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VOL. 123 | NO. 153 | Wednesday, August 06, 2008

Delta to Cancel Mesa Subsidiary Contract

By HARRY R. WEBER | AP Business Writer

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ATLANTA (AP) - Mesa Air Group Inc. says Delta Air Lines Inc. is again trying to terminate a regional flying contract with Mesa subsidiary Freedom Airlines.

Phoenix-based Mesa said in a statement Tuesday that on Friday it received notification from Delta that the carrier is ending Freedom's CRJ-900 Delta Connection agreement, once again alleging Freedom failed to maintain specified operational performance, as outlined in the contract.

"Mesa strongly disputes these allegations and intends to vigorously defend its contractual rights," the company said.

Mesa added that it believes the cancellation plan was driven by Delta's intention to reduce capacity and its "inability to reduce aircraft at its wholly owned Comair subsidiary without incurring significant ongoing expense."

Delta stood by its decision.

"It's more important than ever before that Delta and its Delta Connection partners meet operational and customer service levels," Delta spokeswoman Betsy Talton said.

Freedom currently operates seven 76-seat CRJ-900 regional jets for Delta Connection, with a further seven aircraft scheduled to enter service by May 2009. The company subleases the aircraft from Delta for $1 per month per aircraft. Mesa said the aircraft will be returned to Delta in connection with the termination with no further financial obligation to Mesa.

Talton said the 14 aircraft will be assigned to other Delta Connection carriers.

Delta previously tried to terminate Freedom's ERJ-145 Delta Connection agreement on the grounds Freedom did not meet operational performance standards spelled out in its agreement with Delta. Mesa won a preliminary court injunction to block the move. Delta is appealing the decision.

Mesa had said the previous move, if successful, would have crippled its airline. It did not say in its statement Tuesday what financial impact the termination of the CRJ-900 contract would have on Mesa.

The ERJ-145 contract covers 34 50-seat aircraft.

Copyright 2008 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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