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No Deal for Atlantic Coast, United

July 2, 2003

DULLES, Va. (AP) _ Atlantic Coast Airlines Holdings Inc. Wednesday said it failed to reach an agreement on replacing existing contracts with United Airlines.

Atlantic Coast, a regional airline that operates under the United Express and Delta Connection brands in the Eastern and Midwestern United States and Canada, said it will keep working on contingency plans that would allow it to establish alternatives to the United business if agreements can’t be reached.

The regional carrier said it has held talks with United over terms of a new contract to replace the existing United Express agreements but said the companies were unable to reach an agreement on terms it believes are ``acceptable″ during their last discussion June 30.

In May, United asked a bankruptcy-court judge to prevent Atlantic Coast from walking out on a contract to provide regional airline service. About a month earlier, Dulles-based Atlantic Coast accused United of being in default on the contract, because it wasn’t negotiating new rates in ``good faith.″

United, which is based in Elk Grove Village, Ill., filed for federal bankruptcy protection in December.

In morning trading Wednesday, Atlantic Coast’s shares were down $1.52, or 14 percent, at $9.64 on the Nasdaq National Market.

On Tuesday, the company’s stock fell 19 percent after a Merrill Lynch analyst lowered his investment rating on Atlantic Coast to ``neutral″ from ``buy.″

Separately, United reached deal Wednesday that will allow Air Wisconsin Airlines Corp. to continue to operate under the United Express brand for 11 more years.

A United spokesman declined to disclose financial terms, while Air Wisconsin officials weren’t immediately available to discuss the new agreement.

United and Air Wisconsin have been partners since 1984.

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