The parent of go! airlines warned yesterday that it faces a cash crunch and could be forced into bankruptcy.

Phoenix-based Mesa Air Group Inc. said in a filing with the Securities and Exchange Commission that if it can't stop Delta Air Lines Inc. from going through with canceling a service contract, Mesa may have to seek court protection. The loss of $20 million in monthly revenue from the Delta deal could lead to a cascade of defaults, Mesa said.

Hawaiian Airlines and go! are the only major interisland carriers operating in Hawai'i following the collapse of Aloha Airlines in March.

With less competition and higher jet fuel costs, interisland carriers have been raising prices. Hawaiian announced Wednesday it will increase its lowest fare to $64 from $54 next week.

While changes in the interisland market are a concern to Hawai'i travelers, an even bigger problem may lie ahead for the state's tourism industry as major airlines struggle with higher fuel prices.

Airline executives and analysts say the industry is facing its toughest challenge yet, with little prospect that carriers can return to profits anytime soon.

Even though most of the big airline companies have large cash stockpiles, analysts suggest they could burn through their cash and go bankrupt by early next year. Already, several smaller airlines have filed for bankruptcy protection or simply shut down in recent months.

"This is worse than 9/11," said Ray Neidl, an analyst with Calyon Securities. After the 2001 terror attacks, "at least you knew passengers were coming back. Oil at $130 is unsolvable."

Among the largest airlines, analysts rate US Airways as the most likely to be pushed into bankruptcy, followed by United Airlines parent UAL Corp.

Major airlines are already raising fares — nearly a dozen times already this year — and mining other fees, anything to bring in money.

Some worry that fares could rise so sharply that they will change the very nature of air travel.

Herb Kelleher, the iconic co-founder of Southwest Airlines who stepped down as chairman Wednesday, said flying could become something that only business travelers or the affluent can afford, much as it was in the 1950s and '60s.

"You may see a lot less air service across the United States, and that's really a shame," Kelleher said. "We are heading back in that direction."

A 94 percent increase in the price of jet fuel the past year may push some airlines into bankruptcy, Soleil Securities Corp. analyst James Higgins said yesterday.

"Oil's going to have to fall back to $90 before anybody should be positive about things," said Roger King, a debt analyst at New York-based CreditSights Inc.

"The biggest problem is that we don't know the size of the market that's willing to pay to cover the full cost of airline service," King said. "I'm not even sure the airlines know. They're not raising fares very fast. And the longer they delay in really zapping up fares, the more cash is going out the back door paying for the fuel bills."

SUIT AGAINST DELTA

For Mesa, a key to its near-term future is holding onto its Delta operations. Delta accounted for approximately 20 percent of its 2007 revenue. Losing the deal to provide Delta regional service would cost the company an estimated $960 million over the next four years.

In addition, Mesa would be on the hook for leases for 34 regional jets that it likely would be unable to redeploy to other routes. It estimated aircraft leasing, labor and other costs at $250 million to $300 million over the next four years.

Such a scenario would lead to a cascade of defaults unless the company can restructure debt, acquire additional capital or otherwise restructure.

"In such event, the company's financial condition would require that the company seek protection under applicable U.S. reorganization laws in order to avoid or delay actions by its lessors, creditors, and code-share partners, which could materially adversely affect the company's ability to continue as a going concern," the company said in its SEC filing.

Mesa filed suit against Delta last month in an effort to prevent the company from ending its service agreements. Delta told Mesa that it was canceling its deals because of performance issues on its Freedom Airlines subsidiary, which Mesa in turn blamed on Delta's actions. A hearing on the suit is set to begin Tuesday.

Mesa has been struggling for the past several months.

Last week, the airline said it will shut down subsidiary carrier Air Midwest, cutting off service to 16 small cities in 10 states, because of soaring fuel prices. Air Midwest operated government-subsidized "essential air service" flights to the cities.

Mesa's finances have been hit in many other areas.

Its Hawai'i carrier, go!, has struggled to make a profit and sparked a lawsuit with Hawaiian Airlines Inc. that ended with Mesa agreeing to pay $52.5 million.

Last week, Mesa shareholders authorized issuing millions of new shares to help the company pay off $37.8 million in senior convertible notes due in June. A separate company filing yesterday said the carrier agreed with some of its bondholders to repurchase some of the notes and get a delay in requiring the company to buy back others.

The carrier's shares have dropped more than 75 percent in value since the beginning of the year. Mesa shares lost 9 cents to close at 48 cents yesterday.

FUELING THE TROUBLES

The higher fares and new fees the largest airlines are charging are irritating air travelers, but airlines still can't raise money or cut flights fast enough to cover ever-higher fuel prices.

Bill Warlick, an analyst with Fitch Ratings, said US Airways Group Inc. could face a crunch next winter if revenue drops in the slow fall travel season and fuel remains at current prices. He said the airline has fewer options for raising cash — it can't fetch as much by spinning off assets as others — and without strong international routes is more vulnerable to a weakening U.S. economy.

Many airlines were already charging $25 to check a second piece of luggage, but American Airlines will break new ground next month by charging $15 for the first bag.

Citigroup analyst Andrew Light estimated that if the new fee hits 20 percent of American's passengers — elite frequent fliers, those paying full fare and those on international flights are exempt — it will raise $320 million.

But American's estimated fuel bill for 2008 has gone up $3 billion just since the beginning of the year.

American announced Wednesday that it will cut 11 percent to 12 percent of its U.S. flights later this year and lay off workers — probably thousands of them, although officials declined to give a figure.

United announced last month that it will cut 1,100 jobs and reduce flights, and Delta wants to cut 2,000 jobs.

Both United and Delta have already announced plans to cut capacity about as much as American, which would reduce their fuel burn and leave travelers fighting for seats on fewer planes.

"Less capacity will inevitably mean higher fares," said Southwest Airlines Co. chief Gary Kelly. Southwest has also raised fares but, unlike other U.S. carriers, is still growing, though at a much slower pace than a year ago.

Analysts said American's announcement was only a first step toward further cutbacks. Neidl estimated that the major carriers have made only about half the capacity reductions they need to push fares high enough so the airlines can break even.

Passengers are wondering how long they can afford to fly.

And many, like Roger and Kathy French of Ayer, Mass., who checked four bags on their return from Hawai'i to Boston's Logan Airport aboard an American Airlines flight yesterday, are annoyed by the surge in extra fees.

"Pretty soon you're going to be paying more for your luggage than to get to your destination," Roger French said.

Others were considering how to limit their fees next time. Robin Grossman, a phone company manager from Lunenberg, Mass., also returning to Boston from Hawai'i, said she'll think twice when packing.

"I would travel, but I probably wouldn't take a second checked bag," she said. "I would try to carry on as much as I could."

The Associated Press and Bloomberg News contributed to this report.