Mesa Air halts Delta bid to end flight contract
— -- Mesa Air Group scored a key legal victory in its battle to prevent Delta Air Lines from canceling a multimillion-dollar contract to fly commuter routes.
A federal judge on Thursday granted Mesa's request for a preliminary injunction against the Atlanta-based airline. Mesa's lawsuit against Delta will now proceed.
Shares of Phoenix-based Mesa shot up nearly 40%, to 70 cents, on the news and on a drop in oil prices. The stock has closed as high as $7.25 in the past year.
Delta notified Mesa in late March that it planned to stop using Mesa's Freedom subsidiary for commuter routes because of too many flight delays and cancellations. Phoenix-based Mesa, one of the country's largest regional airlines, was stunned. The company said the poor operations were Delta's fault because it gave its large jets priority over Freedom's regional jets when flights backed up due to congestion and other factors.
The financial implications of losing the contract are severe. Mesa warned last week that it may be forced to file for bankruptcy protection if Delta prevails because it would be hard to find a home for the 34 50-seat jets in use at Delta. The small planes are uneconomical with high fuel prices.
Last year, the Delta contract accounted for 20% of Mesa's revenue, or about $20 million a month. Delta is Mesa's third-largest customer after US Airways and United.
Mesa CEO Jonathan Ornstein was pleased with the ruling, but the airline's financial challenges are far from over.
"It's been a difficult few months at Mesa. This is hopefully a first step in the right direction," he said.
The airline, short on cash after a large legal judgment against the company in Hawaii and losses at some of its subsidiaries, still faces looming debt payments and is at risk of default. Nasdaq has also notified the company that it is at risk of delisting for not filing its latest quarterly report on time. Mesa said it plans to file the 10Q for the quarter that ended March 31 about June 2.
The Arizona Republic is owned by Gannett, parent company of USA TODAY.
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