EX-10.2DELTA CONNECTION AGREEMENT

Exhibit 10.2

* TEXT OMITTED AND FILED SEPARATELY
CONFIDENTIAL TREATMENT REQUESTED
UNDER 17C.F.R. SECTION 200.80(B)(4),
200.83 AND 240.24b-2

Execution Copy

DELTA CONNECTION
AGREEMENT

          This Delta Connection Agreement (this “Agreement”), dated and effective the 3 ^rd day of May, 2005 (the “Effective Date”), is between Delta Air Lines, Inc., whose principal address is 1030 Delta Boulevard, Atlanta, Georgia 30320 (“Delta”), Freedom Airlines, Inc. (“Operator”), a wholly-owned subsidiary of Mesa Air Group, Inc. holding a certificate of Public Convenience and Necessity issued by the Federal Aviation Administration (“FAA”), whose principal address is 410 North 44 ^th Street, Suite 700, Phoenix, Arizona 85008 and Mesa Air Group, Inc. (“Parent”), parent company and sole shareholder of Operator, whose principal address is 410 North 44 ^th Street, Suite 700, Phoenix, Arizona 85008.

          WHEREAS, Delta operates the Delta Connection program; and

          WHEREAS, Operator desires for Delta to perform and provide various marketing, schedule and fare related, and other services for Operator in connection with the Delta Connection program; and

          WHEREAS, Delta is willing to perform and provide various marketing, schedule and fare related, and other services for Operator in connection with the Delta Connection program; and

          WHEREAS, this Agreement will enhance the ability of Operator and Delta to serve the public and the communities that they serve or may choose to serve.

          NOW, THEREFORE, for and in consideration of the foregoing premises and the mutual undertakings set for herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Delta and Operator, intending to be legally bound, hereby agree to enter into this Agreement as follows:

ARTICLE 1. FARES AND RULES PUBLICATION .

A. Delta Connection Program and Appointment of Delta as Agent. Operator hereby appoints Delta as its agent to publish its fares, schedules and related information under Delta’s two letter flight designator code in city pairs specified by Delta on the twenty five (25) 50-seat regional jet aircraft set forth on Exhibit A attached hereto; provided, however, in the event Delta is able to cause it affiliates to (i) reduce their existing order of 50-seat

regional jets with Bombardier by at least five (5) aircraft or (ii) convert nine (9) or more of the 50-seat regional jets currently on order from Bombardier to 70-seat regional jets, then the number of 50-seat regional jet aircraft shall be increased from twenty-five (25) to thirty (30), and any other aircraft subsequently agreed by the parties to be operated by Operator (collectively, the “Aircraft”), and Delta hereby accepts such appointment. Delta hereby grants Operator the authority to operate as a Delta Connection Carrier, and Operator hereby accepts such grant, to conduct air transportation operating the Aircraft utilizing certain services together with certain trademarks and service marks owned by Delta or which Delta has the right to use, all as provided herein. The parties acknowledge and agree that one (1) of the Aircraft shall be used as an operational spare and one (1) of the Aircraft shall be used as a maintenance spare for the remaining Aircraft which shall be in service on a full time basis. From time to time, Operator may require an additional Aircraft removed from service for heavy maintenance and the parties shall mutually agree on such removal times so as to minimize the impact on the scheduling of the Aircraft.

B. Fares, Rules and Seat Inventory . Delta, in its sole discretion, shall establish and publish all fares and related tariff rules for all seats, cargo and freight on the Aircraft, including fares and rules for local traffic in the city pairs served by such Aircraft. In addition, Delta will control all seat inventory and revenue management decisions for the Aircraft.

C. Schedules Publication . Delta, in its sole discretion, shall establish and publish all schedules for the Aircraft, including city-pairs served, frequencies, and timing of scheduled departures. Where practical, Delta will collaborate with Operator to determine mutually optimal schedules. Operator shall operate the Aircraft in the city pairs designated by Delta, subject to the frequency, scheduling and other requirements established by Delta from time to time. In addition, it is agreed and understood that Delta may utilize and schedule any of the Aircraft to perform various charter operations on behalf of Delta as can be reasonably accommodated by Operator.

