| **UNITED STATES**                      |
|----------------------------------------|
| **SECURITIES AND EXCHANGE COMMISSION** |
| **WASHINGTON, D.C. 20549**             |

****

**Form 10-Q**

****

| **[X]**                  |                                                           | **Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of1934**  |
|--------------------------|-----------------------------------------------------------|---------------------------------------------------------------------------------------------|
|                          | **For the quarterly period ended June 30, 2010**          |
|                          | **or**                                                    |
| **[   ]** |                                                           | **Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of1934** |
|                          | **For the transition period from__________ to__________** |

Commission File Number 1-31300

**EXPRESSJET HOLDINGS, INC.***(Exact name of registrant as specified in its charter)*

| **Delaware**(*State or other jurisdiction of incorporation ororganization)*                                | **    ** | **76-0517977***(I.R.S. Employer Identification No.)* |
|------------------------------------------------------------------------------------------------------------|------------------------------|------------------------------------------------------|
|                                                                                                  |                              |                                                      |
| **700 North Sam Houston Parkway West, Suite 200 Houston, Texas***(Address of principal executive offices)* |                              | **77067***(Zip Code)*                                |

**832-353-1000***(Registrant's telephone number, including area code)*

**NOT APPLICABLE***(**Former name, former address and former fiscal year, ifchanged since last report)*

            Indicate by check mark whetherthe registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 duringthe preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has beensubject to such filing requirements for the past 90 days.

|      Yes   | [ X ]  |     No  | [   ]  |
|-----------------------------------------------|-----------------------|----------------------------------|----------------------------|

            Indicate by check mark whetherthe registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to besubmitted and posted pursuant to Rule 405 of Regulation S‐T (§232.405 of this chapter) during the preceding 12 months(or for such shorter period that the registrant was required to submit and post such files).

|      Yes   | [   ]  |     No  | [  ]  |
|-----------------------------------------------|-----------------------|----------------------------------|----------------------|

            Indicate by check mark whetherthe registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reportingcompany” in Rule 12b-2 of the Exchange Act. 

| Large accelerated filer  | [   ]  |  | Accelerated filer          | [    ] |
|-------------------------------|----------------------------|--|---------------------------------|----------------------------|
| Non-accelerated filer    | [   ]  |  | Smaller reporting company  | [ X ]            |

            Indicate by check mark whetherthe registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

|      Yes   | [   ]  |      No   | [ X ]  |
|-----------------------------------------------|----------------------------|----------------------------------------------|-----------------------|

As of August 9, 2010, 17,644,730 shares of common stock wereoutstanding.**

----

**TABLE OF CONTENTS**

| **PART I.**       |         | **FINANCIAL INFORMATION**                                                                                          |   | **PAGE** |
|-------------------|--------------|--------------------------------------------------------------------------------------------------------------------|--------|----------|
| Item 1.           |         | Financial Statements:                                                                                              |        |          |
|              |         | Condensed Consolidated Statements of Operations: Three Months Ended June 30, 2010 (Unaudited) and 2009 (Unaudited) |        | 1        |
|              |         | Condensed Consolidated Statements of Operations: Six Months Ended June 30, 2010 (Unaudited) and 2009 (Unaudited)   |        | 1        |
|              |    | Condensed Consolidated Balance Sheets; June 30, 2010 (Unaudited) and December 31, 2009                             |        | 3        |
|              |    |   Assets                                                                                                 |        | 3        |
|              |    |   Liabilities and Stockholders’ Equity                                                             |        | 4        |
|                   |              | Condensed Consolidated Statements of Cash Flows: Six Months Ended June 30, 2010 (Unaudited) and 2009 (Unaudited)   |        | 5        |
|                   |              | Notes to Condensed Consolidated Financial Statements(Unaudited)                                                    |        | 6        |
| Item 2.           |         | Management’s Discussion and Analysis of Financial Conditionand Results of Operations                         |        | 23       |
| Item 3.           |         | Quantitative and Qualitative Disclosures About MarketRisk                                                          |        | 37       |
| Item 4.           |              | Controls and Procedures                                                                                            |        | 39       |
| **PART II.** |         | **OTHER INFORMATION**                                                                                              |        |          |
| Item 1.           |              | Legal Proceedings                                                                                                  |        | 40       |
| Item 1A.          |              | Risk Factors                                                                                                       |        | 40       |
| Item 2.           |              | Unregistered Sales of Equity Securities and Use ofProceeds                                                         |        | 41       |
| Item 3.           |              | Defaults Upon Senior Securities                                                                                    |        | 42       |
| Item 4.           |              | Submission of Matters to a Vote of SecurityHolders                                                                 |        | 42       |
| Item 5.           |              | Other Information                                                                                                  |        | 42       |
| Item 6.           |              | Exhibits                                                                                                           |        | 43       |
|                   |              | Signatures                                                                                                         |        | 44       |

**

----

**

Table of Contents

****

**EXPRESSJET HOLDINGS, INC. AND SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS(In thousands, except per share data)**

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  |   | **Three Months Ended June 30,** |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--|---|---------------------------------|---|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  |   |                                 |   |
|                                                                                  |  |   | **2010**                        |   |  |  | **2009** |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  |   | ****                            |   |  |  | **** |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  |   | (Unaudited)                     |   |  |  | (Unaudited) |  |
| Operating Revenue:                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |  |   |                                 |   |  |  |  |  |
|   Passenger                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |  | $ | 189,621                         |   |  | $ | 149,383 |  |
|   Corporate Aviation                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |  |   | 7,894                           |   |  |  | 12,825 |  |
|   Ground handling and other                                                                                                                                                                                                                                                                                                                                                                                                                                                            |  |   | 9,525                           |   |  |  | 8,380 |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  |   |                                 |   |  |  |  |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  |   | 207,040                         |   |  |  | 170,588 |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  |   |                                 |   |  |  |  |  |
| Operating Expenses:                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |  |   |                                 |   |  |  |  |  |
|   Wages, salaries and related costs                                                                                                                                                                                                                                                                                                                                                                                                                                                    |  |   | 91,571                          |   |  |  | 79,619 |  |
|   Maintenance, materials and repairs                                                                                                                                                                                                                                                                                                                                                                                                                                                   |  |   | 48,737                          |   |  |  | 40,703 |  |
|   Other rentals and landing fees                                                                                                                                                                                                                                                                                                                                                                                                                                                       |  |   | 20,049                          |   |  |  | 16,230 |  |
|   Aircraft fuel and related taxes                                                                                                                                                                                                                                                                                                                                                                                                                                                      |  |   | 11,764                          |   |  |  | 2,399 |  |
|   Depreciation and amortization                                                                                                                                                                                                                                                                                                                                                                                                                                                        |  |   | 6,591                           |   |  |  | 7,721 |  |
|   Aircraft rentals                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |  |   | 6,774                           |   |  |  | 5,472 |  |
|   Outside services                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |  |   | 4,769                           |   |  |  | 6,132 |  |
|   Ground handling                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |  |   | 1,570                           |   |  |  | 2,496 |  |
|   Impairment of fixed assets                                                                                                                                                                                                                                                                                                                                                                                                                                                           |  |   | 3,075                           |   |  |  | — |  |
|   Other operating expenses                                                                                                                                                                                                                                                                                                                                                                                                                                                             |  |   | 20,894                          |   |  |  | 20,697 |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |  |   |                                 |   |  |  |  |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |  |   | 215,794                         |   |  |  | 181,469 |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |  |   |                                 |   |  |  |  |  |
| Operating Loss                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |  |   | (8,754                          | ) |  |  | (10,881 | ) |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |  |   |                                 |   |  |  |  |  |
| Non-operating Income (Expense):                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  |   |                                 |   |  |  |  |  |
|   Gain on sale of short-term investments, net                                                                                                                                                                                                                                                                                                                                                                                                                                          |  |   | 700                             |   |  |  | — |  |
|   Amortization of debt discount                                                                                                                                                                                                                                                                                                                                                                                                                                                        |  |   | (1,538                          | ) |  |  | (1,523 | ) |
|   Interest expense, net of capitalized interest                                                                                                                                                                                                                                                                                                                                                                                                                                        |  |   | (1,443                          | ) |  |  | (2,043 | ) |
|   Interest income                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |  |   | 55                              |   |  |  | 289 |  |
|   Other, net                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |  |   | (37                             | ) |  |  | (16 | ) |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  |   |                                 |   |  |  |  |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  |   | (2,263                          | ) |  |  | (3,293 | ) |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  |   |                                 |   |  |  |  |  |
| Loss before Income Taxes                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |  |   | (11,017                         | ) |  |  | (14,174 | ) |
| Income Tax (Expense) Benefit                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |  |   | (7,582                          | ) |  |  | 1,077 |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |  |   |                                 |   |  |  |  |  |
| Net Loss                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |  | $ | (18,599                         | ) |  | $ | (13,097 | ) |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |  |   |                                 |   |  |  |  |  |
| Basic and Diluted Loss per Common Share                                                                                                                                                                                                                                                                                                                                                                                                                                                          |  | $ | (0.99                           | ) |  | $ | (0.88) |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |  |   |                                 |   |  |  |  |  |
| Shares Used in Computing Basic and Diluted Loss per     Common Share                                                                                                                                                                                                                                                                                                                                                                                                         |  |   | 18,867                          |   |  |  | 14,885 |  |

The accompanying notes are an integral part of these condensed consolidated financialstatements.

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Table of Contents

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**EXPRESSJET HOLDINGS, INC. AND SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS(In thousands, except per share data)**

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  |   | **Six Months Ended June 30,** |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--|---|-------------------------------|---|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  |   |                               |   |
|                                                                                  |  |   | **2010**                      |   |  |  | **2009** |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  |   | ****                          |   |  |  | **** |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  |   | (Unaudited)                   |   |  |  | (Unaudited) |  |
| Operating Revenue:                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |  |   |                               |   |  |  |  |  |
|   Passenger                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |  | $ | 354,669                       |   |  | $ | 294,344 |  |
|   Corporate Aviation                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |  |   | 23,415                        |   |  |  | 28,875 |  |
|   Ground handling and other                                                                                                                                                                                                                                                                                                                                                                                                                                                            |  |   | 18,237                        |   |  |  | 17,078 |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  |   |                               |   |  |  |  |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  |   | 396,321                       |   |  |  | 340,297 |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  |   |                               |   |  |  |  |  |
| Operating Expenses:                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |  |   |                               |   |  |  |  |  |
|   Wages, salaries and related costs                                                                                                                                                                                                                                                                                                                                                                                                                                                    |  |   | 182,765                       |   |  |  | 159,294 |  |
|   Maintenance, materials and repairs                                                                                                                                                                                                                                                                                                                                                                                                                                                   |  |   | 93,658                        |   |  |  | 79,143 |  |
|   Other rentals and landing fees                                                                                                                                                                                                                                                                                                                                                                                                                                                       |  |   | 37,549                        |   |  |  | 29,124 |  |
|   Aircraft fuel and related taxes                                                                                                                                                                                                                                                                                                                                                                                                                                                      |  |   | 20,679                        |   |  |  | 5,620 |  |
|   Depreciation and amortization                                                                                                                                                                                                                                                                                                                                                                                                                                                        |  |   | 13,245                        |   |  |  | 15,787 |  |
|   Aircraft rentals                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |  |   | 13,207                        |   |  |  | 10,944 |  |
|   Outside services                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |  |   | 10,039                        |   |  |  | 13,727 |  |
|   Ground handling                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |  |   | 4,521                         |   |  |  | 5,601 |  |
|   Impairment of fixed assets                                                                                                                                                                                                                                                                                                                                                                                                                                                           |  |   | 3,075                         |   |  |  | — |  |
|   Other operating expenses                                                                                                                                                                                                                                                                                                                                                                                                                                                             |  |   | 40,811                        |   |  |  | 42,954 |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |  |   |                               |   |  |  |  |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |  |   | 419,549                       |   |  |  | 362,194 |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |  |   |                               |   |  |  |  |  |
| Operating Loss                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |  |   | (23,228                       | ) |  |  | (21,897 | ) |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |  |   |                               |   |  |  |  |  |
| Non-operating Income (Expense):                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  |   |                               |   |  |  |  |  |
|   Gain on sale of short-term investments, net                                                                                                                                                                                                                                                                                                                                                                                                                                          |  |   | 700                           |   |  |  | 482 |  |
|   Extinguishment of debt                                                                                                                                                                                                                                                                                                                                                                                                                                                               |  |   | (1,717                        | ) |  |  | (83 | ) |
|   Amortization of debt discount                                                                                                                                                                                                                                                                                                                                                                                                                                                        |  |   | (3,289                        | ) |  |  | (1,673 | ) |
|   Interest expense, net of capitalized interest                                                                                                                                                                                                                                                                                                                                                                                                                                        |  |   | (3,084                        | ) |  |  | (4,010 | ) |
|   Interest income                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |  |   | 227                           |   |  |  | 636 |  |
|   Equity investments loss, net                                                                                                                                                                                                                                                                                                                                                                                                                                                         |  |   | —                       |   |  |  | (377 | ) |
|   Other, net                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |  |   | (248                          | ) |  |  | (1,129 | ) |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  |   |                               |   |  |  |  |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  |   | (7,411                        | ) |  |  | (6,154) |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  |   |                               |   |  |  |  |  |
| Loss before Income Taxes                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |  |   | (30,639                       | ) |  |  | (28,051 | ) |
| Income Tax (Expense) Benefit                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |  |   | (4,090                        | ) |  |  | 3,550 |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |  |   |                               |   |  |  |  |  |
| Net Loss                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |  | $ | (34,729                       | ) |  | $ | (24,501 | ) |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |  |   |                               |   |  |  |  |  |
| Basic and Diluted Loss per Common Share                                                                                                                                                                                                                                                                                                                                                                                                                                                          |  | $ | (1.92                         | ) |  | $ | (1.54 | ) |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |  |   |                               |   |  |  |  |  |
| Shares Used in Computing Basic and Diluted Loss per     Common Share                                                                                                                                                                                                                                                                                                                                                                                                         |  |   | 18,115                        |   |  |  | 15,952 |  |

The accompanying notes are an integral part of these condensed consolidated financialstatements.

