Mesa Air Group ( MESA) said net income fell during the most recent quarter, causing it to miss analysts' expectations, but the carrier hopes to reverse its fortunes when it starts operating in China this year.

Mesa, which primarily flies small planes for major network carriers, earned $8 million, or 20 cents a share, in its fiscal first quarter. Analysts polled by Thomson Financial had forecast earnings of 24 cents a share. In the same period a year earlier, the company earned $13 million, or 31 cents a share.

The airline said it flew more costly, shorter-stage lengths due to customer demands, took airplanes out of service to repaint them, faced winter weather challenges and had higher maintenance costs. Additionally, Mesa's Hawaiian island operation, called go!, is losing money.

Under a contract with Shenzhen Airlines, Mesa will create a Chinese regional service expected to be in place for the 2008 Olympics. On a conference call, CEO Jonathan Ornstein said the airline will initially operate 20 jets with 50 seats and could eventually operate more than 100 aircraft, some of them Chinese-built planes expected to be available in 2011.

"We are looking for airplanes to operate until we could operate the Chinese aircraft," he said.

Ornstein also said go! fills about 64% of its seats and lost an undisclosed sum, but noted that it accounts for just 2% of Mesa's capacity and will likely turn profitable.

Mesa is unlikely to follow rival ExpressJet ( XJT), which announced it will launch an independent operation to 24 cities using at least 44 aircraft, Ornstein said. Given lower costs throughout the airline industry, he said the opportunity "has come and gone in terms of start-ups for independent carriers" and that he prefers to have a partner's financial backing.