     Delta will make commercially reasonable efforts to notify Operator of schedule times, frequencies and related information for the Aircraft as sufficiently in advance of the schedule publication date so that the information can be properly disseminated to Operator for pilot and flight attendant staffing, and related operational requirements. Additionally, Delta will make commercially reasonable efforts to make reasonable accommodation for Operator’s operational needs including without limitation, crew overnights and maintenance requirements for the Aircraft.

     In the event Delta changes the hub location served by the Aircraft, Delta shall provide Operator with ninety (90) days prior written notice of such change and Delta and Operator shall meet as soon as practicably possible to review and revise the Direct Costs and corresponding Base Compensation as a result of such change in the manner provided in Section 3(J) hereof. In the event Delta opens or closes a non-hub station served or to be served by Operator, Delta shall provide Operator with sixty (60) days prior written notice of such opening or closing unless such station is staffed by, or to be staffed by, Operator, in which case Delta shall provide Operator with ninety (90) days prior written notice of such opening or closing

     Notwithstanding any other provisions of this Agreement, Delta shall not change the hub location served by Operator to any of the following airports: ORD, IAD, LAX, SFO, DEN, PHX, LAS, CLT or PHL.

ARTICLE 2. EXCLUSIVITY .

A. Operator agrees that, except as otherwise directed or approved in writing by Delta, in Delta’s sole discretion, (i) the Aircraft may be used only to provide the air services contemplated by this Agreement (the “Delta Connection Flights”) and (ii) the Aircraft may not be used by Operator for any other purpose including, without limitation, flying for any other airline, providing charter services other than pursuant to Section 1(C) hereof, or on Operator’s own behalf.

B. With the exception of flights operated by Operator or an affiliate of Operator pursuant to codeshare agreements in effect as of April 15, 2005, with each of America West Airlines, United Airlines and U.S. Airways, notwithstanding anything herein to the contrary, except as otherwise directed or approved in writing by Delta, in Delta’s sole discretion, during the Term (including any renewals or extensions thereof) of this Agreement neither Operator, nor any affiliate of Operator, shall operate more than eight (8) flights per day for any third party or under any air carrier’s flight designator code into or out of [*] and any other airport which has on average [*] or more flights per day that are operated by Delta or one or more Delta Connection operators under the ‘DL’ flight designator code (each, a “Restricted Airport”). In the event that Operator or an affiliate of Operator is operating eight (8) or more flights for another airline at a location prior to such location qualifying as a Restricted Airport hereunder, the prohibition in the previous sentence shall not apply with respect to such operations.

C. During the Term of this Agreement, except as otherwise directed or approved in writing by Delta, in Delta’s sole discretion, neither Operator, nor any affiliate of Operator, shall operate more than eight (8) flights per day under its own flight designator code into or out of [*] or any Restricted Airport. In the event that Operator or an affiliate of Operator is operating eight (8) or more flights under its own flight designator code into or out of a location prior to such location qualifying as a Restricted Airport hereunder, the prohibition in the previous sentence shall not apply with respect to such operations.

D. Neither Operator, nor any affiliate of Operator, shall use any of the services, facilities or equipment provided by Delta, or an affiliate of Delta, to Operator in connection with the Aircraft or the Delta Connection Flights outside the scope of this Agreement without the prior written consent of Delta. With respect to any ancillary facilities or equipment used by Operator, or an affiliate of Operator, in connection with providing the services contemplated by this Agreement, such use for the benefit of Delta shall have priority over any other use contemplated by Operator, or any affiliate of Operator. With respect to facilities, equipment owned, leased or otherwise used by Operator in connection with providing services contemplated by this Agreement, Delta shall have the right to designate from time to time which property shall be used to carry out Operator’s obligations under this Agreement.

ARTICLE 3. COMPENSATION .