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Table of Contents

**EXPRESSJET HOLDINGS, INC. AND SUBSIDIARIESCONDENSED CONSOLIDATED BALANCE SHEETS(In thousands)**

| **ASSETS**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |            |   | **June 30,** |        |   | **December 31,** |        |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|---|--------------|--------|---|------------------|--------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |            |   | **2010**     |        |   | **2009**         |        |
|                                                                                          | ** ** |   | ****         |        |   | ****             |        |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |            |   | (Unaudited)  |        |   |                  |        |
| Current Assets:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |            |   |              |        |   |                  |        |
|   Cash and cash equivalents                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |            | $ | 86,891       |   | $ | 80,980           |   |
|   Restricted cash                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |            |   | 20,380       |        |   | 17,738           |        |
|   Short-term investments                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |            |   | 967          |        |   | 9,082            |        |
|   Accounts receivable, net of allowance of $1.2 million and $1.5     million, respectively                                                                                                                                                                                                                                                                                                                                                                                                                         |            |   | 9,860        |        |   | 9,351            |        |
|   Spare parts and supplies, net                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |            |   | 19,230       |        |   | 20,205           |        |
|   Income tax receivable                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |            |   | 1,210        |        |   | 18,523           |        |
|   Deferred Income Taxes – See Note 7                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |            |   | 8,469        |        |   | 8,469            |        |
|   Prepayments and other                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |            |   | 10,241       |        |   | 4,786            |        |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |            |   |              |        |   |                  |        |
|     Total Current Assets                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |            |   | 157,248      |        |   | 169,134          |        |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |            |   |              |        |   |                  |        |
| Property and Equipment:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |            |   |              |        |   |                  |        |
|   Flight equipment                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |            |   | 209,157      |        |   | 209,704          |        |
|   Other                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |            |   | 139,964      |        |   | 140,412          |        |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |            |   |              |        |   |                  |        |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |            |   | 349,121      |        |   | 350,116          |        |
|   Less:  Accumulated depreciation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |            |   | (175,314     | )      |   | (162,000         | )      |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |            |   |              |        |   |                  |        |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |            |   | 173,807      |        |   | 188,116          |        |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |            |   |              |        |   |                  |        |
| Debt Issuance Cost, net                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |            |   | 722          |        |   | 1,056            |        |
| Other Assets, net                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |            |   | 8,339        |        |   | 2,152            |        |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |            |   |              |        |   |                  |        |
|     Total Assets                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |            | $ | 340,116      |        | $ | 360,458          |        |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |            |   |              |        |   |                  |   |

The accompanying notes are an integral part of these condensed consolidated financialstatements.

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Table of Contents

**EXPRESSJET HOLDINGS, INC. AND SUBSIDIARIESCONDENSED CONSOLIDATED BALANCE SHEETS(In thousands, except share data)**

****

| **LIABILITIES AND STOCKHOLDERS' EQUITY**                                                                                                              |  |   | **June 30, 2010** |   |  |   | **December 31, 2009** |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------------|--|---|-------------------|---|--|---|-----------------------|---|
|                                                                                                                                                       |  |   | ****              |   |  |   | ****                  |   |
|                                                                                                                                                       |  |   | (Unaudited)       |   |  |   |                       |   |
| Current Liabilities:                                                                                                                                  |  |   |                   |   |  |   |                       |   |
|   Current maturities of long-term debt                                                                                                      |  | $ | 3,459             |   |  | $ | 3,459                 |   |
|   Current portion of 11.25% Convertible Secured Notes due 2023,     net of discount of $1,908 and $0, respectively      |  |   | 8,092             |   |  |   | —               |   |
|   Accounts payable                                                                                                                          |  |   | 9,090             |   |  |   | 4,144                 |   |
|   Accrued payroll and related costs                                                                                                         |  |   | 46,509            |   |  |   | 37,914                |   |
|   Accrued airport service costs                                                                                                             |  |   | 7,226             |   |  |   | 6,761                 |   |
|   Accrued maintenance, materials and repair costs                                                                                           |  |   | 16,776            |   |  |   | 13,087                |   |
|   Accrued taxes                                                                                                                             |  |   | 7,296             |   |  |   | 7,288                 |   |
|   Amounts due to Continental Airlines, net                                                                                                  |  |   | 1,921             |   |  |   | 1,687                 |   |
|   Credit facility                                                                                                                           |  |   | —           |   |  |   | 5,000                 |   |
|   Accrued other liabilities                                                                                                                 |  |   | 9,876             |   |  |   | 17,521                |   |
|                                                                                                                                                       |  |   |                   |   |  |   |                       |   |
|     Total Current Liabilities                                                                                                     |  |   | 110,245           |   |  |   | 96,861                |   |
|                                                                                                                                                       |  |   |                   |   |  |   |                       |   |
| Long-term Debt                                                                                                                                        |  |   | 659               |   |  |   | 2,389                 |   |
|                                                                                                                                                       |  |   |                   |   |  |   |                       |   |
| 11.25% Convertible Secured Notes due 2023, net of discount of     $6,404 and $13,534, respectively                                |  |   | 27,157            |   |  |   | 38,577                |   |
|                                                                                                                                                       |  |   |                   |   |  |   |                       |   |
| Deferred Income Taxes – See Note 7                                                                                                              |  |   | 30,274            |   |  |   | 26,134                |   |
|                                                                                                                                                       |  |   |                   |   |  |   |                       |   |
| Other Long-term Liabilities                                                                                                                           |  |   | 272               |   |  |   | 367                   |   |
|                                                                                                                                                       |  |   |                   |   |  |   |                       |   |
| Commitments and Contingencies – See Note 9                                                                                                      |  |   |                   |   |  |   |                       |   |
|                                                                                                                                                       |  |   |                   |   |  |   |                       |   |
| Stockholders’ Equity:                                                                                                                           |  |   |                   |   |  |   |                       |   |
|   Preferred stock - $.01 par, 10,000,000 shares authorized, no     shares issued or outstanding, respectively           |  |   | —           |   |  |   | —               |   |
|   Common stock - $.01 par, 150,000,000 shares authorized, and     24,826,156 and 22,731,424 shares issued, respectively |  |   | 248               |   |  |   | 227                   |   |
|   Additional paid-in capital                                                                                                                |  |   | 279,382           |   |  |   | 268,096               |   |
|   Accumulated loss                                                                                                                          |  |   | (88,119           | ) |  |   | (53,328               | ) |
|   Accumulated other comprehensive income                                                                                                    |  |   | 529               |   |  |   | 644                   |   |
|   Common stock held in treasury, at cost, 7,242,470 and     7,084,450 shares, respectively                              |  |   | (20,531           | ) |  |   | (19,509               | ) |
|                                                                                                                                                       |  |   |                   |   |  |   |                       |   |
|     Total Stockholders’ Equity                                                                                              |  |   | 171,509           |   |  |   | 196,130               |   |
|                                                                                                                                                       |  |   |                   |   |  |   |                       |   |
|     Total Liabilities and Stockholders’ Equity                                                                              |  | $ | 340,116           |   |  | $ | 360,458               |   |
|                                                                                                                                                       |  |   |                   |   |  |   |                       |   |

The accompanying notes are an integral part of these condensed consolidated financialstatements.

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**EXPRESSJET HOLDINGS, INC. AND SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS****(In thousands)******

| **                                                                                          ** |  |   | **Six Months Ended June 30,** |   |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--|---|-------------------------------|---|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  |   | ****                          |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  |   | **2010**                      |   |  |  | **2009** |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  |   | ****                          |   |  |  | **** |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  |   | (Unaudited)                   |   |  |  | (Unaudited) |  |
| Net Cash Flows provided by (used in) Operating Activities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |  | $ | 18,341                        |   |  | $ | (8,494 | ) |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  |   |                               |   |  |  |  |  |
| Cash Flows from Investing Activities:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |  |   |                               |   |  |  |  |  |
|   Capital expenditures                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |  |   | (1,792                        | ) |  |  | (2,789 | ) |
|   Proceeds from the sale of property and equipment                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |  |   | 428                           |   |  |  | 9,625 |  |
|   Proceeds from sale of short-term investments                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |  |   | 8,700                         |   |  |  | 3,631 |  |
|   Investments in restricted cash                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |  |   | (2,890                        | ) |  |  | (2,205 | ) |
|   Other                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |  |   | 62                            |   |  |  | — |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  |   |                               |   |  |  |  |  |
|   Net cash provided by investing activities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |  |   | 4,508                         |   |  |  | 8,262 |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  |   |                               |   |  |  |  |  |
| Cash Flows from Financing Activities:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |  |   |                               |   |  |  |  |  |
|   Repurchase of common stock                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |  |   | (2,497                        | ) |  |  | (3,380 | ) |
|   Payments on long-term debt and credit facility                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |  |   | (6,730                        | ) |  |  | (1,731 | ) |
|   Repurchases of convertible debt                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |  |   | (8,336                        | ) |  |  | (1,340 | ) |
|   Proceeds from debt financing                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |  |   | —                       |   |  |  | 5,000 |  |
|   Proceeds from issuance of common stock related to     benefit plans                                                                                                                                                                                                                                                                                                                                                                                                                                                              |  |   | 543                           |   |  |  | 403 |  |
|   Other                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |  |   | 82                            |   |  |  | 934 |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  |   |                               |   |  |  |  |  |
|   Net cash used in financing activities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |  |   | (16,938                       | ) |  |  | (114 | ) |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  |   |                               |   |  |  |  |  |
|   Net Increase (Decrease) in Cash and Cash Equivalents                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |  |   | 5,911                         |   |  |  | (346 | ) |
| Cash and Cash Equivalents - Beginning of Period                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  |   | 80,980                        |   |  |  | 57,528 |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |  |   |                               |   |  |  |  |  |
| Cash and Cash Equivalents - End of Period                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |  | $ | 86,891                        |   |  | $ | 57,182 |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  |   |                               |   |  |  |  |  |
| Supplemental Cash Flow Information:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |  |   |                               |   |  |  |  |  |
|   Interest paid, net                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |  | $ | 3,158                         |   |  | $ | 3,663 |  |
|   Income taxes paid (refunded)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |  | $ | (17,363                       | ) |  | $ | 297 |  |
|   Non-cash deferred sales incentive                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |  | $ | 11,367                        |   |  | $ | — |  |

The accompanying notes are an integral part of these condensed consolidated financialstatements.

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**EXPRESSJET HOLDINGS, INC. AND SUBSIDIARIESNOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)**

           **Overview**

            ExpressJet Holdings, Inc.(“Holdings”) has strategic investments in the air transportation industry.  Our principal asset is all of theissued and outstanding shares of stock of XJT Holdings, Inc., the sole stockholder of ExpressJet Airlines, Inc. (referred to inthis report as “Airlines” and, together with Holdings, as “ExpressJet”, “we” or“us”).  Airlines currently operates a fleet of 244 aircraft flying under contractual arrangements forContinental Airlines, Inc. (“Continental”) and United Airlines, Inc. (“United”), and within its corporateaviation (charter) division. Airlines services entities desiring cost-effective and fully customizable group travel.

**            Definitive MergerAgreement**.  We signed a definitive merger agreement with SkyWest, Inc. whereby SkyWest, Inc. will acquire all ofthe outstanding common shares of Holdings for $6.75 per share in cash subject to the conditions of the definitive merger agreementdated August 3, 2010 (the “Acquisition”).  SkyWest, Inc. advised that its intention is that ExpressJet Airlineswill be merged with its wholly-owned subsidiary, Atlantic Southeast Airlines, following the closing of the transaction and receiptof all required regulatory approvals. 

**            Liquidity. **As of June 30, 2010, our available liquidity (including restricted and unrestricted cash and ourauction rate securities holdings) was $108.2 million.  We will continue to focus on improving our balance sheet throughgenerating cash flow from operations and making repurchases under our approved securities program.  Additionally, we intend tocontinue to pursue cost-savings efforts under the Operation:  Green Light Plan (“Operation: Green Light”), whichwe announced June 7, 2010.

            Our 2010 cash flows as of thedate of this filing have included the following sources of cash outside of normal operating revenues:

| **        ** | **• ** | received a $16.5 million tax refund in March 2010 from the "Worker, Homeownership, and BusinessAssistance Act of 2009," which allows taxpayers to elect to carry back either their 2008 or 2009 net operating loss for a period ofup to five years; |
|------------------------------------------------------|------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                      | **• ** | sold $10.0 million of our auction rate securities  (“ARS”) at aweighted average rate of 87% of par value in the second quarter of 2010; and                                                                                        |
|                                                      | **• ** | collected a $1.7 million state and local tax settlement in April 2010.                                                                                                                                                                              |

           Subsequentto June 30, 2010 we began the process of completing our previously announced plans to redeem $10.0 million of the principal balanceof our 11.25% Convertible Secured Notes due 2023.  As of the date of this filing, we redeemed $8.2 million par value of our11.25% Convertible Secured Notes due 2023.  An additional redemption of $1.8 million par value of our 11.25% ConvertibleSecured Notes due 2023 is scheduled to be completed on August 23, 2010. 

            We believe that our existingliquidity and projected 2010 cash flows, including the incremental sources of liquidity described above, will be sufficient to fundcurrent operations and our financial obligations through the twelve months ending June 30, 2011.  However, factors outside ourcontrol may dictate that we alter our current plans and expectations.

