Phoenix-based Mesa Air Group says it may have to lay off 500 workers at its Freedom Airline subsidiary after a federal judge ruled that Delta Air Lines has the right to cancel a service contract with the regional carrier.

U.S. District Judge Clarence E. Cooper ruled against Mesa yesterday in a long-running dispute with Delta. Mesa, which operates interisland carrier go! Mokulele, said it will leave 22 of its jets without work.

Cooper had prevented Delta Air Lines Inc. from canceling the $20 million-a-month contract in June 2008. Delta said Phoenix-based Mesa Air Lines Inc. wasn't completing enough of its Delta Connection flights. But Mesa argued that was because Delta asked it to cancel many flights out of John F. Kennedy International Airport in New York during bad weather.