A. Base Compensation.

     In exchange for the flying and operation of the Aircraft, Delta shall pay Operator one hundred percent (100%) of the “Base Rate Costs” and the “Pass Through Costs” (each as such term is defined below, and collectively, the “Direct Costs”) and one hundred percent (100%) of the “Reimbursable Costs” (as such term is defined below), in each case, as relates to the operation of the Delta Connection Flights and as determined in the annual rate setting. It is understood that Direct Costs and Reimbursable Costs shall be based on market-based, direct operating costs and generally accepted accounting principles (“GAAP”), and specifically exclude any pre-paid expenses except as expressly provided herein. In addition, in any month in which Operator achieves a completion rate for the Delta Connection Flights of at least [*]%, Delta shall pay Operator a mark-up (the “Base Mark-up”) of [*] percent ([*]%) of such Direct Costs incurred during such month, subject to certain limitations and adjustments set forth below.

(i) The “Base Rate Costs” shall include all direct, operating costs recorded in accordance with generally accepted accounting principles (“GAAP”), (but specifically excluding any prepayments except as expressly provided herein) based upon the model attached hereto as Exhibit B (as modified from time to time) including, without limitation, the following:

     Notwithstanding anything herein to the contrary, at all times during the Term of this Agreement, Operator’s Base Rate Costs (on a unit basis and taken as a whole) shall not exceed (a) the Base Rate Costs (on a unit basis and taken as a whole) of any other carrier within the Delta Connection program operating aircraft similarly configured as the Aircraft and (b) the Base Rate Costs (or similarly categorized costs) (on a unit basis and taken as a whole) charged by Operator, or any affiliate of Operator, to another codeshare partner for aircraft similarly configured as the Aircraft.

(ii) The “Pass Through Costs” shall include the following variable costs for which Delta shall bear the risk of price and volume fluctuations, provided that such costs shall be reconciled on a monthly basis to reflect the actual costs incurred by Operator:

     Notwithstanding the foregoing, Pass Through Costs shall not include any late payment charges, penalties and/or fees which Operator incurs in connection with the payment of the expenses listed above.

     Notwithstanding anything herein to the contrary, at all times during the Term of this Agreement, Operator’s Pass Through Costs (on a unit basis and taken as a whole) shall not

exceed (a) the Pass Through Costs (on a unit basis and taken as a whole) of any other carrier within the Delta Connection program operating aircraft similarly configured as the Aircraft taking into account geographic locations and (b) the Pass Through Costs (or similarly categorized costs) (on a unit basis and taken as a whole) charged by Operator, or any affiliate of Operator, to another codeshare partner for aircraft similarly configured as the Aircraft.

B. Reimbursable Costs not Subject to Mark-up .

     Delta shall reimburse Operator for one hundred percent (100%) of the costs incurred for the following items (“Reimbursable Costs”), but it is expressly agreed that no Mark-Up (including any incentive compensation) of such costs shall be paid by Delta:

C. Non-Reimbursable Costs .

     The parties hereby acknowledge and agree that Operator shall be solely responsible, and Delta shall not be responsible, nor reimburse Operator, for any of the following costs:

D. Delta Costs .

The parties acknowledge and agree that the following costs related to Operator’s services hereunder shall be paid directly by Delta and shall not be included in the Base Compensation or any incentive compensation calculation or payment:

E. Incentive Compensation .

[([*]) * [*]%] + [*]= [*]%

modified from time to time in the event that one or more of Monthly Incentive Goals is modified by Delta pursuant to Section 3(E)(1)(a) above.

(i) Actual Completion rate (excluding cancellations due to charter flights pursuant to Section 1(C) hereof) for its Delta Connection Flights equal to or greater than the applicable Semi-Annual Incentive Goal; and

(ii) Actual A-15 rate for its Delta Connection Flights equal to or greater than the applicable Semi-Annual Incentive Goal;.