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            The interim financial informationin the accompanying condensed consolidated financial statements and these notes is unaudited, but reflects all adjustmentsnecessary, in our opinion, to provide a fair presentation of our financial results for the interim periods presented.  Theseadjustments are of a normal, recurring nature.  In addition, all intercompany transactions have been eliminated inconsolidation.  Certain amounts reported in previous periods have been reclassified to conform to the currentpresentation.  These interim consolidated condensed financial statements should be read in conjunction with the consolidatedfinancial statements and the notes thereto contained in our Annual Report on Form 10-K for the fiscal year ended December 31, 2009(the “2009 10-K”).

**Note 1 – Summary of Significant Accounting Policies**

******

            The accompanying condensedconsolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles and includethe accounts of Holdings and its subsidiaries.  All material intercompany transactions have been eliminated in consolidation.Our accounting policies and estimates have not changed from those disclosed in our 2009 10-K.

**Note 2 – Contract Flying**

**           *****AmendedContinental CPA***.  In June 2008, we entered into an amended capacity purchase agreement (the “AmendedContinental CPA”) with Continental which modified our previously existing agreement with Continental (the “OriginalContinental CPA”).  The Amended Continental CPA, which became effective July 1, 2008, has a seven-year term that isscheduled to expire on June 30, 2015.  Under the Amended Continental CPA, Continental compensates us at a pre-determined ratebased on block hours flown and reimburses us for various pass-through expenses, including passenger liability insurance, hullinsurance, war risk insurance, landing fees and substantially all regional jet engine maintenance expenses under current long-termthird-party contracts with no margin or mark-up.  Under the Amended Continental CPA, Continental is directly responsible forthe cost of providing fuel and paying aircraft rent for all flights operated as Continental Express; therefore, these items are notincluded in our Consolidated Statements of Operations for periods subsequent to July 1, 2008.  The fixed block hour rates areconsiderably lower than the rates under the Original Continental CPA and are subject to annual escalations tied to a consumer priceindex (“CPI”) (capped at 3.5%) on each anniversary date, July 1.  The CPI escalation used for the July 1, 2010 and2009 rate adjustments were 0.76% and 1.94%, respectively.

            Pursuant to the terms of thefirst and second amendments to the Amended Continental CPA, beginning in July 2009 and throughout the remainder of the term of theAmended Continental CPA, if Continental increases utilization of our aircraft above a pre-determined threshold,then Continental will be entitled to receive a discount on the block hour rates; provided that the aggregate discount received byContinental shall not exceed $10 million.  For the three and six months ended June 30, 2010, there were increases inutilization of our aircraft above the pre-determined threshold for such periods that resulted in Continental receiving discounts inthe amount of $1.4 million and $2.7 million, respectively.  To date, Continental has received discounts totaling $3.9 millionfor increases in utilization of our aircraft above the pre-determined threshold; therefore, $6.1 million of the obligationremains.

            In December 2009, we entered intothe third amendment to the Amended Continental CPA pursuant to which, among other things, we agreed to sublease eight aircraftfrom Continental in order to meet our aircraft requirements under our capacity purchase agreement with United (the “UnitedExpress Agreement”).  These aircraft were previously operated as Continental Express under the Amended ContinentalCPA.

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***           ******United Express Agreement.****** ***In February 2010, we announced the execution of the United Express Agreement, whichhad an effective date retroactive to December 1, 2009.  The United Express Agreement has an initial term expiring on April 30,2012 for 11 aircraft and on April 30, 2013 for the remaining 11 aircraft, and contains a renewal option, at United’selection, for additional periods up to a total term of five years.  Under this arrangement, United must notify ExpressJet ofits intention to renew each group of aircraft not less than six months prior to the end of the term for such aircraft.

            In addition, inFebruary 2010, we entered into the First Amendment to the United Express Agreement with United, which provided that we would fly upto 10 additional aircraft for United in the current ExpressJet livery from May 2010 through December 2010.  On August 11,2010, we entered into the Second Amendment to the United Express Agreement with United, which amended and replaced the FirstAmendment to the United Express Agreement in its entirety. Pursuant to the terms of the Second Amendment, we extended through April4, 2011 the term of the 10 additional aircraft that we are flying for United pursuant to the First Amendment. We will also operatetwo additional aircraft for United beginning December 16, 2010 through April 4, 2011. The Second Amendment does not contain aspecific renewal option for these twelve aircraft.  As of June 30, 2010, we operated a total of 32 aircraft as United Expressfor United.

            Under the terms of the UnitedExpress Agreement, United is responsible for scheduling, marketing, pricing and revenue management of the aircraft and collectingall passenger revenues and Airlines' operates, maintains and subleases the aircraft.

            We receive payments under theUnited Express Agreement at a pre-determined rate based on block hours and departures flown at variable mark-up ratesbased upon Airlines’ performance, including on-time departure performance and completion percentage ratesas determined within the United Express Agreement.  We are also reimbursed for various pass-through expenses,including passenger liability insurance, hull insurance, war risk insurance, landing fees and fuel.  As part of the UnitedExpress Agreement, we agreed to a temporary mark-up discount through June 2010, which resulted in an approximate $1.2 million costsavings for United.

           The UnitedExpress Agreement also provides for incentives and penalties.

            Under the United ExpressAgreement, we agreed to a fuel risk sharing program with United whereby our mark-up is tied to an index consisting of the gapbetween increases in the price of fuel and increases in United’s regional affiliate’s passenger revenue per availableseat mile.

*           *As part of the United Express Agreement, on February 17, 2010, we issued a warrant to United for the purchase of 2.7million shares of common stock with an exercise price of $0.01 per share of common stock (the “United Warrant”). The United Warrant contains certain restrictions preventing sale, transfer or other disposition. The United Warrant terminates andbecomes void upon execution or early termination of the United Express Agreement; provided that, the United Express Agreement isnot terminated due to any material default or breach by ExpressJet at which point the United Warrant shall not terminate or becomevoid and shall continue in full force and effect until April 30, 2013.

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**

*           *Per guidance contained in the Financial Accounting Standards Board’s (“FASB”) Accounting StandardsCodification (“ASC”) Topic 605-50, Customer Payments and Incentives, (“Topic 605-50”), we characterized theissuance of the United Warrant as a sales incentive to United, and we are amortizing the measured cost as a reduction of revenueover the initial term of the United Express Agreement utilizing an option pricing model.  We estimated that the fair value ofthe United Warrant was $11.4 million on February 17, 2010, the measurement date.  As such, we recorded a deferred salesincentive of $11.4 million representing the future discount to passenger revenue that will be recognized over the initial term ofthe United Express Agreement.  During the three and six months ended June 30, 2010, we recognized $1.0 million and $1.9million, respectively, of the deferred sales incentive as a reduction to passenger revenue.  As of June 30, 2010, the balanceof the deferred sales incentive was $9.5 million, of which $4.1 million is current.  The United Warrant is fully vested andnon-forfeitable and United has no future performance commitment with respect to the United Warrant.  As of the date of thisfiling, United has not exercised its rights under the United Express Warrant.

**Note 3 – Impairment of Fixed Assets**

****

            In accordance withASC Subtopic 360-10, “Overall – Impairment or Disposal of Long-Lived Assets” we record impairment charges onlong-lived assets used in operations when events and circumstances indicate that the assets may be impaired, the undiscounted cashflows estimated to be generated by those assets are less than the carrying amount of those assets and the net book value of theassets exceeds their estimated fair value.  As a result of our impairment test, we concluded the carrying value of certain ofour aircraft leasehold improvements related to our contract flying segment were no longer recoverable.  Consequently, duringthe quarter ended June 30, 2010, we recorded impairment charges of $3.1 million to write these long-lived assets down to theirestimated fair values.  Fair values were determined based on estimated future cash flows which were considered nominal. Noportion of the impairment charge will result in future cash expenditures.  All other long-lived assets for our reportablesegments were tested for impairment but were concluded to be recoverable.

            The above costs arereflected in the line “Impairment of fixed assets” on our Condensed Consolidated Statements of Operations.

**Note 4 *–* Segment Reporting**

            The following discussion is basedon our two reportable segments, Contract Flying and Aviation Services, as they were structured for the three and six month periodsended June 30, 2010.

           A significant portion of our operating expenses and infrastructure is integrated across segments (e.g., non-airportfacility rentals, outside services and general and administrative expenses) in order to support our entire fleet of aircraft;therefore, we do not allocate these costs to the individual segments identified above, but evaluate them for our consolidatedoperation.  The presentation of our consolidated shared costs is consistent with the manner in which these expenses are viewedby our chief operating decision makers.  Consequently, the unaudited tables below present (in thousands) our operatingrevenues, including inter-segment revenues, and segment profit generated per reportable segment for the three and six months endedJune 30, 2010 and 2009.  We also included our reconciliation of the consolidated operating revenue to consolidated loss beforeincome taxes and of our total assets for the three and six months ended and as of June 30, 2010 and 2009.

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|                                                                                                                                                                                                                                                                                                                                                                                          |   | **Contract Flying** |        |   | **Aviation Services** |        |        | **Eliminations** |   |        | **Consolidated** |   |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|---|---------------------|--------|---|-----------------------|--------|--------|------------------|---|--------|------------------|---|
| **                                                              ** |   | ****                |        |   | ****                  |        |        | ****             |   |        | ****             |   |
| **Three Months Ended June 30, 2010:**                                                                                                                                                                                                                                                                                                                                                    |   |                     |        |   |                       |        |   |                  |   |   |                  |   |
| Revenue from customers                                                                                                                                                                                                                                                                                                                                                                   | $ | 197,515             |   | $ | 11,071                |   | $      | (1,546           | ) | $      | 207,040          |   |
| Direct segment expenses                                                                                                                                                                                                                                                                                                                                                                  |   | 178,236             |        |   | 8,356                 |        |        | (1,546           | ) |        | 185,046          |   |
|                                                                                                                                                                                                                                                                                                                                                                                          |   |                     |        |   |                       |        |        |                  |   |        |                  |   |
|     Segment profit                                                                                                                                                                                                                                                                                                                                                   | $ | 19,279              |        | $ | 2,715                 |        | $      | —          |   | $      | 21,994           |   |
| Other shared expenses (1)                                                                                                                                                                                                                                                                                                                                                                |   |                     |        |   |                       |        |        |                  |   |        | (27,673          | ) |
| Impairment of fixed assets                                                                                                                                                                                                                                                                                                                                                               |   | (3,075              | )      |   |                       |        |        |                  |   |        | (3,075           | ) |
| Non-operating expense                                                                                                                                                                                                                                                                                                                                                                    |   |                     |        |   |                       |        |        |                  |   |        | (2,263           | ) |
|                                                                                                                                                                                                                                                                                                                                                                                          |   |                     |        |   |                       |        |        |                  |   |        |                  |   |
| Consolidated loss before income taxes                                                                                                                                                                                                                                                                                                                                                    |   |                     |        |   |                       |        |        |                  |   | $      | (11,017          | ) |
|                                                                                                                                                                                                                                                                                                                                                                                          |   |                     |        |   |                       |        |        |                  |   |        |                  |   |
| **Six Months Ended June 30, 2010:**                                                                                                                                                                                                                                                                                                                                                      |   |                     |        |   |                       |        |   |                  |   |   |                  |   |
| Revenue from customers                                                                                                                                                                                                                                                                                                                                                                   | $ | 378,084             |   | $ | 22,448                |   | $      | (4,211           | ) | $      | 396,321          |   |
| Direct segment expenses                                                                                                                                                                                                                                                                                                                                                                  |   | 349,444             |        |   | 16,416                |        |        | (4,211           | ) |        | 361,649          |   |
|                                                                                                                                                                                                                                                                                                                                                                                          |   |                     |        |   |                       |        |        |                  |   |        |                  |   |
|     Segment profit                                                                                                                                                                                                                                                                                                                                                   | $ | 28,640              |        | $ | 6,032                 |        | $      | —          |   | $      | 34,672           |   |
| Other shared expenses (2)                                                                                                                                                                                                                                                                                                                                                                |   |                     |        |   |                       |        |        |                  |   |        | (54,825          | ) |
| Impairment of fixed assets                                                                                                                                                                                                                                                                                                                                                               |   | (3,075              | )      |   |                       |        |        |                  |   |        | (3,075           | ) |
| Non-operating expense                                                                                                                                                                                                                                                                                                                                                                    |   |                     |        |   |                       |        |        |                  |   |        | (7,411           | ) |
|                                                                                                                                                                                                                                                                                                                                                                                          |   |                     |        |   |                       |        |        |                  |   |        |                  |   |
| Consolidated loss before income taxes                                                                                                                                                                                                                                                                                                                                                    |   |                     |        |   |                       |        |        |                  |   | $      | (30,639          | ) |
|                                                                                                                                                                                                                                                                                                                                                                                          |   |                     |        |   |                       |        |        |                  |   |        |                  |   |
| **Assets as of June 30, 2010**                                                                                                                                                                                                                                                                                                                                                           |   |                     |        |   |                       |        |        |                  |   |        |                  |   |
| Segment assets                                                                                                                                                                                                                                                                                                                                                                           | $ | 159,727             |        | $ | 14,080                |        | $      | —          |   | $      | 173,807          |   |
| Other shared assets (3)                                                                                                                                                                                                                                                                                                                                                                  |   |                     |        |   |                       |        |        |                  |   |        | 166,309          |   |
|                                                                                                                                                                                                                                                                                                                                                                                          |   |                     |        |   |                       |        |        |                  |   |        |                  |   |
|     Total consolidated assets                                                                                                                                                                                                                                                                                                                                        |   |                     |        |   |                       |        |        |                  |   | $      | 340,116          |   |
|                                                                                                                                                                                                                                                                                                                                                                                          |   |                     |        |   |                       |        |        |                  |   |        |                  |   |

|    | (1)  | The major components of other shared expenses for the three months ended June 30, 2010 are generaland administrative labor and related expenses – $11.6 million; other general and administrative expenses – $10.3million; outside services – $5.4 million; and non-airport rentals – $0.4 million.     |
|--------------|-----------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|              | (2)  | The major components of other shared expenses for the six months ended June 30, 2010 are general andadministrative labor and related expenses – $23.5 million; other general and administrative expenses – $20.7 million;outside services – $9.7 million; and non-airport rentals – $0.9 million.  |
|    | (3)  | Other shared assets include assets that are interchangeable between segments.                                                                                                                                                                                                                                                   |

