UPDATE 3-Mesa Air Group files for bankruptcy, to cut fleet

* Says will eliminate excess aircraft to cut costs

* Mesa has 52 unused aircraft, to retire 25 more

* Shares plunge 50 pct (Updates with quotes from CEO, analyst; Shares; Adds CHICAGO to dateline)

BANGALORE/CHICAGO, Jan 5 (Reuters) - U.S. regional airline operator Mesa Air Group Inc MESA.O filed for bankruptcy protection on Tuesday, and said it would trim its oversized fleet and emerge as a stronger company.

Mesa has 130 planes -- about 52 of them not in use -- and said in court papers it plans to retire 25 others that it does not need.

Mesa said the downsizing will eliminate significant costs associated with retaining, maintaining and storing excess aircraft.

“Our company has ample liquidity to support itself during this process and we are confident we will emerge from Chapter 11 an even stronger operation,” Jonathan Ornstein, Mesa chief executive, said in a statement.

Mesa filed for Chapter 11 protection in U.S. Bankruptcy Court, Southern District of New York.

Mesa provides regional service for US Airways Group Inc LCC.N, Delta Air Lines DAL.N and other carriers, and had been trying to shore up its finances while riding out volatile fuel prices and a drop in travel demand.

The company, which employs about 3,400 people, said it would continue to operate as normal during the restructuring. Mesa did not announce any job cuts on Tuesday.

In court papers, Mesa listed assets of $975 million and liabilities of $869 million as of Sept. 30. The company offered no forecast on when it expected to emerge from bankruptcy.

“It’s fundamentally a function of the aircraft lessors and how willing they are to negotiate terms and conditions on the aircraft, I think will ultimately establish how successful this bankruptcy is in terms of speed and scope,” said airline consultant Doug Abbey.

Mesa’s Hawaiian inter-island, low-cost airline joint venture, go!-Mokulele, is not part of the filing and will continue to operate its full flight schedule, the company said.

Mesa also said the bankruptcy protection would help it reach a more “timely conclusion” in its litigation with Delta. The company is seeking damages of more than $70 million in the lawsuit, after Delta canceled its agreement with a Mesa unit in 2008, saying it had poor completion rates.

Mesa contended those cancellations stemmed from Delta’s decision to run Mesa flights out of New York’s John F. Kennedy International Airport and were beyond the airline’s control.

Last year, a U.S. appeals court affirmed a decision by a lower court to prevent Delta from ending the flying agreement with Mesa.

Mesa currently has about 700 daily system departures to 127 cities in the United States, Canada and Mexico.

For the fiscal year that ended Sept. 30, 2009, Mesa had revenue of $968 million. About 96 percent of its consolidated passenger revenue came from code-share "revenue guarantee" agreements with US Airways, UAL Corp's UAUA.O United Air Lines Inc unit and Delta.

Mesa shares plunged 55 percent to about 5 cents in midday trading. Typically, new shares are issued when a company emerges from Chapter 11.

Brian Gillman, Mesa’s general counsel, said it was too soon to say whether Mesa would issue new shares. (Reporting by Santosh Nadgir and Kyle Peterson; Editing by Gopakumar Warrier and Maureen Bavdek)