F. Margin Cap . Within sixty (60) days after the end of each calendar year during the Term, Operator shall provide Delta a certificate (the “Margin Certificate”) signed on behalf of Operator by its chief financial officer, that states the actual total margin that Operator earned on operating the Delta Connection Flights (and any charter operations pursuant to Section 1(C) hereof) (the “Actual Margin”) during such calendar year. Such Margin Certificate shall include an exhibit that fully sets forth Operator’s calculation of its Actual Margin and certify to the accuracy of the Actual Margin. Actual Margin for any given calendar year shall be determined, on a pre-tax

basis, by subtracting Operator’s aggregate actual Direct Costs incurred to operate the Delta Connection Flights (and any charter operations pursuant to Section 1 (C) hereof) for such calendar year from the total payments (the “Total Payments”) made by Delta to Operator for such Delta Connection Flights for such year, including any and all Base Mark-up, Monthly Incentive Compensation and Semi-Annual Compensation, and dividing such difference by the Total Payments. In the event that Operator’s Actual Margin is greater than [*] percent ([*]%), Operator shall pay Delta an amount equal to the amount necessary to reduce the Total Payments such that the Actual Margin for such calendar year will equal [*]%. Any payment made pursuant to this Section 3. F. shall be made within thirty (30) days of Delta receiving the Margin Certificate.

G. Fuel Burn Cap and Penalty . Delta and Operator agree to review the fuel burn performance of the Aircraft for Delta Connection Flights for compliance with the performance measure (“Burn Rate Ceiling”) of *. Either party may initiate the Burn Rate Ceiling.

     In the event that the Aircraft’s actual fuel burn for the period of review is above the Burn Rate Ceiling, the parties will work together in good faith to explain the variance relative to the Burn Rate Ceiling and to resolve the cause of the variance. If it is determined that actual fuel burn was above the Burn Rate Ceiling for reasons within the control of Operator, Operator will be charged a “Fuel Burn Penalty Payment” and such charge shall be accounted for in the next applicable monthly reconciliation payment made pursuant to Section 3(H) below. The Fuel Burn Penalty Payment shall be calculated as follows:

Fuel Burn Penalty Payment = [(total fuel expense/actual fuel price) / scheduled Block Hours – Burn Rate Ceiling] * completed scheduled Block Hours * actual fuel price + applicable Mark-up on fuel overpayment.

H. Accounting Provisions .

     Delta shall retain all revenues (including, without limitation, passenger, cargo, mail, food, beverage and duty-free services or any other revenue including, without limitation, any guaranteed or incentive payments from airport, local or municipal authorities in connection with scheduling flights to such airport or locality or any federal funds payments in connection with the operation of the Delta Connection Flights. Operator shall promptly remit to Delta all monies with respect to all airline ticket sales, on-board sales, baggage charges, passenger charges, cargo sales and all other revenue collected by Operator or any agent or employee of Operator in connection with the operation of the Aircraft (including credit card transactions).

     On the 1st, 8 ^th , 15th and 22nd day of each month (or if not a business day, on the following business day) Delta will advance to Operator, via wire transfer or through the Airline Clearing House (the “Clearing House”) in Delta’s discretion, [*] percent ([*] %) of the estimated monthly Direct Costs and Base Mark-Up (collectively, the “Base Compensation”). In computing the amount of the advance, Operator shall submit an invoice to Delta will shall be based on the

projected fuel costs and will estimate the anticipated number of weekly revenue block hours, departures and passengers.

     Within sixty (60) days following the end of each month, Delta and Operator will reconcile the actual costs incurred by Operator for the Base Compensation, the final operating results (including actual performance in the Performance Categories) of, and actual revenue block hours flown by, Operator with the estimated payments made pursuant to the previous paragraph. Within five (5) business days of completing such reconciliation, Delta or Operator, as the case may be, shall pay, via wire transfer or the Clearing House in Delta’s discretion, to an account designated by the other party, monies equal to the reconciled amount. If certain actual costs are not known by the end of such 60-day period, Operator shall provide Delta with a good faith estimate of such unknown costs and such estimated amount shall be included in the initial 60-day reconciliation. As soon as commercially reasonable, such estimated amounts shall be reconciled with the actual costs for such expenses, and Delta or Operator, as the case may be, shall pay, via wire transfer or the Clearing House in Delta’s discretion, to an account designated by the other party, monies equal to the reconciled amount.

