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                                                                 Exhibit 10.5(b)

                                [AMR LETTERHEAD]




                                  July 30, 2002


Mr. Bryan Bedford
President and CEO
Chautauqua Airlines, Inc.
Indianapolis International Airport
Suite 160
2500 High School Road
Indianapolis, IN 46241

         Re:    Letter Agreement

Dear Mr. Bedford:

         This Letter Agreement ("Letter Agreement"), effective as of the date
hereof, evidences the understanding of AMR Corporation. ("AMR") and Chautauqua
Airlines, Inc. ("Chautauqua") regarding the transactions set forth herein (the
"Transactions") pending the negotiation and execution of expanded documentation
for such Transactions.

         1.       GENERAL TERMS.

                  A.       AMR and Chautauqua will amend the existing Amended
and Restated American Connection Air Services Agreement, dated as of June 12,
2002, between AMR and Chautauqua (the "Agreement") as follows:

                           (i) AMR may, from time to time and at any time, as it
         determines in its sole discretion, remove or add the AA flight
         designator from or to some or all of the Feeder Air Service Flights (as
         defined in the Agreement) of Chautauqua, provided that it provides
         Chautauqua with the right, subject to the terms and conditions of this
         Letter Agreement, to operate such Feeder Air Service Flights under an
         alternative flight designator. AMR's present intent is (a) to remove
         the AA flight designator from a substantial number, if not all, of
         Chautauqua's Feeder Air Service Flights, (b) to enter into an agreement
         with a cooperating American Connection carrier (a "Cooperating
         Carrier") whereby American Airlines, Inc. ("American") will be able to
         place on certain American Airlines' flights the designator code of the
         Cooperating Carrier, and (c) to facilitate an

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                           appropriate agreement between the Cooperating Carrier
         and Chautauqua pursuant to which Chautauqua will be provided with the
         right to put the designator code of the Cooperating Carrier on the
         Feeder Air Service Flights of Chautauqua and will agree to do so
         subject to the terms and conditions provided herein;

                           (ii) Chautauqua shall operate the Feeder Air Service
         Flights only (a) under the AA flight designator code (where AMR
         requests such flight designator be used) or (b) under flight designator
         codes approved by AMR as provided herein. AMR will approve at least one
         flight designator code under which Chautauqua may operate its Feeder
         Air Service Flights, but such approval may require Chautauqua to enter
         into a Codeshare Agreement (as defined below) with a Cooperating
         Carrier; and

                           (iii) All other provisions of the Air Services
         Agreement, including but not limited to each party's obligations to
         make payments and provide services thereunder, shall remain in full
         force and effect.

                  B.       If requested by one or more Cooperating Carriers to
enter into a codeshare agreement (a "Codeshare Agreement") with such
Cooperating Carriers allowing such Cooperating Carriers to place their flight
designators on the Feeder Air Service Flights operated by Chautauqua,
Chautauqua shall negotiate a Codeshare Agreement with each such Cooperating
Carrier. Chautauqua's obligation to enter into a Codeshare Agreement with a
Cooperating Carrier shall be conditioned on such Codeshare Agreement including
the following terms and conditions:

         (i)      Indemnification by Chautauqua of the Cooperating Carrier for
                  all claims arising from the transport of passengers by
                  Chautauqua under the applicable Codeshare Agreement, except to
                  the extent such claims arise as a result of the gross
                  negligence or willful misconduct of the Cooperating Carrier;
         (ii)     Indemnification by the Cooperating Carrier of Chautauqua for
                  all claims arising from the willful misconduct or negligent
                  acts or omissions of the Cooperating Carrier and for breach of
                  the Cooperating Carrier's representations and warranties under
                  the Codeshare Agreement;
         (iii)    Common ticket stock to be used for all ticketing for all seats
                  sold under such Codeshare Agreement;
         (iv)     The Cooperating Carrier will have no financial claim to
                  revenues from Codeshare Agreement tickets flown on Chautauqua;
         (v)      Apportionment of revenue for tickets with any other carrier's
                  flight designator will be done in accordance with each
                  carrier's Air Services Agreement, or related document, with
                  AMR or American Airlines, Inc. or as otherwise agreed upon in
                  writing by the parties;

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Chautauqua Airlines, Inc.
July 30, 2002
Page 3

         (vi)     The term of such Codeshare Agreement shall be three years from
                  the date hereof, provided that in the event of a termination
                  of the Agreement for any reason, the Codeshare Agreement shall
                  terminate concurrently therewith;
         (vii)    The Cooperating Carrier shall not prohibit Chautauqua from
                  placing other flight designators on its flights carrying the
                  code of another carrier;
         (viii)   The Cooperating Carrier shall have no right to set fares for
                  flights operated by Chautauqua;.
         (ix)     The Codeshare Agreement shall not modify any provisions of the
                  Agreement; and
         (x)      The Codeshare Agreement shall not place any obligations on
                  Chautauqua that are more onerous than those under the
                  Agreement.