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|                                                   |   | **Contract Flying** |        |   | **Aviation Services** |        |        | **Eliminations** |   |        | **Consolidated** |   |
|---------------------------------------------------|---|---------------------|--------|---|-----------------------|--------|--------|------------------|---|--------|------------------|---|
|                                                   |   | ****                |        |   | ****                  |        |        | ****             |   |        | ****             |   |
| **Three months ended June 30, 2009:  ** |   |                     |        |   |                       |        |   |                  |   |   |                  |   |
| Revenue from customers                            | $ | 162,208             |   | $ | 10,238                |   | $      | (1,858           | ) | $      | 170,588          |   |
| Direct segment expenses                           |   | 146,339             |        |   | 6,622                 |        |        | (1,858           | ) |        | 151,103          |   |
|                                                   |   |                     |        |   |                       |        |        |                  |   |        |                  |   |
|     Segment profit            | $ | 15,869              |        | $ | 3,616                 |        | $      | —          |   | $      | 19,485           |   |
| Other shared expenses (1)                         |   |                     |        |   |                       |        |        |                  |   |        | (30,366          | ) |
| Non-operating expense                             |   |                     |        |   |                       |        |        |                  |   |        | (3,293           | ) |
|                                                   |   |                     |        |   |                       |        |        |                  |   |        |                  |   |
| Consolidated loss before income taxes             |   |                     |        |   |                       |        |        |                  |   | $      | (14,174          | ) |
|                                                   |   |                     |        |   |                       |        |        |                  |   |        |                  |   |
|                                                   |   |                     |        |   |                       |        |        |                  |   |        |                  |   |
| **Six months ended June 30, 2009:  **   |   |                     |        |   |                       |        |   |                  |   |   |                  |   |
| Revenue from customers                            | $ | 323,219             |   | $ | 21,414                |   | $      | (4,336           | ) | $      | 340,297          |   |
| Direct segment expenses                           |   | 290,983             |        |   | 13,125                |        |        | (4,336           | ) |        | 299,772          |   |
|                                                   |   |                     |        |   |                       |        |        |                  |   |        |                  |   |
|     Segment profit            | $ | 32,236              |        | $ | 8,289                 |        | $      | —          |   | $      | 40,525           |   |
| Other shared expenses (2)                         |   |                     |        |   |                       |        |        |                  |   |        | (62,422          | ) |
| Non-operating expense                             |   |                     |        |   |                       |        |        |                  |   |        | (6,154           | ) |
|                                                   |   |                     |        |   |                       |        |        |                  |   |        |                  |   |
| Consolidated loss before income taxes             |   |                     |        |   |                       |        |        |                  |   | $      | (28,051          | ) |
|                                                   |   |                     |        |   |                       |        |        |                  |   |        |                  |   |
|                                                   |   |                     |        |   |                       |        |        |                  |   |        |                  |   |
| **Assets as of June 30, 2009**                    |   |                     |        |   |                       |        |        |                  |   |        |                  |   |
| Segment assets                                    | $ | 178,657             |        | $ | 22,673                |        | $      | —          |   | $      | 201,330          |   |
| Other shared assets (3)                           |   |                     |        |   |                       |        |        |                  |   |        | 160,743          |   |
|                                                   |   |                     |        |   |                       |        |        |                  |   |        |                  |   |
|     Total consolidated assets |   |                     |        |   |                       |        |        |                  |   | $      | 362,073          |   |
|                                                   |   |                     |        |   |                       |        |        |                  |   |        |                  |   |

| (1)  | The major components of other shared expenses for the three months ended June 30, 2009 are generaland administrative labor and related expenses – $12.1 million; other general and administrative expenses – $12.2million; outside services – $5.2 million; and non-airport rentals – $0.9 million.  |
|-----------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (2)  | The major components of other shared expenses for the six months ended June 30, 2009 are general andadministrative labor and related expenses – $24.3 million; other general and administrative expenses – $24.7 million;outside services – $11.3 million; and non-airport rentals – $2.1 million.   |
| (3)  | Other shared assets include assets that are interchangeable between segments.                                                                                                                                                                                                                                                     |

**Note 5 – Fair Value Measurements**

           As of June30, 2010, we had short-term investments in ARS valued at $1.0 million.  Our ARS are classified as available-for-salesecurities and are reflected at fair value.  For a detailed discussion of our ARS, refer to our 200910-K.

           The fair value of our $1.1 million ARS portfolio, as calculated using a discounted cashflow valuation model under accounting guidance on fair value measurements as of June 30, 2010 was $1.0 million,which represents a $0.2 million recovery of fair value from March 31, 2010.  Such recovery of fair value was recordedto other comprehensive income during the six months ended June 30, 2010.

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            As of June 30, 2010, we continueto earn interest at a weighted average rate of 0.6% on our remaining ARS, the rates of which are reset every 7 or 28 days,depending on the terms of the particular instrument.

            During the quarter ended June 30, 2010, we sold $10.0million of our ARS in two separate transactions for $8.7 million, resulting in $0.7 million in gains on the sales.

            Subsequent to June 30, 2010, weentered into a settlement agreement related to our ongoing ARS litigation.  This settlement relates to our remaining ARShaving a par value of approximately $1.1 million and a carrying value of $1.0 million at June 30, 2010, which was sold for 90% ofpar value.

            Assets that we measure at fairvalue on a recurring basis are shown below (in thousands):

|                                                                                                                                                                                                                                                                                                | **As of June 30, 2010 Fair Value Measurements Using** |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-------------------------------------------------------|
|                                                                                                                                                                                                                                                                                                |                                                       | **Total** |  |  | **Level 1** |  |  | **Level 2** |  |  | **Level 3** |
| **                                               ** |                                                       | **** |  |  | **** |  |  | **** |  |  | **** |
| Cash equivalents                                                                                                                                                                                                                                                                               | $                                                     | 80,976 |    | $ | 80,976 |    | $ | — |    | $ | — |
| Short-term investments                                                                                                                                                                                                                                                                         |                                                       | 968 |  |  | — |  |  | — |  |  | 968 |
|                                                                                                                                                                                                                                                                                                |                                                       | **** |  |  | **** |  |  | **** |  |  | **** |
| Total                                                                                                                                                                                                                                                                                          | $                                                     | 81,944 |  | $ | 80,976 |  | $ | — |  | $ | 968 |
|                                                                                                                                                                                                                                                                                                |                                                       |  |  |  |  |  |  |  |  |  |  |

            The following table presents ourARS, which were measured at fair value on a recurring basis using a discounted cash flow model and significant unobservable inputs(Level 3) as defined in FASB’s ASC Topic 820 Fair Value Measurements and Disclosures (“ASC Topic 820”), for thethree months ended June 30, 2010 and 2009 (in thousands):

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |            |   | **Six Months Ended June 30,** |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|---|-------------------------------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |            |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |            |   | ****                          |
|                                                                                      | ** ** |   | **2010**                      |  |  | **2009** |  |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |            |   | ****                          |  |  | **** |  |   |
| Beginning Balance Short-Term Investments                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |            | $ | 9,082                         |  | $ | 41,369 |  |   |
| Proceeds from Sales                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |            |   | —                       |  |  | (3,631 | ) |   |
| Gross realized gains on sales                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |            |   | —                       |  |  | 482 |  |   |
| Temporary (declines) recoveries in Market Value   (included in other comprehensive income)                                                                                                                                                                                                                                                                                                                                                                                                                     |            |   | 48                            |  |  | (628 | ) |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |            |   |                               |  |  |  |  |   |
| Balance Short-Term Investments at March 31                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |            | $ | 9,130                         |  | $ | 37,592 |  |   |
| Proceeds from Sales                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |            |   | (8,700                        | ) |  | — |  |   |
| Gross realized gains on sales                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |            |   | 700                           |  |  | — |  |   |
| Temporary (declines) recoveries in Market Value   (included in other comprehensive income)                                                                                                                                                                                                                                                                                                                                                                                                                     |            |   | (162                          | ) |  | 957 |  |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |            |   |                               |  |  |  |  |   |
| Ending Balance Short-Term Investments at June 30                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |            |   | 968                           |  |  | 38,549 |  |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |            |   |                               |  |  |  |  |   |

**           **Wedetermine the cost basis for our ARS sold using the specific identification method.

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            In March 2009, weentered into and drew down fullya$5.0 million revolving line of credit(the “Citigroup Credit Facility”) with Citigroup Global Markets Inc. (“Citigroup”)to increase our liquidity.  The Citigroup Credit Facility, which had a five year term and was pre-payable at anytime at our election, was secured by $10 million of our ARS holdings that were purchased from Citigroup.  Since the creditfacility was secured by a portion of our ARS holdings, we classified the liability as current on our Consolidated BalanceSheet.  During the quarter ended June 30, 2010, we sold $10.0 million of the secured ARS that were purchased from Citigroupand repaid the entire $5.0 million of the Citigroup Credit Facility.

**Note 6 –– Long-term Debt**

            As of June 30, 2010 andDecember 31, 2009, our debt consisted of the following (in thousands):

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   |        | **June 30,** |   |        |   | **December 31,** |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|--------------|--------|--------|--------|------------------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   |        | **2010**     |   |   |   | **2009**         |
| **                                                                                            ** |   |        |              |   |        |   |                  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |        |        | (Unaudited)  |        |        |        |                  |
| Current Debt:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |   |        |         |   |        |   |             |
|   Current maturities of EDC Loans                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   | $      | 3,459        |   |        | $      | 3,459            |
|   Current portion of 11.25% Convertible Secured Notes due     2023, net of discount of $1,908 and $0, respectively                                                                                                                                                                                                                                                                                                                                                                                                                        |        |        | 8,092        |        |        |        | —          |
|   Citigroup Credit Facility                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   |        | —      |   |        |   | 5,000            |
| Long-term Debt:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   |        |              |   |        |   |             |
|   EDC Loans                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   |        | 659          |   |        |        | 2,389            |
|   11.25% Convertible Secured Notes due 2023, net of discount****    of $6,404 and $13,534, respectively                                                                                                                                                                                                                                                                                                                                                                                                                                        |   |        | 27,157       |   |        |   | 38,577           |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   |        |              |   |        |   |                  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   | $      | 39,367       |   |        | $      | 49,425           |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   |   |              |   |        |   |                  |

           Other than the 11.25% Convertible Secured Notes due 2023, we do not have any material long-term borrowings oravailable lines of credit.  Pursuant to the terms of the amended indenture governing the 11.25% Convertible Secured Notes due2023, we granted a security interest, with a pro-rata portion (based on the portion that the remaining notes represent of the totalconvertible notes that were issued) of assets with an appraised value of approximately $173.2 million, including approximately$79.4 million in spare parts and $93.8 million of spare engines.  We agreed that we will not as of any fiscal year end permitthe aggregate outstanding principal amount of the notes divided by the fair market value of the pledged collateral to be greaterthan certain percentages.  If such collateral ratios are greater than the applicable maximum, we will pledge additional spareparts, spare aircraft engines and / or cash and cash equivalents.  If such collateral ratios are less than the requiredpercentages, we are permitted to request a release of the security interest granted under the amended indenture on excess spareparts, spare aircraft engines and / or cash and cash equivalents.  In December 2009, the trustee under the amended indenturegranted our request for the release of the security interest on approximately $39.9 million in spare parts and $58.6 million ofspare engines.  Pursuant to the terms of the amended indenture, we are required to deliver a certificateto the trustee from a third-party appraiser dated no later than 15 business days after January 1 of each year certifying the valueof the pledged collateral for the remaining balance of the notes as of January 1 or such later date.  We delivered acertificate from our independent appraiser in January 2010 indicating that the appraised value of the spare parts that remainsubject to the lien and security interest following the foregoing release was $39.5 million and the fair value of the spare enginesthat remain subject to the lien and security interest following the foregoing release was $35.3 million.  Based on theprincipal amount of notes remaining outstanding as of June 30, 2010, the pledged collateral required under the 11.25% ConvertibleSecured Notes due 2023 is approximately $32.8 million of spare parts and $28.8 million of spare engines.

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            During the sixmonths ended June 30, 2010, we repurchased $8.6 million par value (book value of $6.6 million) of our 11.25% Convertible SecuredNotes due 2023 for $8.3 million, resulting in a net realized loss of $1.7 million. Duringthe six months ended June 30, 2009, we repurchased $1.9 million par value (book value of $1.2 million) of our 11.25% ConvertibleSecured Notes due 2023 for $1.3 million, resulting in a net realized loss of $0.1 million.We estimated the fair value of our bond repurchases based on an average of market trading activity for the convertiblenotes on the date of repurchase.  Subsequent to these repurchases, our interest expense, calculated using the effectiveinterest method, related to the debt discount will be $3.5 million for the remainder of 2010 and $4.8 million for the seven monthsending July 31, 2011.

            Subsequent to June30, 2010, we began the process to redeem $10.0 million of our 11.25% Convertible Secured Notes due 2023 in three separatetransactions at 100% of the aggregate principal amount.  Thus, at June 30, 2010, we reflected the current portion of our debtat $8.1 million.