     Notwithstanding anything herein to the contrary, in the event Operator is unable to operate any of the Aircraft, or any of the Delta Connection Flights, due to weather, fire, war, terrorism, act of God, a strike, labor dispute, work stoppage or similar event, or any other event, provided such other event is substantially not within the control of or not caused by some action or inaction of Delta, Delta shall not be obligated to pay Operator any portion of the Base Compensation, incentive compensation, or any other reimbursements, in connection with such non-operated Aircraft or Delta Connection Flights. If the non-operated Aircraft or Delta Connection Flight is caused by some action or inaction of Delta, Delta shall pay Operator’s fixed costs on Exhibit B attached hereto, as well as Aircraft Rent/Ownership Costs, Hull Insurance, Property Taxes and Heavy Inspection Costs for inspections already in process prior to any such event), but not any variable costs or Base Mark-Up, with respect to such non-operated Aircraft and Delta Connection Flights during the period that Operator is unable to operate such Aircraft or the Delta Connection Flights.

I. Audit of Costs, Operations and Service Levels .

     Operator shall maintain complete and accurate books and records to support and document all revenues, costs and expenses related to the Aircraft and its Delta Connection operations hereunder, in accordance with generally accepted accounting principles consistently applied and in accordance with the accounting policies and procedures used by the parties to develop the Direct Costs. Delta’s in-house finance staff and any independent consultants selected by Delta shall be entitled, following reasonable notice to Operator, to audit and inspect Operator’s books and records with respect to services provided hereunder, the service levels achieved, and the determination of charges due pursuant to this Agreement for the purpose of (i) prospectively adjusting the Base Rate Amount in connection with any annual review pursuant to Section 3(H) hereof or (ii) auditing Reimbursable Costs, Pass Through Costs, Other Reimbursable Costs, any Mark-up or incentive compensation due or paid hereunder, the Margin Cap and Fuel Burn Penalty Payment. Any such audit will be conducted during regular business hours and be paid for by Delta unless such audit determines that Operator owes Delta in excess

of $1,000,000, then Operator shall pay Delta the costs and expenses incurred by Delta in connection with such audit.

J. Rate Setting .

     Promptly upon receiving pro forma operating statistics from Delta for the next year, Operator shall provide Delta an estimate of the next year’s projected operating costs by no later than September 30 ^th of each year during the Term. Such projected operating costs shall include an off-set of any guaranty, incentive payments or rebates from any airport, local or municipal authorities Operator anticipates receiving related to the Delta Connection Flights during such year. Delta will have the right to review and provide comments and suggestions to such estimate, and such suggestions will be duly considered by Operator. With respect to aircraft acquisition costs for any aircraft added to the scope of this Agreement after the Effective Date for which Operator acquires without any leasing or financing arrangement (i.e. Operator pays purchase price completely in cash at the time of acquisition), an imputed rent may be applied to Operator’s operating costs with respect to any such aircraft at a rate as mutually agreed by the parties. Operator and Delta hereby agree to meet promptly after Delta’s receipt of Operator’s projected operating costs in order to review and revise the Direct Costs and corresponding Base Compensation, as well as Exhibit B hereto, as appropriate, for the subsequent year (the “Annual Operating Plan”). In the event that the parties are unable to agree on any Annual Operating Plan [*] the parties further agree that (i) at the request of either party, and at the expense of the requesting party, the parties shall engage a mutually agreed independent consultant to determine the applicable Annual Operating Plan [*] and (ii) if no new Annual Operating Plan has been adopted by the beginning of the next calendar year, the existing Annual Operating Plan shall be used on an interim basis to determine the Direct Costs and Base Compensation, subject to reconciliation and retroactive adjustment upon adoption of the new Annual Operating Plan. Any such determination by the independent consultant shall be binding on and implemented by the parties. The Annual Rate Plan will apply for all Delta Connection Flights during the year applicable to such plan, and Operator will bear any risks of additional expenses not reflected therein. Operator will use its best efforts to minimize its costs to operate the Aircraft in accordance with this Agreement, and Operator and Delta each agree to notify the other as soon as reasonably practicable of any anticipated or potentially substantial change of cost or operational performance. If during a current year and after an Annual Operating Plan is established, Operator’s projected Direct Costs materially changes due to some action by Delta, then the parties shall meet and, to the extent applicable, revise the Annual Operating Plan then in effect for the remainder of such year to take into account such change to Operator’s Direct Costs-based rates (a “Modified Annual Operating Plan”).

