The contract dispute between Delta Air Lines and Mesa Air Group could change the airscape around Medford in the weeks to come.

The contract dispute between Delta Air Lines and Mesa Air Group could change the airscape around Medford in the weeks to come.

Fuel prices have driven up fares, leading airlines to slap on luggage surcharges and reduce the number of flights. So far, however, departures and arrivals haven't changed all that much in the Rogue Valley.

That might happen if Mesa Air Group loses its bid to keep Delta Air Lines from canceling a contract involving an eastern regional carrier.

Mesa Air operates US Airways Express in Medford for US Airways Group and provides regional service for United Airlines and Delta Air Lines.

In March, Delta told Phoenix, Ariz.-based Mesa it was canceling its contract because of performance issues on its Freedom Airlines subsidiary feeding into its Atlanta hub. Mesa blamed its woes on Delta and filed suit in April to force Delta to continue the agreement. A hearing on the lawsuit is set to begin Tuesday.

Mesa said that it could be forced into bankruptcy-court protection if it can't stop Delta from canceling the contract.

In a Securities and Exchange Commission filing, Mesa said the loss of $20 million in monthly revenue from the Delta deal could quickly lead to defaults if it can't restructure its debt, acquire additional capital or otherwise restructure. The SEC filing said Delta operations accounted for about 20 percent of Mesa's 2007 revenue and it would lose an estimated $960 million over the next four years without the Delta deal.

Paul Skellon, Mesa's corporate communications and international operations vice president, denied that the company's struggles with Delta would spill over into its US Airways Express service.

"That's a completely different contract," Skellon said.

Mesa has recently made a series of moves to shore up its flagging finances. Last week, the airline said it would shut down subsidiary carrier Air Midwest, eliminating service to 16 small cities in 10 states, because of fuel prices. Air Midwest provided government-subsidized "essential air service" flights to the cities.

Mesa's Hawaiian carrier, Go, settled a lawsuit with Hawaiian Airlines.

US Airways spokesman Philip Gee said he isn't sure what it would mean for the regional routes run between Medford and Phoenix if Mesa files for court protection.

"We're monitoring the situation with Mesa closely and preparing for any possible outcome," Gee said in an e-mail interview. "That's all we can really say at this point since nothing has happened, everything else is just speculation and we try and stay away from commenting about speculation."

Mesa began flying to Medford in 2002, operating AmericaWest Express flights to Phoenix and then adding service to Las Vegas in 2004. Following the AmericaWest Airlines merger with US Airways, the flights were branded US AirExpress.

Last month, nearly 4,000 passengers — less than 10 percent of Medford's commercial travel — used US Airways Express flights. If Mesa couldn't maintain operations, it would leave US Airways three options, said Connie Brook of Express Travel in Medford.

"They could contract with another airline, maybe use their own planes, or say 'To heck with Medford' for a while," Brook said. "The airlines are all in dire straits. You don't know what any of them are going to do tomorrow."

Reach reporter Greg Stiles at 776-4463 or e-mail business@mailtribune.com.