         2.       ADDITIONAL DOCUMENTATION. This Letter Agreement sets forth
the essential terms and conditions, but not every term and condition, with
respect to the Transactions. This Letter Agreement is intended to serve as a
binding interim agreement and a guide in the negotiation of the amendment to
the Agreement, and any related documentation (the "Additional Documentation").
After the execution of this Letter Agreement by AMR and Chautauqua, the
undersigned will proceed to negotiate the Additional Documentation. Each of
AMR and Chautauqua will each engage in good faith negotiations with the other
and use its reasonable efforts to execute, as soon as practicable, the
Additional Documentation for the Transactions before August 15, 2002.

         3.       CONFIDENTIALITY. The parties hereto agree that, until entry
into the Additional Documentation, the terms of Article 11 of the Agreement
(Confidentiality) shall apply to the terms of the Transaction and to the
information to be exchanged by the parties, provided that to the extent
required by law, including in connection with the filing of a registration
statement by Republic Airways Holdings, Inc., Chautauqua may disclose, without
redaction, the terms and conditions of this Letter Agreement.

         4.       COSTS. AMR shall bear the reasonable costs of any systems
development required to implement the Transactions. Each party shall bear its
own costs and expenses of negotiating and documenting the Transactions.

         5.       BINDING LETTER. Notwithstanding the fact that Additional
Documentation has not yet been executed, the parties intend for this Letter
Agreement to be binding upon each of the parties hereto and shall only
terminate upon termination of the Agreement.

         6.       INDEPENDENT CONTRACTOR. Each party is an independent
contractor working for itself and this Letter shall not constitute or be
considered to create a partnership, joint venture, agency, fiduciary,
work-for-hire, or employee-employer relationship between the parties.

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Chautauqua Airlines, Inc.
July 30, 2002
Page 4


         7.       ASSIGNMENT. Neither of the undersigned may assign or
otherwise convey this Letter Agreement or any of its rights and obligations
hereunder, to any third party without the prior written consent of the other
party, which may be withheld in such party's sole discretion, and any such
attempted assignment without consent shall be void. This Letter Agreement
shall be binding upon and shall inure to the benefit of the permitted
successors and assigns of each party hereto.

         8.       NOTICE AND GOVERNING LAW. The Notice and Governing Law
provisions of the Agreement shall be incorporated in, and applicable to, this
Letter Agreement as if spelled out herein.

         9.       ENTIRE AGREEMENT. This Letter Agreement and the Agreement,
as amended hereby, constitute the entire agreement between the parties, and
supersede any and all previous representations, understanding, discussions or
agreements between the parties, with respect to the subject matter of this
Letter Agreement and the Agreement and may only be amended by an instrument in
writing signed by the parties.

         10.      COUNTERPARTS. This Letter Agreement may be executed in any
number of counterparts, each of which when executed and delivered shall be
deemed an original, but all such counterparts together shall constitute one
and the same instrument.

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Chautauqua Airlines, Inc.
July 30, 2002
Page 5


         Please confirm your agreement to and acceptance of the foregoing by
signing the original of this Letter Agreement and returning a copy of the fully
executed instrument to the undersigned via facsimile and one fully executed
original to the undersigned via overnight courier.


                                           Very truly yours,

                                           AMR CORPORATION


                                           By: /s/ Kenneth Wimberley
                                              --------------------------------
                                           Name: Kenneth Wimberley
                                                ------------------------------
                                           Title: Asst. Corporate Secretary
                                                 -----------------------------




ACKNOWLEDGED, AGREED AND ACCEPTED
THIS        DAY OF JULY, 2002:

CHAUTAUQUA AIRLINES, INC.



By: /s/ Bryan Bedford
   -------------------------------
Name: Bryan Bedford
     -----------------------------
Title: President and CEO
      ----------------------------