K. Right of Set-off . Delta may offset against the next scheduled payment to be made pursuant to Section 3(H) above the amount of any undisputed payment that Operator or an affiliate of Operator owes to Delta of an affiliate of Delta but has not made when due.

ARTICLE 4. TICKETING SERVICES; SIGNAGE; FACILITIES; SLOTS AND ROUTES .

A. Ticketing Services . Either Delta or Operator will provide primary airport ticketing services in connection with the Delta Connection Flights, and, if applicable, the other party will provide supplemental ticketing services for the Delta Connection Flights at Delta’s airport ticketing locations and will use Delta ticket stock for such purposes.

B. Signage . Unless otherwise agreed by the parties, Delta will design, provide and pay for appropriate airport and other signage installed after the Effective Date to reflect the Delta Connection and the relationship between Operator and Delta. The nature and type of such signage will be in the sole discretion of Delta, subject to any airport, governmental or quasi-governmental restrictions or requirements. Delta will be responsible for installing and maintaining all such signage, but the parties will mutually determine which party will obtain any necessary formal or informal approvals from appropriate airport or other authorities to install such signage. The parties will fully cooperate with each other in all endeavors relating to such signage and any necessary approvals.

C. Facilities .

     (1) In connection with the Delta Connection Flights, Operator shall use the gates and facilities designated by Delta from time to time at the locations in which Operator operates such Delta Connection Flights. No other use of such gates and other facilities by Operator or parties other than Delta shall be allowed without Delta’s express written consent.

     (2) Delta’s right to designate gates and other facilities to be used by Operator in connection with providing Delta Connection Flights shall include the right at each airport, in Delta’s discretion, to either: (a) provide for use of some or all of the needed facilities to Operator through mutually acceptable subleases, ground handling agreements, licenses, permits or otherwise; or (b) require Operator to obtain use of such facilities from the airport operator or other lessors (subject to Delta providing mutually acceptable backstop protection in signatory airport leases for Delta Connection Flights). Delta and Operator agree that Delta may relocate Operator to comparable facilities at the service locations, provided that Delta pays Operator’s reasonable relocation expenses.

     (3) All leases, subleases, permits, licenses and other use agreements of airport facilities used in connection with Delta Connection Flights (each, a “Facility Lease” and collectively, “Facilities Leases”) entered into by Operator shall be assignable to Delta or Delta’s designee, at Delta’s election, without the consent of the other party to such Facility Lease on termination of this Agreement, the withdrawal of Delta Connection Flights from such airport or upon written notice from Delta to Operator, provided that if the consent of the facility lessor is required by contract or governmental regulations, Operator will use its best efforts to obtain such consent: (a) at the time the Facility Lease is entered into and to incorporate such consent in the terms of the Facility Lease; or (b) for an already existing Facility Lease, if and at such time as Delta may direct. Subject only to Operator obtaining any necessary consent of such other party, Operator shall, at Delta’s option, assign such Facilities Leases as Delta shall designate to Delta or Delta’s

designee on termination of this Agreement, the withdrawal of Delta Connection Flights from such airport or upon receipt of written notice from Delta. If Delta elects and if the other party to the Facilities Lease agrees, instead of an assignment, this transfer can be accomplished by either: (x) a termination of the applicable Operator Facilities Lease and a direct lease of such premises to Delta or Delta’s designee; or (y) a release of premises designated by Delta from the applicable Operator Facility Lease and lease of such premises directly to Delta or Delta’s designee. On termination of this Agreement, Delta shall have the option to purchase from Operator all facilities and equipment used in connection with Delta Connection Flights then owned by Operator for an amount equal to such assets’ then fair market value or Delta depreciated book value, whichever is less. On the assignment of a Facility Lease to Delta or on the withdrawal of Delta Connection Flights from an airport and for a period of thirty (30) days thereafter, Delta shall have the option to purchase from Operator all facilities and equipment used in connection with Delta Connection Flights at such airport then owned by Operator for an amount equal to such assets’ then fair market value or Delta depreciated book value, whichever is less.

