Mesa Air loses ruling over Delta connections

* Delta found within rights to end connection agreement

* Mesa negotiating new accord

May 24 (Reuters) - Mesa Air Group Inc said an Atlanta federal court found that Delta Air Lines Inc (DAL.N) had the right to terminate its connection agreement with the regional airline operator in 2008.

The decision last week was a setback for Mesa, which had previously won a preliminary injunction prohibiting Delta from terminating the agreement.

Mesa said the termination resulted from the alleged failure of its Freedom Airlines unit to complete enough flights.

The regional carrier had said it faced more cancellations because of Delta's decision to run flights out of New York's busy John F. Kennedy International Airport, a decision beyond its control.

Mesa had sought more than $70 million of damages. It is now seeking bankruptcy court approval for a temporary connection agreement with Delta, to expire on Aug. 31.

Mesa filed for Chapter 11 protection from creditors in January to trim its fleet and help it reach a more "timely conclusion" of litigation with Delta.

The case is Mesa Air Group Inc et al v. Delta Air Lines Inc, U.S. District Court, Northern District of Georgia, No. 08-1334. The bankruptcy case is In re: Mesa Air Group Inc, U.S. Bankruptcy Court, Southern District of New York, No 10-10018. (Reporting by Santosh Nadgir in Bangalore, editing by Gerald E. McCormick)