            The debt andunamortized discount components of our 11.25% Convertible Secured Notes due 2023 were as follows (in millions):

|                                                                           |  |  |   | **June 30, 2010** |   |              |   | **December 31, 2009** |   |
|---------------------------------------------------------------------------|--|--|---|-------------------|---|--------------|---|-----------------------|---|
|                                                                           |  |  |   | ****              |   |              |   | ****                  |   |
|                                                                           |  |  |   | (Unaudited)       |   |              |   |                       |   |
| Principal amount of 11.25% Convertible Secured   Notes due 2023 |  |  | $ | 43.6              |   |    | $ | 52.1                  |   |
| Unamortized debt discount                                                 |  |  |   | (8.3              | ) |              |   | (13.5                 | ) |
|                                                                           |  |  |   |                   |   |              |   |                       |   |
| Net carrying amount                                                       |  |  |   | 35.3              |   |              |   | 38.6                  |   |
|                                                                           |  |  |   |                   |   |              |   |                       |   |

           At June 30, 2010, the unamortized discount had a remaining recognition period of approximately 13months.

            The effectiveinterest rate for the 11.25% Convertible Secured Notes due 2023 for each of the three months ended June 30, 2010 and 2009, wasapproximately 34% when factoring in the impact of the bond discount amortization.

            We estimatedthe fair values of our $43.6 million and $52.1 million (carrying value) 11.25% Convertible Secured Notes due 2023 to be $41.8million and $50.3 million as of June 30, 2010 and December 31, 2009, respectively, based upon actual quoted market prices-which areLevel 2 fair value measurements under ASC Topic 820.  For a detailed background of our convertible notes, refer to our 200910-K.

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            The following tablepresents the changes in the carrying value of our 11.25% Convertible Secured Notes due 2023 (in millions):

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      | ** ** |   | **Six Months Ended June 30,** |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|---|-------------------------------|---|
|                                                                                |            |   | ****                          |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |            |   | **2010**                      |   |  |  | **2009** |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |            |   | ****                          |   |  |  | **** |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |            |   | (Unaudited)                   |   |  |  | (Unaudited) |  |
| Beginning Balance in convertible notes, net                                                                                                                                                                                                                                                                                                                                                                                                                                          |            | $ | 38.6                          |   |   | $ | 39.7 |  |
| Repurchases                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |            |   | (6.6                          | ) |  |  | (1.2 | ) |
| Amortization of debt discount                                                                                                                                                                                                                                                                                                                                                                                                                                                        |            |   | 3.3                           |   |  |  | 1.7 |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |            |   |                               |   |  |  |  |  |
| Ending Balance in convertible notes, net                                                                                                                                                                                                                                                                                                                                                                                                                                             |            | $ | 35.3                          |   |  | $ | 40.2 |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |            |   |                               |   |  |  |  |  |

           We are alsoparty to aseries of secured loan agreements with Export Development Canada (“EDC”), whichconsistof a $10.7 million loan entered into in May 2003 and a $6.6 million loan entered intoin September 2003(the “EDC Loans”).  The EDC Loans are secured bycertain of our flight simulators, flight data software and other equipment related to the simulators.  The amount due to EDCaccrues interest at the six-month LIBOR plus 1.75% per annum.  Each of the EDC Loans has a term of 96 months and each containscustomary representations, warranties and covenants.  Additionally, Continental is the guarantor of the EDC Loans, and adefault under the guarantee would cause an acceleration of the loans.  During the six months ended June 30, 2010, we madepayments in the amount of $1.8 million on the EDC Loans, which primarily related to principal.  As of June 30, 2010, theoutstanding principal balance of the EDC Loans was $4.1 million.

            Other than our 11.25% ConvertibleSecured Notes due 2023 and the EDC Loans, we do not have any other material borrowings or available lines of credit.

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            The following CondensedConsolidated Balance Sheets, Results of Operations and Cash Flows present separately the financial position of the parent issuer,Holdings, the subsidiary guarantor, Airlines, and all other non-guarantor subsidiaries of Holdings on a combined basis.

|                                                              |        |   | **Condensed Consolidated Balance Sheet June 30, 2010 (In thousands) (Unaudited)** |   |
|--------------------------------------------------------------|--------|---|-----------------------------------------------------------------------------------|---|
|                                                              |        |   | ****                                                                              |   |
|                                                              |        |   | **Holdings**                                                                      |   |  |  | **Airlines** |  |  |  | **Other Non- Guarantor Subsidiaries** |  |  |  | **Eliminations** |  |  |  | **Consolidated Totals** |  |
|                                                              |   |   |                                                                                   |   |   |  |  |  |   |  |  |  |  |  |  |  |   |  |  |  |
| Current assets                                               |   | $ | —                                                                           |   |  | $ | 152,873 |  |  | $ | 4,375 |  |  | $ | — |  |  | $ | 157,248 |  |
| Property and equipment, net                                  |   |   | 102                                                                               |   |  |  | 165,202 |  |  |  | 8,503 |  |  |  | — |  |  |  | 173,807 |  |
| Other assets                                                 |   |   | 1,253                                                                             |   |  |  | 7,808 |  |  |  | — |  |  |  | — |  |  |  | 9,061 |  |
|                                                              |        |   |                                                                                   |   |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Total assets                                                 |        | $ | 1,355                                                                             |   |  | $ | 325,883 |  |  | $ | 12,878 |  |  | $ | — |  |  | $ | 340,116 |  |
|                                                              |        |   |                                                                                   |   |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Current liabilities                                          |        |   | 10,145                                                                            |   |  |  | 98,836 |  |  |  | 1,264 |  |  |  | — |  |  |  | 110,245 |  |
| Intercompany payables (receivables)                          |        |   | (337,136                                                                          | ) |  |  | 341,296 |  |  |  | (4,160 | ) |  |  | — |  |  |  | — |  |
| Long-term debt                                               |        |   | 27,157                                                                            |   |  |  | 659 |  |  |  | — |  |  |  | — |  |  |  | 27,816 |  |
| Other liabilities                                            |        |   | —                                                                           |   |  |  | 30,545 |  |  |  | 1 |  |  |  | — |  |  |  | 30,546 |  |
| Stockholders’ equity                                   |        |   | 301,189                                                                           |   |  |  | (145,453 | ) |  |  | 15,773 |  |  |  | — |  |  |  | 171,509 |  |
|                                                              |        |   |                                                                                   |   |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Total liabilities and stockholders’   equity |        | $ | 1,355                                                                             |   |  | $ | 325,883 |  |  | $ | 12,878 |  |  | $ | — |  |  | $ | 340,116 |  |
|                                                              |        |   |                                                                                   |   |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

|                                                              |        |   | **Condensed Consolidated Balance Sheet December 31, 2009 (In thousands)** |   |
|--------------------------------------------------------------|--------|---|---------------------------------------------------------------------------|---|
|                                                              |        |   | ****                                                                      |   |
|                                                              |        |   | **Holdings**                                                              |   |  |  | **Airlines** |  |  |  | **Other Non- Guarantor Subsidiaries** |  |  |  | **Eliminations** |  |  |  | **Consolidated Totals** |  |
|                                                              |   |   |                                                                           |   |   |  |  |  |   |  |  |  |  |  |  |  |   |  |  |  |
| Current assets                                               |   | $ | —                                                                   |   |  | $ | 164,019 |  |  | $ | 5,115 |  |  | $ | — |  |  | $ | 169,134 |  |
| Property and equipment, net                                  |   |   | 104                                                                       |   |  |  | 179,274 |  |  |  | 8,738 |  |  |  | — |  |  |  | 188,116 |  |
| Other assets                                                 |   |   | 1,636                                                                     |   |  |  | 1,572 |  |  |  | 2,064 |  |   |  | (2,064 | ) |  |  | 3,208 |  |
|                                                              |        |   |                                                                           |   |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Total assets                                                 |        | $ | 1,740                                                                     |   |  | $ | 344,865 |  |  | $ | 15,917 |  |  | $ | (2,064 | ) |  | $ | 360,458 |  |
|                                                              |        |   |                                                                           |   |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Current liabilities                                          |        |   | 2,456                                                                     |   |  |  | 92,834 |  |  |  | 1,571 |  |  |  | — |  |  |  | 96,861 |  |
| Intercompany payables (receivables)                          |        |   | (344,516                                                                  | ) |  |  | 345,713 |  |  |  | (1,197 | ) |  |  | — |  |  |  | — |  |
| Long-term debt                                               |        |   | 38,577                                                                    |   |  |  | 2,389 |  |  |  | — |  |  |  | — |  |  |  | 40,966 |  |
| Other liabilities                                            |        |   | 3,840                                                                     |   |  |  | 24,725 |  |  |  | — |  |  |  | (2,064 | ) |  |  | 26,501 |  |
| Stockholders’ equity                                   |        |   | 301,383                                                                   |   |  |  | (120,796 | ) |  |  | 15,543 |  |  |  | — |  |  |  | 196,130 |  |
|                                                              |        |   |                                                                           |   |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Total liabilities and stockholders’   equity |        | $ | 1,740                                                                     |   |  | $ | 344,865 |  |  | $ | 15,917 |  |  | $ | (2,064 | ) |  | $ | 360,458 |  |
|                                                              |        |   |                                                                           |   |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

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|                                   |        | **** | **Condensed Consolidated Results of Operations Three Months Ended June 30, 2010 (In thousands) (Unaudited)** |   |
|-----------------------------------|--------|------|--------------------------------------------------------------------------------------------------------------|---|
|                                   |        |      | ****                                                                                                         |   |
|                                   |        |      | **Holdings**                                                                                                 |   |  |  | **Airlines** |  |  |  | **Other Non- Guarantor Subsidiaries** |  |  |  | **Eliminations** |  |  |  | **Consolidated Totals** |  |
|                                   |        |      | ****                                                                                                         |   |  |  | **** |  |  |  | **** |  |  |  | **** |  |  |  | **** |  |
| Operating revenue                 |   | $    | —                                                                                                      |   |   | $ | 205,162 |  |   | $ | 3,424 |  |  | $ | (1,546 | ) |   | $ | 207,040 |  |
| Operating expenses                |   |      | (2                                                                                                           | ) |  |  | 213,878 |  |  |  | 3,464 |  |  |  | (1,546 | ) |  |  | 215,794 |  |
|                                   |   |      |                                                                                                              |   |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Operating income (loss)           |   |      | 2                                                                                                            |   |  |  | (8,716 | ) |  |  | (40 | ) |  |  | — |  |  |  | (8,754 | ) |
|                                   |        |      |                                                                                                              |   |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Non-operating income (expense)    |        |      | 1,524                                                                                                        |   |  |  | (3,734 | ) |  |  | (53 | ) |  |  | — |  |  |  | (2,263 | ) |
|                                   |        |      |                                                                                                              |   |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Income (loss) before income taxes |        |      | 1,526                                                                                                        |   |  |  | (12,450 | ) |  |  | (93 | ) |  |  | — |  |  |  | (11,017 | ) |
| Income tax benefit                |        |      | —                                                                                                      |   |  |  | (7,582 | ) |  |  | — |  |  |  | — |  |  |  | (7,582 | ) |
|                                   |        |      |                                                                                                              |   |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Net income (loss)                 |        | $    | 1,526                                                                                                        |   |  | $ | (20,032 | ) |  | $ | (93 | ) |  | $ | — |  |  | $ | (18,599 | ) |
|                                   |        |      |                                                                                                              |   |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

|                                   |        |   | **Condensed Consolidated Results of Operations Six Months Ended June 30, 2010 (In thousands) (Unaudited)** |   |
|-----------------------------------|--------|---|------------------------------------------------------------------------------------------------------------|---|
|                                   |        |   | ****                                                                                                       |   |
|                                   |        |   | **Holdings**                                                                                               |   |  |  | **Airlines** |  |  |  | **Other Non- Guarantor Subsidiaries** |  |  |  | **Eliminations** |  |  |  | **Consolidated Totals** |  |
|                                   |        |   | ****                                                                                                       |   |  |  | **** |  |  |  | **** |  |  |  | **** |  |  |  | **** |  |
| Operating revenue                 |   | $ | —                                                                                                    |   |   | $ | 393,182 |  |   | $ | 7,350 |  |  | $ | (4,211 | ) |   | $ | 396,321 |  |
| Operating expenses                |   |   | (1                                                                                                         | ) |  |  | 416,609 |  |  |  | 7,152 |  |  |  | (4,211 | ) |  |  | 419,549 |  |
|                                   |   |   |                                                                                                            |   |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Operating income (loss)           |   |   | 1                                                                                                          |   |  |  | (23,427 | ) |  |  | 198 |  |  |  | — |  |  |  | (23,228 | ) |
|                                   |        |   |                                                                                                            |   |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Non-operating income (expense)    |        |   | 950                                                                                                        |   |  |  | (8,392 | ) |  |  | 31 |  |  |  | — |  |  |  | (7,411 | ) |
|                                   |        |   |                                                                                                            |   |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Income (loss) before income taxes |        |   | 951                                                                                                        |   |  |  | (31,819 | ) |  |  | 229 |  |  |  | — |  |  |  | (30,639 | ) |
| Income tax benefit                |        |   | —                                                                                                    |   |  |  | (4,090 | ) |  |  | — |  |  |  | — |  |  |  | (4,090 | ) |
|                                   |        |   |                                                                                                            |   |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Net income (loss)                 |        | $ | 951                                                                                                        |   |  | $ | (35,909 | ) |  | $ | 229 |  |  | $ | — |  |  | $ | (34,729 | ) |
|                                   |        |   |                                                                                                            |   |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

