many as 14 76-seat Bombardier CRJ-900 aircraft.

Mesa operates 182 planes for larger carriers including Delta, US Airways Group Inc. and UAL Corp.'s United Airlines. Mesa has delayed filing financial reports and is fighting legal damages and fees related to a dispute with Hawaiian Airlines Inc. over misuse of confidential information in deciding to enter the Hawaii market, where it has operated the interisland carrier go! since mid-2006.