     (4) All Facilities Leases entered into by Operator shall expressly provide that Delta or Delta’s designee, at Delta’s election, shall have the right to sublease any or all of the premises covered by the applicable Facilities Lease without the consent of the other party to such Facility Lease on termination of this Agreement, the withdrawal of Delta Connection Flights from such airport or upon written notice from Delta to Operator, provided that if the consent of the facility lessor is required by contract or governmental regulations, Operator will use its best efforts to obtain such consent: (a) at the time the Facility Lease is entered into and to incorporate such consent in the terms of the Facility Lease; or (b) for an already existing Facility Lease, if and at such time as Delta may direct. Subject only to Operator obtaining any necessary consent of such other party, Operator shall, at Delta’s option, sublease the premises Delta specifies under any applicable Facilities Lease to Delta or Delta’s designee on termination of this Agreement, the withdrawal of Delta Connection Flights from such airport or upon receipt of written notice from Delta. If Delta or Delta’s designee enters into such a sublease, at Delta’s option, Operator shall enter into a sub-sublease of all or the portion of the subleased premises that Delta designates.

     (5) In addition to Delta’s other options with respect to premises occupied by Operator pursuant to any Facilities Lease, sublease or sub-sublease, Delta shall have the right from time to time to direct Operator to handle or allow Delta to handle other carriers designated by Delta at any such premises. If Operator is the handling carrier, it will do so on terms consistent with the applicable Facilities Lease and handling arrangements and at fees mutually agreed upon by Delta and Operator.

     (6) Operator shall not assign, transfer, sublease, alter, amend, modify or terminate any Facilities Lease to which it is a party without the prior written consent of Delta.

     (7) Notwithstanding anything to the contrary in this Agreement, Delta may, at its option, elect to enter the Facilities Lease in lieu of Operator for any facilities to be used by Operator at any new or existing city to be served by Operator pursuant to this Agreement, and in the event Delta exercises this option (i) Delta shall enter into a Facilities Lease with

the lessor of such facilities, (ii) Operator shall utilize such facilities pursuant to a sublease, license agreement, permit, facilities use agreement or ground handling agreement with Delta, (iii) at Delta’s option, the sublease, facilities use agreement or ground handling agreement shall terminate when Operator ceases to operate Delta Connection Flights at the airport, and (iv) Delta shall enter into agreements for facilities which are reasonably suitable for Operator’s operational needs. If for any reason Delta fails to provide such facilities, such failure shall not be a breach hereof and Operator shall be obligated to secure such facilities.

     (8) At any location in which Operator is the signatory carrier of the applicable Facility Lease, Operator shall vote as directed by Delta on any matters submitted to the signatory carriers for a vote.

     (9) Operator shall comply with all requirements of such Facilities Leases, subleases and sub-subleases described in this Section 4.C. and a default by Operator under any such agreements shall be a breach of this Agreement. If Operator receives any notice of default or breach with respect to any Facilities Lease, Operator shall promptly provide a copy to Delta, consult with Delta on handling and advise Delta on Operator’s plans for resolving the matter.

D. Slots and Route Authorities . During the Term of this Agreement (including any renewal terms or extensions) or upon the expiration or termination of this Agreement, Delta may, in its sole discretion, require Operator to transfer to Delta or its designee at no charge any airport takeoff or landing slots, route authorities or other regulatory authorities as Delta shall designate which have been or are being used for Delta Connection Flights under this Agreement.

ARTICLE 5. CUSTOMER SERVICES .

A. Operator will handle all customer related services in connection with the Delta Connection Flights in a professional, businesslike and courteous manner. In order to ensure a high level of customer satisfaction for the Delta Connection Flights, Operator will (i) establish and maintain customer handling procedures and policies that are substantially similar to those utilized by Delta (“Customer Service Policies”) and (ii) establish, maintain and enforce employee conduct, appearance and training standards and policies that are substantially similar to those used by Delta. All uniforms worn by Operator employees on the Delta Connection Flights and by any Operator employees providing support services in connection with such flights shall be subject to the prior approval of Delta and shall at all times be consistent with Delta’s existing uniform standards.