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|                                                                                                                                                                                                                                                                                                                                                        |        |   | **Condensed Consolidating Results of Operations Three Months Ended June 30, 2009 (In thousands)** |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---|---------------------------------------------------------------------------------------------------|---|
|                                                                                                                                                                                                                                                                                                                                                        |        |   | ****                                                                                              |   |
|                                                                                                                                                                                                                                                                                                                                                        |        |   | **Holdings**                                                                                      |   |  |  | **Airlines** |  |  |  | **Other Non- Guarantor Subsidiaries** |  |  |  | **Eliminations** |  |  |  | **Consolidated Totals** |  |
|                                                           |        |   | ****                                                                                              |   |  |  | **** |  |  |  | **** |  |  |  | **** |  |  |  | **** |  |
| Operating revenue                                                                                                                                                                                                                                                                                                                                      |   | $ | —                                                                                           |   |   | $ | 169,358 |  |   | $ | 3,088 |  |  | $ | (1,858 | ) |   | $ | 170,588 |  |
| Operating expenses                                                                                                                                                                                                                                                                                                                                     |   |   | (12                                                                                               | ) |  |  | 179,601 |  |  |  | 3,738 |  |  |  | (1,858 | ) |  |  | 181,469 |  |
|                                                                                                                                                                                                                                                                                                                                                        |   |   |                                                                                                   |   |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Operating income (loss)                                                                                                                                                                                                                                                                                                                                |   |   | 12                                                                                                |   |  |  | (10,243 | ) |  |  | (650 | ) |  |  | — |  |  |  | (10,881 | ) |
|                                                                                                                                                                                                                                                                                                                                                        |        |   |                                                                                                   |   |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Non-operating income (expense)                                                                                                                                                                                                                                                                                                                         |        |   | (5,563                                                                                            | ) |  |  | (5,726 | ) |  |  | 1,532 |  |  |  | 6,464 |  |  |  | (3,293 | ) |
|                                                                                                                                                                                                                                                                                                                                                        |        |   |                                                                                                   |   |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Income (loss) before income taxes                                                                                                                                                                                                                                                                                                                      |        |   | (5,551                                                                                            | ) |  |  | (15,969 | ) |  |  | 882 |  |  |  | 6,464 |  |  |  | (14,174 | ) |
| Income tax benefit (expense)                                                                                                                                                                                                                                                                                                                           |        |   | —                                                                                           |   |  |  | 1,077 |  |  |  | — |  |  |  | — |  |  |  | 1,077 |  |
|                                                                                                                                                                                                                                                                                                                                                        |        |   |                                                                                                   |   |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Net income (loss)                                                                                                                                                                                                                                                                                                                                      |        | $ | (5,551                                                                                            | ) |  | $ | (14,892 | ) |  | $ | 882 |  |  | $ | 6,464 |  |  | $ | (13,097 | ) |
|                                                                                                                                                                                                                                                                                                                                                        |        |   |                                                                                                   |   |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

|                                                                                                                                                                                                                                                                                                                                            |        |   | **Condensed Consolidating Results of Operations Six Months Ended June 30, 2009 (In thousands)** |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---|-------------------------------------------------------------------------------------------------|---|
|                                                                                                                                                                                                                                                                                                                                            |        |   | ****                                                                                            |   |
|                                                                                                                                                                                                                                                                                                                                            |        |   | **Holdings**                                                                                    |   |  |  | **Airlines** |  |  |  | **Other Non- Guarantor Subsidiaries** |  |  |  | **Eliminations** |  |  |  | **Consolidated Totals** |  |
|                                                         |        |   | ****                                                                                            |   |  |  | **** |  |  |  | **** |  |  |  | **** |  |  |  | **** |  |
| Operating revenue                                                                                                                                                                                                                                                                                                                          |   | $ | —                                                                                         |   |   | $ | 336,851 |  |   | $ | 7,782 |  |  | $ | (4,336 | ) |   | $ | 340,297 |  |
| Operating expenses                                                                                                                                                                                                                                                                                                                         |   |   | 14                                                                                              |   |  |  | 358,717 |  |  |  | 7,799 |  |  |  | (4,336 | ) |  |  | 362,194 |  |
|                                                                                                                                                                                                                                                                                                                                            |   |   |                                                                                                 |   |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Operating income (loss)                                                                                                                                                                                                                                                                                                                    |   |   | (14                                                                                             | ) |  |  | (21,866 | ) |  |  | (17 | ) |  |  | — |  |  |  | (21,897 | ) |
|                                                                                                                                                                                                                                                                                                                                            |        |   |                                                                                                 |   |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Non-operating income (expense)                                                                                                                                                                                                                                                                                                             |        |   | (3,616                                                                                          | ) |  |  | (10,279 | ) |  |  | 1,277 |  |  |  | 6,464 |  |  |  | (6,154 | ) |
|                                                                                                                                                                                                                                                                                                                                            |        |   |                                                                                                 |   |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Income (loss) before income taxes                                                                                                                                                                                                                                                                                                          |        |   | (3,630                                                                                          | ) |  |  | (32,145 | ) |  |  | 1,260 |  |  |  | 6,464 |  |  |  | (28,051 | ) |
| Income tax benefit (expense)                                                                                                                                                                                                                                                                                                               |        |   | —                                                                                         |   |  |  | 3,550 |  |  |  | — |  |  |  | — |  |  |  | 3,550 |  |
|                                                                                                                                                                                                                                                                                                                                            |        |   |                                                                                                 |   |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Net income (loss)                                                                                                                                                                                                                                                                                                                          |        | $ | (3,630                                                                                          | ) |  | $ | (28,595 | ) |  | $ | 1,260 |  |  | $ | 6,464 |  |  | $ | (24,501 | ) |
|                                                                                                                                                                                                                                                                                                                                            |        |   |                                                                                                 |   |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

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|                                                                                                                                                                                                                                |        |   | **Condensed Consolidated Cash Flows Six Months Ended June 30, 2010 (In thousands) (Unaudited)** |  |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---|-------------------------------------------------------------------------------------------------|--|
|                                       |        |   |                                                                                                 |  |
|                                                                                                                                                                                                                                |        |   | **Holdings**                                                                                    |  |  |  | **Airlines** |  |  |  | **Other Non- Guarantor Subsidiaries** |  |  |  | **Eliminations** |  |  |  | **Consolidated Totals** |  |
|                                                                                                                                                                                                                                |        |   |                                                                                                 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Operating activities                                                                                                                                                                                                           |   | $ | —                                                                                         |  |   | $ | 18,464 |  |  | $ | (667 | ) |   | $ | 544 |  |   | $ | 18,341 |  |
| Investing activities                                                                                                                                                                                                           |   |   | —                                                                                         |  |  |  | 4,508 |  |  |  | — |  |  |  | — |  |  |  | 4,508 |  |
| Financing activities                                                                                                                                                                                                           |   |   | —                                                                                         |  |  |  | (16,938 | ) |  |  | 544 |  |  |  | (544 | ) |  |  | (16,938 | ) |
|                                                                                                                                                                                                                                |   |   |                                                                                                 |  |  |  |  |  |  |  |  |  |   |  |  |  |  |  |  |  |
| Net decrease in cash                                                                                                                                                                                                           |   |   | —                                                                                         |  |  |  | 6,034 |  |  |  | (123 | ) |  |  | — |  |  |  | 5,911 |  |
| Cash at the beginning of the period                                                                                                                                                                                            |   |   | —                                                                                         |  |  |  | 80,678 |  |  |  | 302 |  |  |  | — |  |  |  | 80,980 |  |
|                                                                                                                                                                                                                                |   |   |                                                                                                 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Cash at the end of the period                                                                                                                                                                                                  |   | $ | —                                                                                         |  |  | $ | 86,712 |  |  | $ | 179 |  |  | $ | — |  |  | $ | 86,891 |  |
|                                                                                                                                                                                                                                |        |   |                                                                                                 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

|                                                                                                                                                                                                                                                                                                                                                        |        |   | **Condensed Consolidating Cash Flows Six Months Ended June 30, 2009 (In thousands)** |  |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---|--------------------------------------------------------------------------------------|--|
|                                                                                                                                                                                                                                                                                                                                                        |        |   | ****                                                                                 |  |
|                                                           |        |   | **Holdings**                                                                         |  |  |  | **Airlines** |  |  |  | **Other Non- Guarantor Subsidiaries** |  |  |  | **Eliminations** |  |  |  | **Consolidated Totals** |  |
|                                                                                                                                                                                                                                                                                                                                                        |   |   |                                                                                      |  |   |  |  |  |   |  |  |  |  |  |  |  |   |  |  |  |
| Operating activities                                                                                                                                                                                                                                                                                                                                   |   | $ | —                                                                              |  |  | $ | (2,382 | ) |  | $ | (6,112 | ) |  | $ | — |  |  | $ | (8,494 | ) |
| Investing activities                                                                                                                                                                                                                                                                                                                                   |   |   | —                                                                              |  |  |  | 2,644 |  |  |  | 5,442 |  |  |  | 176 |  |  |  | 8,262 |  |
| Financing activities                                                                                                                                                                                                                                                                                                                                   |   |   | —                                                                              |  |  |  | (113 | ) |  |  | 175 |  |  |  | (176 | ) |  |  | (114 | ) |
|                                                                                                                                                                                                                                                                                                                                                        |   |   |                                                                                      |  |  |  |  |  |  |  |  |  |   |  |  |  |  |  |  |  |
| Net increase (decrease) in cash                                                                                                                                                                                                                                                                                                                        |   |   | —                                                                              |  |  |  | 149 |  |  |  | (495 | ) |  |  | — |  |  |  | (346 | ) |
| Cash at the beginning of the period                                                                                                                                                                                                                                                                                                                    |   |   | —                                                                              |  |  |  | 56,672 |  |  |  | 856 |  |  |  | — |  |  |  | 57,528 |  |
|                                                                                                                                                                                                                                                                                                                                                        |   |   |                                                                                      |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Cash at the end of the period                                                                                                                                                                                                                                                                                                                          |   | $ | —                                                                              |  |  | $ | 56,821 |  |  | $ | 361 |  |  | $ | — |  |  | $ | 57,182 |  |
|                                                                                                                                                                                                                                                                                                                                                        |        |   |                                                                                      |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

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****

**Note 7 –– Income Taxes**

           At the endof 2009, Holdings recorded the impact of an observed potential change in ownership limitation under Section 382 of the InternalRevenue Code. Consequently, we adjusted certain deferred tax assets to their net realizable values as of December 31, 2009. The offset was recorded as a reduction to the valuation allowance of our deferred tax assets and liabilities. During the first andsecond quarter of 2010 we continued to analyze newly available information and determined the estimated date of ownership changeoccurred in the first quarter of 2010. As a result, we further adjusted certain deferred tax assets to their net realizable valuesas of June 30, 2010.

            In late 2009, the Federalgovernment passed the "Worker, Homeownership, and Business Assistance Act of 2009," which allowed taxpayers to elect to carry backeither their 2008 or 2009 net operating loss for a period of up to five years. Holdings elected to carry back its 2008 netoperating loss and recover a portion of federal regular and alternative minimum taxes paid in prior years.  Holdings filed acarryback claim with the Internal Revenue Service and received a $16.5 million refund in March 2010 and in the process fullyexhausted any benefit available to us under the Act.

            Our tax agreement withContinental increases our dependence on Continental’s financial condition.  If it is determined that any of the taxbenefits related to the basis increase should not have been available at the time of utilization and, as a result, we are requiredto pay additional taxes, interest and penalties, then we could be adversely affected if Continental were unable to indemnify usunder the agreement.

           We account for income taxes in accordance with ASC Topic 740 “Income Taxes” (“Topic 740”) whichclarifies the accounting for uncertainty in income taxes recognized in financial statements if a position is more likely than notof being sustained by a taxing authority.  We classify interest and penalties on tax deficiencies as charges to income taxexpense.  As of June 30, 2010 and December 31, 2009, there were no material unrecognized tax benefits or associated accruedinterest and penalties under Topic 740.  The calendar tax years 2003 through 2008 remain subject to examination by theInternal Revenue Service.  The Company’s state returns are also open to examination, as they are still within theapplicable review periods.

           For furtherbackground on income taxes, please refer to our 2009 10-K.

****

**Note 8 – Earnings / (Loss) Per Share**

            We account for earnings per sharein accordance with ASC Topic 260 “Earnings Per Share”.  Basic earnings per share (“Basic EPS”)excludes dilution and is computed by dividing net income available to common stockholders by the weighted average number of commonshares outstanding during the periods presented.  Diluted earnings per share (“Diluted EPS”) reflects thepotential dilution that could occur if securities or other obligations to issue common stock were exercised or converted intocommon stock or resulted in the issuance of common stock that then shared in the earnings of the Company.

