Judge blocks Delta's termination of Mesa contract

A federal judge Thursday blocked Delta Air Lines Inc. from terminating a regional flying contract with a subsidiary of Mesa Air Group Inc.

Mesa shares shot up almost 40 percent on the news.

Phoenix-based Mesa had warned that it would file for bankruptcy protection by July 20 and cut 700 jobs -- 14 percent of its work force -- if Delta's termination of the contract with Freedom Airlines stuck and Mesa was unable to redeploy unused aircraft.

A spokeswoman for Atlanta-based Delta said the airline was disappointed with U.S. District Judge Clarence Cooper's ruling approving an injunction, and it planned to appeal.

Mesa said the contract amounts to $20 million in monthly revenue for the parent company, or about 20 percent of its total sales for 2007. Mesa has 5,000 employees overall.

"I think it is a step in the right direction -- we still have a lot of work ahead of us and we look forward to continuing to do the right thing for our partner Delta, our passengers and our people," Mesa Chief Executive Jonathan Ornstein said of the ruling Thursday. "This has been a very tough few months for us and we're happy the judge decided in our favor."

A lawyer for Delta said during a hearing in federal court in Atlanta this week that the company has the right to terminate the contract because Freedom did not maintain at least a 95 percent completion rate for three months within a six-month period.

But a Mesa lawyer said the reason Freedom fell below the minimum completion rate in October and December 2007 and February of this year was because Delta told Freedom to cancel numerous flights.

Mesa suggested it was Delta's strategy to force Freedom to not meet the necessary completion rate so it could cancel its contract with Freedom and reduce its overall domestic capacity. Delta and other major carriers have been reducing U.S. capacity because of high fuel prices.

Delta denied that it intentionally forced Mesa into the situation it found itself in.

Mesa is a major commuter carrier and operates flights as Delta Connection, US Airways Express and United Express under agreements with Delta, US Airways Group Inc. and United Airlines.

Mesa filed suit against Delta last month in an effort to prevent the company from ending its service agreements. With the injunction in place, the suit will go forward.

Mesa said it would be in serious peril without the Delta contract because Mesa would have little to no ability to redeploy the 34 regional jets it uses for Delta. US Airways and United have told Mesa they don't need the aircraft for their routes, according to Mesa.

Mesa shares rose 20 cents to 70 cents Thursday, while Delta shares rose 49 cents, or 8.7 percent, to $6.14.

Judge blocks Delta's termination of Mesa contract

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