Analysts agree that the proposed merger between Delta Air Lines and Northwest Airlines could lead to a consolidation of hubs and elimination of overlapping routes, but it is uncertain how this would affect regional airline partners that operate under contract with the carriers. "We continue to believe that longer-term consolidation poses a threat to regional airlines," JP Morgan's Jamie Baker wrote. "Regionals exist to feed hubs. . .As a means of reducing industry capacity, consolidation is a process by which hubs are likely to be shuttered. It is difficult to imagine a consolidated Delta/Northwest operating hubs in Detroit and Cincinnati." While the airlines have promised that the combination will not result in hub closures (ATWOnline, April 16), DL has made no secret that it would like to sell its wholly owned subsidiary Comair (ATWOnline, Feb. 5). Northwest is likely to continue to rely on its new subsidiary Compass Airlines, which began last spring (ATWOnline, April 7). Regional partners Republic Airways, Pinnacle Airlines, Mesa Air Group, SkyWest Airlines and ExpressJet all have contract agreements with one or both carriers. The most likely scenario would be fleet rationalization, analyst Mike Boyd said, with regional carriers taking the first hit. "These leasing companies--small jet providers--are clearly in the crosshairs," Boyd said. "Delta and Northwest, regardless of any merger, have about 125 too many 50-seaters that have to go quick. They are losing money on every flight, with or without a merger." Prior to the merger negotiations, DL said it would terminate its agreement as of May 3 with Mesa subsidiary Freedom Airlines, which operates 34 ERJ-145s on behalf of Delta Connection (ATWOnline, April 9). The decision to drop Freedom's ERJ service, which resulted in a lawsuit, came a little more than a month after DL announced it would reduce capacity by 10% in the second half of 2008 and ground 20-25 regional jets, presumably the less-fuel-efficient 50-seaters. The decision does not affect Freedom's CRJ900 flying for Delta Connection. "We are confident that Delta's actions are not supported by the terms of the Connection Agreement, that we have complied with all of our obligations under that agreement and that Delta's effort to terminate the agreement will not be upheld in a court of law," Mesa Chairman and CEO Jonathan Ornstein said. Boyd said both SkyWest and Republic have a "good future" because they have invested heavily in larger regional jets. But many of the 50-seaters will have to go, he contended. "They are fast becoming litters of kittens--cute but nobody wants them." by Sandra Arnoult