Originally Posted by winglet

ToiletDuck,

Delta already "dropped" MAG by terminating their ERJ contract in March 2008 and their CRJ-900 contract in August 2008.

Mesa brought civil action in the Georgia District Court concerning the ERJ's and won an injunction. This is the "ERJ Litigation" (Mesa Airlines, Inc. and Freedom Airlines, Inc. vs. Delta Airlines Inc. Civil Action No. 1:08-CV-1334-CC). Delta appealed in the Georgia Court of Appeals and lost the appeal.

MAG has since submitted a motion to assume the contract in the New York Bankruptcy Court and, against Delta's hopes, the case has subsequently been transferred from the Georgia District Court to the New York Bankruptcy Court. The court date is currently scheduled for July 12th, 2010. The result is that Delta is now bound by a court injunction to honor their executory contract until either Mesa assumes the contract in reorganization or the contract expires.

There are other cases pending in the Georgia District Court:

"MFN Litigation" (Delta Airlines, Inc. vs. Mesa Airlines, Inc. and Freedom Airlines, Inc. Civil Action No. 1:08-CV-1334-CC)

The "MFN Litigation" concerns the "Most Favored Nation" provision of the contract. MFN provisions effectively guarantee that sub-contractors don't out price the "lowest bidder". Delta claims that MAG is charging $1.5 million a month more than Pinnacle Airlines and that the MFN provision guaranteed that MAG would be the lowest cost Delta Connection operator. MAG in turn claims; Delta hasn't been properly utilizing their aircraft on a "full-time basis"; Delta refuses to engage in the annual rate setting procedures; attorneys' fees; costs; and "other damages". This case is currently scheduled in the Georgia District Court for April 20th, 2010.

MAG also commenced an action in the Georgia District Court concerning the cancellation of the Delta CRJ-900 agreement (These were the 14 NexGen CRJ-900's owned by Delta to be operated by MAG. MAG only flew seven of them from Nov. 2007 to Aug. 2008). The "Delta CRJ Litigation" seeks damages for lost profits and training costs. Delta, of course, filed a counterclaim for "failure to meet contract conditions".

Yet another action exists in the Arizona District Court:

This case, the "Engine Litigation", was filed by MAG seeking the return of seven engines that Delta took posession of. Delta agreed to return the engines but then filed a mechanics lien and a counterclaim to foreclose on the liens. The Court ruled that Delta had forfeited its claims and Delta appealed. The appeals case is pending.

These cases, especially the "ERJ and MFN litigation", are key to the reorganization of MAG and were the primary reasons for the timing of the bankruptcy filing. Until these cases are concluded, or a settlement is reached, MAG's bankruptcy case will effectively be in limbo.

winglet