June 10, 2008 / 2:29 PM / 11 years ago

UPDATE 1-Pinnacle says Delta intends to terminate contract

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NEW YORK, June 10 (Reuters) - Pinnacle Airlines Corp PNCL.O said on Tuesday that Delta Air Lines Inc (DAL.N) intended to terminate its contract as a Delta Connection carrier, effective July 31, sending its shares down more than 20 percent.

Pinnacle said it believed the termination was wrongful and that it would pursue “appropriate remedies.”

Delta argued that Pinnacle did not meet minimum arrival-time performance requirements for a period since flights began late last year, but Pinnacle said the flight schedules Delta created were unrealistic.

“We are extremely surprised and disappointed that Delta is attempting to take this drastic and improper action,” said Pinnacle Chief Executive Phil Trenary.

A Delta spokeswoman said Pinnacle’s operational performance had fallen below minimum levels required under the contract.

Pinnacle agreed in April 2007 to operate 16 CRJ-900 aircraft as a Delta Connection carrier and began operations under the agreement in December.

Trenary stressed that the issue between Pinnacle and Delta would have no immediate effect on schedules, routes or staffing.

Delta is also involved in a legal fight with Mesa Air Group Inc (MESA.O) after saying in March that it intended to end a partnership with that company’s Freedom Air subsidiary. On May 29, Mesa won a preliminary injunction in federal court in Atlanta preventing Delta from going ahead with the termination.

Mesa, which provides regional flights for major airlines, had said it would have to file for bankruptcy protection if it lost its legal fight with Delta.

Delta had accused Mesa of failing to complete a specified number of flights. Mesa denied that allegation and in April sued Delta, saying it had breached their agreement.

Pinnacle shares were down $1.28, or 21.4 percent, at $4.70 in morning Nasdaq trading. (Reporting by Mark McSherry, editing by Gerald E. McCormick and Lisa Von Ahn)

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