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            The following table sets forththe reconciliation of the numerator and denominator of Basic EPS to the numerator and denominator of Diluted EPS for the three andsix months ended June 30, 2010 and 2009 (in thousands, except per share amounts). 

|                                                                        |   | **Three Months Ended June 30,** |   |   | **Six Months Ended June 30,** |
|------------------------------------------------------------------------|---|---------------------------------|---|---|-------------------------------|
|                                                                        |   |                                 |   |
|                                                                        |   | ****                            |   |   | ****                          |
|                                                                        |   | **2010**                        |   |   | **2009**                      |  |  | **2010** |  |  | **2009** |  |
|                                                                        |   | ****                            |   |   | ****                          |  |  | **** |  |  | **** |  |
| **Numerator:**                                                         |   |                                 |   |   |                               |  |  |  |  |  |  |  |
| Net loss                                                               | $ | (18,599                         | ) | $ | (13,097                       | ) | $ | (34,729 | ) | $ | (24,501 | ) |
| Income impact of assumed conversion of   convertible debt    |   | —                         |   |   | —                       |  |  | — |  |  | — |  |
| Income impact from recognition of deferred   sales incentive |   | —                         |   |   | —                       |  |  | — |  |  | — |   |
|                                                                        |   |                                 |   |   |                               |  |  |  |  |  |  |  |
|                                                                        | $ | (18,599                         | ) | $ | (13,097                       | ) | $ | (34,729 | ) | $ | (24,501 | ) |
|                                                                        |   |                                 |   |   |                               |  |  |  |  |  |  |  |
| **Denominator:**                                                       |   |                                 |   |   |                               |  |  |  |  |  |  |  |
| Weighted average common shares   outstanding                 |   | 18,867                          |   |   | 14,885                        |  |  | 18,115 |  |  | 15,952 |  |
| Effect of stock options and restricted   stock outstanding   |   | —                         |   |   | —                       |  |  | — |  |  | — |  |
| Assumed conversion of convertible debt                                 |   | —                         |   |   | —                       |  |  | — |  |  | — |  |
|                                                                        |   |                                 |   |   |                               |  |  |  |  |  |  |  |
|                                                                        |   | 18,867                          |   |   | 14,885                        |  |  | 18,115 |  |  | 15,952 |  |
|                                                                        |   |                                 |   |   |                               |  |  |  |  |  |  |  |
| Basic & diluted loss per common share                              | $ | (0.99                           | ) | $ | (0.88                         | ) | $ | (1.92 | ) | $ | (1.54 | ) |
|                                                                        |   |                                 |   |   |                               |  |  |  |  |  |  |  |

            For the three and six monthsended June 30, 2010, we included 2.7 million shares of common stock in our weighted average common shares outstanding for purposesof calculating Basic EPS and Diluted EPS, as the nominal exercise price of the United Warrant results in the assumption thateventual exercise is assured.

            We excluded 1.3 million shares ofrestricted stock from the weighted average shares used in computing Basic EPS and Diluted EPS for the three and six months endedJune 30, 2010 and 0.8 million shares of restricted stock from the weighted average shares used in computing Basic EPS and DilutedEPS for the three and six months ended June 30, 2009, as these shares were not vested as of these dates. 

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            Weighted average common sharesoutstanding for the Diluted EPS calculation also include the incremental effect of shares issuable upon the exercise of stockoptions and restricted stock not yet vested.  We excluded the following common stock equivalents from our Diluted EPScalculations, because their inclusion would have been anti-dilutive:

| **        ** | **• ** | options to purchase 0.2 million shares of our common stock for the three and six months ended June30, 2010, and 0.4 million shares of our common stock for the three and six months ended June 30, 2009, as these options’exercise prices were greater than the average market price of the common shares for the respective periods; and |
|------------------------------------------------------|------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                      | **• ** | 0.2 million shares of common stock equivalents for the assumed conversion of convertible debt forthe three and six months ended June 30, 2010 in addition to 0.3 million shares of common stock equivalents for the assumedconversion of convertible debt for the three and six months ended June 30, 2009.                                     |

**Note 9 –– Commitments and Contingencies**

            ***Capacity PurchaseAgreements.***  Refer to Note 2, “Contract Flying,” for additional information regarding the AmendedContinental CPA and the United Express Agreement.

            ***General Guarantees andIndemnifications.***  Pursuant to our agreements with Continental and United, we provide indemnification for certainof our actions and they provide indemnification for certain of their actions.

            Additionally, we are party tomany contracts, in which it is common for us to agree to indemnify third parties for tort liabilities that arise out of or relateto the subject matter of the contract.  In some cases, this indemnity extends to related liabilities arising from thenegligence of the indemnified parties, but typically excludes liabilities caused by gross negligence or willful misconduct. We cannot estimate the potential amount of future payments under these indemnities until events arise that would trigger aliability under the indemnities.  However, we expect to be covered by insurance for a material portion of these liabilities,subject to deductibles, policy terms and condition.

            ***LegalProceedings.***  Subsequent to June 30, 2010, we entered into a settlementagreement related to our ongoing ARS litigation.  This settlement relates to our remaining ARS having a par value ofapproximately $1.1 million and a carrying value of $1.0 million at June 30, 2010, which was sold for 90% of par value.

            We are a defendant in variouslawsuits and proceedings arising in the ordinary course of our business.  While the outcome of these lawsuits and proceedingscannot be predicted with certainty and could have a material adverse effect on our financial position, results of operations orcash flows, we do not believe that the ultimate disposition of these proceedings will have a material adverse effect on ourfinancial position, results of operations or cash flows.

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**Item 2.  Management's Discussion and Analysis of Financial Condition and Results ofOperations**

            This quarterly report on Form10-Q contains forward-looking statements that are not limited to historical facts, but reflect our current beliefs, expectations orintentions regarding future events.  All forward-looking statements involve risks and uncertainties that could cause actualresults to differ materially from those in the forward-looking statements.  For examples of such risks anduncertainties,please see the “Risk Factors” sections in our Form 10-K for thefiscal year ended December 31, 2009, as well as in this report, and in our reports and proxy statements filed from time to timewith the SEC, which identify important matters such as risks related to the acquisition of ExpressJet by SkyWest, Inc.; ouroperations for Continental Airlines, Inc. (“Continental”) as Continental Express, pursuant our amended capacitypurchase agreement effective July 1, 2008 (the “Amended Continental CPA”); our operations for United Air Lines, Inc.(“United”) as United Express pursuant to a capacity purchase agreement effective December 1, 2009 (the “UnitedExpress Agreement”); our charter operation and other aviation services businesses; our covenants under the indenturegoverning our convertible notes; rising costs, open labor contracts for certain of our work groups, the uncertainties of aneconomic recovery and the highly competitive nature of the airline industry; and regulations and other factors.  We undertakeno duty to update or revise any of our forward-looking statements, whether as a result of new information, future events orotherwise.

            Our website address iswww.expressjet.com.  All of our SEC filings, together with exhibits, are available free of charge through our website as soonas reasonably practicable after we file them with, or furnish them to, the SEC.

**SkyWest, Inc. Acquisition Proposal**

            We signed a definitive mergeragreement with SkyWest, Inc. whereby SkyWest, Inc. will acquire all of the outstanding common shares of ExpressJet Holdings, Inc.(“Holdings”) for $6.75 per share in cash subject to the conditions of the definitive merger agreement dated August 3,2010 (the “Acquisition”).  SkyWest, Inc. advised that its intention is that ExpressJet Airlines will be mergedwith its wholly-owned subsidiary, Atlantic Southeast Airlines following the closing of the transaction and receipt of all requiredregulatory approvals.

            It is anticipated that thecombined airline will maintain significant operational presence in each of the hubs we currently serve, includingContinental’s current hubs in Houston, Newark/New York and Cleveland, as well as hubs in Chicago O’Hare and WashingtonDulles for United.  This transaction is not expected to result in material changes to operating schedules, destinations servedor aircraft deployment of either airline.  In addition, it is expected that the vast majority of front-line employee positionswill not be impacted by the Acquisition.

            The Boards of Directors of bothcompanies unanimously approved the definitive merger agreement.  The transaction is not subject to a financing condition, butis subject to approval by ExpressJet stockholders and to receipt of certain regulatory approvals and customary conditions. The transaction is currently expected to close during the fourth quarter of 2010.

            It is anticipatedthat the combined airline will maintain an operational support structurein Houston, Texas,while corporate headquarters will be located in Atlanta, Georgia.

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            **Second Quarter FinancialHighlights**

|                                                        | **• ** | Generated $7.6 million in positive cash flow from operations;                                                                   |
|--------------------------------------------------------|------------------|---------------------------------------------------------------------------------------------------------------------------------|
|                                                        | **• ** | developed and announced the Operation: Green Light Plan (“Operation: GreenLight”);                                  |
|           | **• ** | monetized $10 million in auction rate securities; and                                                                           |
|                                                        | **• ** | repaid the remaining $5 million on the outstanding credit facility provided by Citigroup related toour auction rate securities. |

            Subsequent to the end of thesecond quarter, we also successfully executed steps to improve our balance sheet, including a settlementrelated to the remaining balance of our auction rate securities portfolioand the firstredemption of our 11.25% Convertible Secured Notes due 2023.  During July 2010, we entered into a settlement agreement related to our ongoing auction rate securities litigation.  This settlementrelates to our remaining auction rate securities having a par value of approximately $1.1 million and a carrying value of $1.0million at June 30, 2010, which was sold for 90% of par value.

            We also continue to focus on thebalance sheet through the redemption of our 11.25% Convertible Secured Notes due 2023.  The first redemption, which took placeon July 9, 2010, resulted in the redemption of $3.2 million in principal of our 11.25% Convertible SecuredNotes due 2023.  The shortfall of $1.8 million from the announced $5.0 million principal amount redemption was due to anadministrative error made by the Company’s agent on the original note redemption.  To correct this error, wedelivered notice to the trustee of our intention to redeem an additional $1.8 million in principal of our 11.25% Convertible Secured Notes due 2023 on August 23, 2010.  The administrative error will not have a financialimpact on us.

            We also successfully completedthe redemption of an additional $5.0 million in principal of our 11.25% Convertible Secured Notes due 2023on August 2, 2010.  After completing these redemptions, we will have redeemed a total of $10 million of our 11.25%Convertible Secured Notes due 2023 and our remaining balance on the notes will be $33.6 million.  Thisbalance represents the par value due to noteholders when the notes become due August 1, 2023 and a 43% reduction in these notesversus June 30, 2009.  The early redemption of our 11.25% Convertible Secured Notes due 2023 will save us approximately$1.1 million annually in interest expense.

           After these redemptions, the remaining balance in our securities repurchase program will be $11.8 million. We expect any future purchases of securities under the securities repurchase program to be made periodically inthe open market or in privately negotiated transactions.

**Second Quarter Operational Highlights**

|                                                        | **• ** | Experienced a 17.6% increase in utilization year-over-year;                                                        |
|--------------------------------------------------------|------------------|--------------------------------------------------------------------------------------------------------------------|
|                                                        | **• ** | increased the number of aircraft flying for United by 16 during the quarter for atotal of 32 aircraft;             |
|                                                        | **• ** | opened a new Chicago O’Hare crew base and transitioned over 450 crewmembers forUnited flying during May; and |
|           | **• ** | recovered the operation after cancelling over 2,000 flights for severeweather.                                     |

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****

**Outlook**

            While the Acquisition is pending,we will maintain control over our operational and business decisions.  During this period, we will continue to focus on thesemain areas:  contract flying for mainline partners; charter agreements and ad-hoc charter arrangements for customers seekingcustomizable travel solutions (corporate aviation) and aviation services.  We anticipate that our reported results willclosely follow the general trends of the aviation industry.

            During the second quarter 2010,we flew more hours for our partners – a 19.8% increase in block hours – as more people began to travel and the economycontinued its recovery.  The second and third quarters are traditionally the busiest two quarters of the year fortravel.  Accordingly, we expect our utilization at approximately 8 hours 53 minutes during third quarter 2010.

            As utilization increased duringsecond quarter 2010, variable costs associated directly with operating the aircraft increased proportionately with the increase inblock hours.  We also achieved labor productivity gains within our maintenance and dispatch organizations.  We hope toextend the productivity gains to our pilot and flight attendant groups during third quarter 2010, as a result of the new Unitedcrew base in Chicago O’Hare that opened May 1, 2010.

            We also made measured progress onour Operation: Green Light during the second quarter of 2010.  Operation: Green Light, which we announced on June 7, 2010, isa multi-phase plan which we expect will allow us to save up to $40 million in run-rate cost savings by 2012.  As we work toclose the Acquisition, we will continue to pursue cost-savings opportunities under Operation: Green Light.

            Subsequent to the close of thesecond quarter, the Federal government passed the Airline Safety and Federal Aviation Administration Extension Act of 2010 (the“Act”).  The Act contained provisions for flight crewmember screening and qualifications as well as requirementsfor safety management systems.  We currently don’t expect the passage of the Act to have a material impact on ouroperation as we already meet or exceed the criteria.

            As we are able to reduce costsand operate at increased block hours, we expect that we will generate positive cash flowsfor the remainder of2010.  During this same period, we expect to generate a loss on a net income level despite generating positive cash flows forthe full-year 2010.

            As of June 30, 2010, ouravailable liquidity (including restricted and unrestricted cash and our auction rate securities holdings) was $108.2 million. We will continue to focus on improving our balance sheet through generating cash flow from operations and making repurchases underour approved securities repurchase program.

           We believe that our existing liquidity together with projected 2010 cash flows will be sufficient to fund currentoperations and our financial obligations through the twelve months ending June 30, 2011.  However, as noted above, factorsoutside our control may dictate that we alter our current plans and expectations.

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**Operations Review**

           Thefollowing discussion provides an analysis of our results of operations and reasons for any material changes for the periodsindicated.