B. Operator and Delta will periodically meet to discuss and review Operator’s customer handling procedures and policies to insure compliance with this Article 5. Each party will seek to set forth concerns and complaints under this Article 5 in writing to the other party. To the extent Delta advises Operator of any deviation from Article 5(A) hereof, the parties shall meet to mutually determine appropriate solutions and to agree on the terms of a corrective action plan and the timing of its implementation. In the event Operator shall fail,

in any material respect, to adopt or implement any such agreed corrective action plan in the time period described therein, any such failure may be deemed a material breach of this Agreement.

C. Operator shall adopt as its own Delta’s Terms and Conditions of Contract of Carriage (“Contract of Carriage”), baggage liability policies and denied boarding compensation policies, each as amended from time to time, and be bound by their respective terms with respect to its operation of Delta Connection Flights.

D. Operator shall reimburse Delta for any expenses incurred as a result of Operator’s non-compliance with any of the Customer Service Policies, Contract of Carriage, baggage liability policies and denied boarding compensation policies.

ARTICLE 6. TRAFFIC DOCUMENTS AND RELATED PROCEDURES . To the extent that the parties subsequently agree that Operator will handle traffic documents or passenger handling services in connection with any Delta Connection Flights, the following terms and conditions shall apply:

A. Pursuant to mutually acceptable procedures, either Operator will purchase (which shall be a Pass Through Cost), or Delta will periodically provide Operator with, Delta machine and manual ticket stock, miscellaneous charges orders, credit card refund drafts, credit card refund vouchers, FIMS, expense vouchers, expense checks, travel credit vouchers and other related documents (collectively referred to as “Traffic Documents”). Delta will maintain a supply of Traffic Documents at a suitable location and, upon written request from Operator, will provide Operator with appropriate supplies of Traffic Documents.

B. Unless otherwise agreed to by Delta in writing, Traffic Documents may be used, completed, validated and issued only by Operator and only in connection with transactions related to Delta Connection Flights and for no other purpose.

C. Operator will promptly surrender and return all Traffic Documents to Delta upon Delta’s written request.

D. Operator will maintain records of the Traffic Documents in a manner and format acceptable to Delta. Operator will acknowledge receipt in writing of all Traffic Documents in the manner prescribed by Delta.

E. Operator will conform with and abide by all of Delta’s rules and regulations regarding the Traffic Documents.

F. Operator will take all reasonable and necessary measures to safeguard the Traffic Documents as of the time of receipt and thereafter and will maintain the Traffic Documents in accordance with mutually agreed upon security procedures. Operator shall be responsible for all risk of loss, use, misuse, misappropriation or theft of Traffic Documents as of the time Operator takes possession of the Traffic Documents.

G. Reporting and Remitting With Respect to Traffic Documents .

     1. On a daily basis, Operator will provide Delta with a report for each Operator ticketing location of all ticketing and related transactions on Traffic Documents for the prior day. Such report will be in a format determined by Delta and will include, without limitation, all credit card transactions and supporting documentation.

     2. Operator will issue all Traffic Documents, and will collect appropriate charges, in accordance with the tariffs, fares, rates, rules and regulations of Delta and any other applicable carriers. Operator shall be responsible for all undercharges and incorrect fares, rates and charges on Traffic Documents issued by or for Operator, and Delta may deduct from sums due Operator or bill Operator for the amount of any such undercharges or incorrect fares, rates and charges. The amount of such undercharges will be determined by utilizing the ACH Procedures for passenger tickets and on a direct billing basis for baggage/cargo related items.

H. Refund Vouchers .

     1. Delta will use Delta refund vouchers for all refund transactions handled by Delta involving Operator.

     2. Operator will use Delta refund vouchers, and Delta credit card refund vouchers for credit card sales refunds, and will comply with Delta’s rules and regulations for handling and processing such refunds.

ARTICLE 7. FREQUENT FLYER PARTICIPATION . During the Term of this Agreement, the parties agree that passengers on Operator’s Delta Connection Flights will be eligible to participate in the Delta SkyMiles frequent flyer program, as may be amended from time to time, or