After Delta filed a new lawsuit against Mesa on August 19, Mesa, in a Friday SEC filing, said its partner was seeking a declaratory judgment allowing it to terminate its contract with Mesa subsidiary Freedom Airlines. Mesa has said that should the contract be terminated it would have to file for bankruptcy and indicated that it will file a countersuit to defend its subsidiary.

“The alleged material breach relates to Delta's efforts to impose certain cost reductions on Freedom,” Mesa said in its filing. “Freedom believes that Delta's claims are wholly without merit and are a direct effort by Delta to circumvent the injunction prohibiting Delta from terminating Freedom's Connection Agreement, which was recently upheld by the 11th Circuit Court of Appeals.”

The suit is the latest round in more than a year of battling between the two carriers, after Delta sought a termination of the Freedom contract in April 2008, citing a material breach. According to the SEC filing, Delta had originally tried to buy Mesa out of its contract at that time. After Mesa said no, Delta sent a letter terminating the contract saying flight cancellations exceeded contractual limits. Mesa said that the cancellations calculations included those requested and coordinated with Delta. Last year, the regional carrier won a court injunction against the termination of the contract and that preliminary injunction was confirmed last month by the U.S. Court of Appeals for the 11th Circuit.

“After months of working in good faith to try to resolve a contractual billing dispute with Mesa, we unfortunately have been left with no choice but to ask a court to resolve Mesa’s refusal to honor its contract pricing guarantees," Delta spokeswoman Kristin Baur told the Atlanta Business Chronicle.

Delta launched a similar attack against Pinnacle Airlines which was later resolved and its efforts to streamline capacity at other regionals has largely been met with success as regionals bow to the will of their partners, regardless of contract provisions. It has also ended its small contract with ExpressJet.

Virgin America Narrows Losses; More News
In the midst of its pitched battle with Alaska as to whether or not it meets citizenship rules, Virgin America reported a net loss in the second quarter ahead of the release of the Department of Transportation’s quarterly reports data. Despite double-digit industry revenue decreases, the new carrier reported significantly improved financial results and unit costs, record-setting load factors and steady year-over-year growth in stage length-adjusted guest unit revenue, said the airline.

The privately held carrier posted a $15,766 loss a dramatic shift of 75.5% from the $64,361 loss posted in the year-ago period. Revenues jumped 46.9% to $135.9 million which operating expenses declined 4.7% to $147.3 million. Its operating loss declined 81.6% to $11.4 million. "Given the overall industry revenue environment and our record growth, we're very pleased with our unit cost improvements and steady progress to date on our bottom line," said President and CEO David Cush.

Available seat miles in the quarter rose 47% to 1.7 billion while load factor rose 7.7 points to 85.3%. Its operating margin also experienced a dramatic shift swinging 58.7 points from -67.1% to -8.4%. Total revenue per available seat mile dropped 0.6% to 7.99 cents. Operating cost per available seat mile dropped 35.6% to 8.66 cents. CASM ex fuel dropped 20.9% to 6.47 cents. Its average stage length rose 12.3% to 1,397 miles.

"Given double digit year-over-year industry revenue declines and a 48% increase in our capacity, we're particularly pleased to report stage-length adjusted unit revenue growth and record-setting load factors in the second quarter," said Cush. "As we continue to grow to new destinations in 2009 and beyond, our business model is right on track."

The airline ended the second quarter with $28 million in unrestricted cash and $54 million in total liquidity, with full funding for its operation through its projected profitability date.

In the second quarter, Virgin America launched new service to Orange County (SNA) and added additional flights to its popular Boston (BOS) to San Francisco (SFO) route. In May, Virgin America became the first and only airline to offer WiFi on every flight. Take rates for the Gogo In-Flight Internet Service continue to climb with some flights and routes reporting up to 20-25% of guests using the service. Virgin America is also the only domestic airline to offer standard power outlets near every seat - so travelers can stay connected longer.

Operationally, Virgin America achieved an impressive 82.7 percent A-14 on-time performance for the second quarter. The carrier's mishandled baggage rate was an average of 1.14 bags per 1,000 guests, versus the industry average of 3.85 bags per 1,000 guests.

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