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UBS raised its price target for

Mesa Airlines

(MESA) - Get Mesa Air Group Inc Report

, saying the regional airline could post better-than-expected growth in the next few quarters.

Analyst Robert Ashcroft boosted his price target to $16.50 from $14.50, citing a three-way deal among Mesa, bankrupt

UAL

(UAL) - Get United Airlines Holdings, Inc. Report

unit United Airlines and

America West

( AWA). Under the new agreement, Mesa will fly 15 regional jets for United instead of flying 15 for America West, boosting near-term traffic in its lucrative United partnership.

Despite the upgrade, shares in the Phoenix-based airline gave back an early gain of 2.5% and were recently off 37 cents, or 3.3%, at $10.75.

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One reason for the weakness was Ashcroft's warning that a Mesa plan to fly regional jets for US Airways seems like it's softening, with Mesa only taking 20 planes from US Air in 2004, instead of 25, because planemaker Bombardier is running out of time to deliver planes in time. But even with this reduction, Ashcroft said, Mesa's growth prospects in 2004 and 2005 seem good.

"The net of our projected US Airways reduction and the America West/United deal is still a positive in overall Mesa growth.

Our projected 2005 available seat miles

are 10.3 billion, up from 9.9 billion before. But we'd like to see US Airways and Mesa ink a deal sooner than later, and we will grow increasingly concerned if this drags too far into October," said Ashcroft.

October will be a key month not only for the US Airways and Mesa partnership, but for Mesa rival Midway Airlines. US Airways said it would withdraw financing from Midway if the Chicago-based regional airline can't emerge from Chapter 11 by Oct. 31. According to Ashcroft, if Midway were to stumble, Mesa would be the first place US Airways turns to replace the eight regional jets Midway would have flown.

"Midway's regional jets would increase Mesa's yearly earnings per share by about 5 cents, but it's too soon to count on this," said Ashcroft.

The analyst also increased his price target on

SkyWest

(SKYW) - Get SkyWest, Inc Report

to $19 from $18, because the Salt Lake City-based carrier will take slightly faster deliveries of regional jets in 2004 and 2005. Earlier, Ashcroft expected the airline to take 12 deliveries in 2004 and 24 in 2005, which has been revised to 15 and 27, respectively.

SkyWest shares were down 42 cents, or 2.4%, at $17.28. The Amex Airline Index was off 0.6%.