Mesa Air Group has signed a letter of intent to merge Mesa Airlines with Charlotte, North Carolina-based CCAir. The two carriers were already linked through the Barlow Investment partnership, which has minority shareholdings in both.

The transaction, valued at about $60 million, which includes $15 million of assumed debt, is subject to a series of business and regulatory approvals. Officials hope to complete the merger within six months, however.

The deal is an all-stock transaction whereby cash-strapped Mesa would acquire all outstanding shares of CCAir's common stock by issuing Mesa shares which are equivalent in value.

Mesa Air Group is the parent of Mesa Airlines, which has struggled with losses after failing to renew its code-share agreement to act as a United Express feeder. Earlier this year it closed its WestAir Com-muter division, but signed a new six-year code-share pact with America West Airlines, after the latter reversed a decision to end the partnership.

CCAir has suffered financial difficulties in recent years, but earned $2.1 million in the quarter ending 30 June. The regional, which provides service as US Airways Express, operates an all-turboprop fleet of eight de Havilland Dash 8s and 20 British Aerospace Jetstream Super 31s (J32s). Eric Montgomery, CCAir's vice-president for finance, expects CCAir will retain its Dash 8s and J32s, at least until their leases expire in 2007 and 2004, respectively.

Early this year, former Virgin Express executives Jonathan Ornstein and Jim Swigart acquired a 5.3% stake in Mesa while part of the Barlow Partners II investment group. A year ago, Ornstein and Barlow Partners I bought a 7% interest in CCAir. Ornstein, who became Mesa's chief executive in March, says the link with CCAir is "an excellent fit" because of its Charlotte hub and US Airways affiliation. He says: "The merger will strengthen Mesa's strong relationship with US Airways."

Source: Flight International