***Comparison of Three Months Ended June 30, 2010 to Three Months Ended June 30,2009***

**Operating Revenue and Segment Profit**

**

            The table below (in thousands,except percentage data) sets forth the changes in revenue, direct segment costs and segment profit from the three months ended June30, 2010 to the three months ended June 30, 2009.  A significant portion of our operating expenses and infrastructure isintegrated across segments (e.g., for non-airport facility rentals, outside services, general and administrative expenses) in orderto support our entire fleet of 244 aircraft; therefore, we do not allocate these costs to the individual segments identified above,but evaluate them for our consolidated operation.  We believe that the presentation of our consolidated shared costs andtransition costs is consistent with the manner in which these expenses are viewed by our chief operating decision makers. However, we continue to monitor the shared costs to identify direct segment expenses.

|                                                         |          | **Three Months Ended June 30,** |   |        |                     |   |        |   |          |   |
|---------------------------------------------------------|----------|---------------------------------|---|--------|---------------------|---|--------|---|----------|---|
|                                                         |          | ****                            |   |        |                     |   |        |   |          |   |
|                                                         |          | **2010**                        |   |        | **Total Revenue %** |   |        |   | **2009** |   |  | **Total Revenue %** |  |  |  | **Increase/ (Decrease)** |  |  | **Change %** |  |
|                                                         |          | ****                            |   |        | ****                |   |        |   | ****     |   |  | **** |  |  |  | **** |  |  | **** |  |
| Revenue from customers:                                 |          |                                 |   |   |                     |   |        |   |          |   |   |  |  |  |  |  |  |  |  |  |
|    Contract Flying                       | $        | 197,515                         |   |        | 95.4                | % |   | $ | 162,208  |   |  | 95.1 | % |   | $ | 35,307 |  |  | 21.8 | % |
|    Aviation Services                     |          | 11,071                          |   |        | 5.3                 |   |        |   | 10,238   |   |  | 6.0 |  |  |  | 833 |  |  | 8.1 |  |
|    Eliminations                          |          | (1,546                          | ) |        | (0.7                | ) |        |   | (1,858   | ) |  | (1.1 | ) |  |  | 312 |  |  | 16.8 |  |
| Total revenue from customers                            |          | 207,040                         |   |        | 100.0               |   |        |   | 170,588  |   |  | 100.0 |  |  |  | 36,452 |  |  | 21.4 |  |
| Direct segment costs:                                   |          |                                 |   |        |                     |   |        |   |          |   |  |  |  |  |  |  |  |  |  |  |
|    Contract Flying                       |          | 178,236                         |   |        | 86.1                |   |        |   | 146,339  |   |  | 85.8 |  |  |  | 31,897 |  |  | 21.8 |  |
|    Aviation Services                     |          | 8,356                           |   |        | 4.0                 |   |        |   | 6,622    |   |  | 3.9 |  |  |  | 1,734 |  |  | 26.2 |  |
|    Eliminations                          |          | (1,546                          | ) |        | (0.7                | ) |        |   | (1,858   | ) |  | (1.1 | ) |  |  | 312 |  |  | 16.8 |  |
| Total direct segment costs                              |          | 185,046                         |   |        | 89.4                |   |        |   | 151,103  |   |  | 88.6 |  |  |  | 33,943 |  |  | 22.5 |  |
| Segment profit                                          |          | 21,994                          |   |        | 10.6                |   |        |   | 19,485   |   |  | 11.4 |  |  |  | 2,509 |  |  | 12.9 |  |
| Other shared expenses                                   |          | (27,673                         | ) |        |                     |   |        |   | (30,366  | ) |  |  |  |  |  |  |  |  |  |  |
| Impairment of fixed assets                              |          | (3,075                          | ) |        |                     |   |        |   | —  |   |  |  |  |  |  |  |  |  |  |  |
| Non-operating expenses, net                             |          | (2,263                          | ) |        |                     |   |        |   | (3,293   | ) |  |  |  |  |  |  |  |  |  |  |
|                                                         |          | ****                            |   |        |                     |   |        |   | ****     |   |  |  |  |  |  |  |  |  |  |  |
| Consolidated loss before income    taxes |   $ | (11,017                         | ) |        |                     |   |        | $ | (14,174  | ) |  |  |  |  |  |  |  |  |  |  |
|                                                         |          |                                 |   |        |                     |   |        |   |          |   |  |  |  |  |  |  |  |  |  |  |

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            The table below (in thousands,except percentage data) sets forth the segment profit for the three months ended June 30, 2010 and for the three months ended June30, 2009 for each segment.

|                        |        |   | **Contract Flying** |            |        | **Aviation Services** |        |
|------------------------|--------|---|---------------------|------------|--------|-----------------------|--------|
|                        |        |   |                     | ** ** |        |                       |        |
|                        |        |   | **2010**            |            |        | **Total Revenue %**   |        |  | **2010** |  |  | **Total Revenue %** |  |
|                        |        |   |                     |            |   |                       |   |  |  |   |  |  |  |
| Revenue from customers |   | $ | 197,515             |            |        | 100.0                 | %      | $ | 11,071 |  |  | 100.0 | % |
| Direct segment costs   |        |   | 178,236             |            |        | 90.2                  |        |  | 8,356 |  |  | 75.5 |  |
|                        |        |   |                     |            |        |                       |        |  |  |  |  |  |  |
| Segment profit         |        | $ | 19,279              |            |        | 9.8                   |        | $ | 2,715 |  |  | 24.5 | % |

|                        |        |   | **Contract Flying** |            |        | **Aviation Services** |        |
|------------------------|--------|---|---------------------|------------|--------|-----------------------|--------|
|                        |        |   |                     | ** ** |        |                       |        |
|                        |        |   | **2009**            |            |        | **Total Revenue %**   |        |  | **2009** |  |  | **Total Revenue %** |  |
|                        |        |   |                     |            |   |                       |   |  |  |   |  |  |  |
| Revenue from customers |   | $ | 162,208             |            |        | 100.0                 | %      | $ | 10,238 |  |  | 100.0 | % |
| Direct segment costs   |        |   | 146,339             |            |        | 90.2                  |        |  | 6,622 |  |  | 64.7 |  |
|                        |        |   |                     |            |        |                       |        |  |  |  |  |  |  |
| Segment profit         |        | $ | 15,869              |            |        | 9.8                   | %      | $ | 3,616 |  |  | 35.3 | % |

****

**           *****Contract Flying.***The increase in revenue and direct segment costs within our Contract Flyingsegment is attributable primarily to the increased block hours with the addition of flying under the United Express Agreement andhigher aircraft utilization within the Amended Continental CPA.  The overall segment profit margin is consistent quarter overquarter. 

**           *****Aviation Services.***  The reduction in the segmentprofit margin within our Aviation Services segment from 35.3% to 24.5% is due to increased labor rates and fringe benefit costs andour transition to new contracts in our ground handling business with Continental.

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**Operating Expenses**

**

            Thetablebelow (in thousands, except percentage data) sets forththe changes in operating expenses from the threemonths ended June 30, 2010 to the three months ended June 30, 2009.

|                                    |   | **Three Months Ended June 30,** |        |                     |   |        |   |          |        |                     |
|------------------------------------|---|---------------------------------|--------|---------------------|---|--------|---|----------|--------|---------------------|
|                                    |   | ****                            |        |                     |   |        |   |          |        |                     |
|                                    |   | **2010**                        |        | **Total Revenue %** |   |        |   | **2009** |        | **Total Revenue %** |  |  |  | **Increase / (Decrease)** |  |  | **Change %** |  |
|                                    |   |                                 |   |                     |   |        |   |          |   |                     |  |  |  |  |  |   |  |  |
| Wages, salaries, and related costs | $ | 91,571                          |        | 44.2                | % |   | $ | 79,619   |        | 46.7                | % |   | $ | 11,952 |  |  | 15.0 | % |
| Maintenance, materials and repairs |   | 48,737                          |        | 23.5                |   |        |   | 40,703   |        | 23.9                |  |  |  | 8,034 |  |  | 19.7 |  |
| Other rentals and landing fees     |   | 20,049                          |        | 9.7                 |   |        |   | 16,230   |        | 9.5                 |  |  |  | 3,819 |  |  | 23.5 |  |
| Aircraft fuel and related taxes    |   | 11,764                          |        | 5.7                 |   |        |   | 2,399    |        | 1.4                 |  |  |  | 9,365 |  |  | nm |  |
| Depreciation and amortization      |   | 6,591                           |        | 3.2                 |   |        |   | 7,721    |        | 4.5                 |  |  |  | (1,130 | ) |  | (14.6 | ) |
| Aircraft rentals                   |   | 6,774                           |        | 3.3                 |   |        |   | 5,472    |        | 3.2                 |  |  |  | 1,302 |  |  | 23.8 |  |
| Outside services                   |   | 4,769                           |        | 2.3                 |   |        |   | 6,132    |        | 3.6                 |  |  |  | (1,363 | ) |  | (22.2 | ) |
| Ground handling                    |   | 1,570                           |        | 0.8                 |   |        |   | 2,496    |        | 1.5                 |  |  |  | (926 | ) |  | (37.1 | ) |
| Impairment of fixed assets         |   | 3,075                           |        | 1.5                 |   |        |   | —  |        | nm                  |  |  |  | 3,075 |  |  | nm |  |
| Other operating expenses           |   | 20,894                          |        | 10.1                |   |        |   | 20,697   |        | 12.1                |  |  |  | 197 |  |  | 1.0 |  |
|                                    |   |                                 |        |                     |   |        |   |          |        |                     |  |  |  |  |  |  |  |  |
| Total operating expenses           | $ | 215,794                         |        | 104.2               | % |        | $ | 181,469  |        | 106.4               | % |  | $ | 34,325 |  |  | 18.9 | % |
|                                    |   |                                 |        |                     |   |        |   |          |        |                     |  |  |  |  |  |  |  |  |

**           *****Wages, salaries & related costs***increased 15.0% due to our 17.6%increase in block hours quarter over quarter offset slightly by productivity gains in certain of our work groups.

***           ******Maintenance, materials and repairs***increased 19.7% primarily due to our 17.6% increase inblock hours combined with the impact of scheduled rate increases in many of our long-term maintenance contracts and increased scopeof repairs as our aircraft age.

**           *****Other rentals and landing fees***increased 23.5% quarter over quarter inline with the 23.4% increase in departures within our Continental Express and United Express operations.

***            Aircraft Fuel and relatedtaxes***increased $9.4 million due to the increased volume attributable to the UnitedExpress Agreement. Fuel and related taxes are reimbursed by United.

***            Aircraftrentals ***increased 23.8% due to our subleasing eight aircraft from Continentalstarting in December 2009 that were previously operated as Continental Express under the Amended Continental CPA and for which wewere not recognizing aircraft rental expense in our condensed consolidated financial statements.  The last of the eightaircraft transitioned in April 2010.

***           ******Outside services ***decreased 22.2% primarily due to a $1.6million credit from the Transportation Security Administration received in second quarter 2010 for passenger screening chargesincurred in prior periods.

***            Impairment of fixedassets***of $3.1 million represents the impairment charge for certain aircraft leaseholdimprovements the carrying values of which were no longer recoverable as of June 30, 2010.  No such charge was incurred duringthe three months ended June 30, 2009.

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**Non-Operating Expenses**

**

            The table below (in thousands,except percentage data) sets forth the changes in non-operating expenses from the three months ended June 30, 2010 to the threemonths ended June 30, 2009.

|                                                                 |   | **Three Months Ended June 30,** |   |  |                     |    |  |   |          |   |
|-----------------------------------------------------------------|---|---------------------------------|---|--|---------------------|----|--|---|----------|---|
|                                                                 |   | ****                            |   |  |                     |    |  |   |          |   |
|                                                                 |   | **2010**                        |   |  | **Total Revenue %** |    |  |   | **2009** |   |  | **Total Revenue %** |  |  |  | **Increase / (Decrease)** |  |  | **Change %** |  |
|                                                                 |   | ****                            |   |  | ****                |    |  |   | ****     |   |  | **** |  |  |  | **** |  |  | **** |  |
| Gain on sale of short-term    investments, net   | $ | 700                             |   |  | 0.3                 | %  |  | $ | —  |   |  | — | % |   |  | 700 |  |  | nm | % |
| Amortization of debt discount                                   |   | (1,538                          | ) |  | (0.7                | )  |  |   | (1,523   | ) |  | (0.9 | ) |  |  | (15 | ) |  | (1.0 | ) |
| Interest expense, net of capitalized    interest |   | (1,443                          | ) |  | (0.7                | )  |  |   | (2,043   | ) |  | (1.2 | ) |  |  | 600 |  |  | 29.4 |  |
| Interest income                                                 |   | 55                              |   |  | 0.0                 |    |  |   | 289      |   |  | 0.2 |  |  |  | (234 | ) |  | (81.0 | ) |
| Other, net                                                      |   | (37                             | ) |  | (0.0                | )  |  |   | (16      | ) |  | 0.0 |  |  |  | (21 | ) |  | nm |  |
|                                                                 |   |                                 |   |  |                     |    |  |   |          |   |  |  |  |  |  |  |  |  |  |  |
| Total non-operating expenses                                    | $ | (2,263                          | ) |  | (1.1                | %) |  | $ | (3,293   | ) |  | (1.9 | %) |  | $ | 1,030 |  |  | 31.3 | % |
|                                                                 |   |                                 |   |  |                     |    |  |   |          |   |  |  |  |  |  |  |  |  |  |  |

**            *Total non-operatingexpenses***decreased primarily due to the gains realized from sales of our auction rate securities(“ARS”) during the three months ended June 30, 2010.  In addition, we saw a reduction in interest expense due torepurchases of our 11.25% Convertible Secured Notes due 2023, offset partially by a decline in interest income.

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***Comparison of Six Months Ended June 30, 2010 to Six Months Ended June 30,2009***

**Operating Revenue and Segment Profit**

**

            The table below (in thousands,except percentage data) sets forth the changes in revenue, direct segment costs and segment profit from the six months ended June30, 2010 to the six months ended June 30, 2009.  A significant portion of our operating expenses and infrastructure isintegrated across segments (e.g., for non-airport facility rentals, outside services and general and administrative expenses) inorder to support our entire fleet of 244 aircraft; therefore, we do not allocate these costs to the individual segments identifiedabove, but evaluate them for our consolidated operation.  We believe that the presentation of our consolidated shared costsand transition costs is consistent with the manner in which these expenses are viewed by our chief operating decision makers. However, we continue to monitor the shared costs to identify direct segment expenses.

|                                                         |          | **Six Months Ended June 30,** |   |        |                     |   |        |   |          |   |
|---------------------------------------------------------|----------|-------------------------------|---|--------|---------------------|---|--------|---|----------|---|
|                                                         |          | ****                          |   |        |                     |   |        |   |          |   |
|                                                         |          | **2010**                      |   |        | **Total Revenue %** |   |        |   | **2009** |   |  | **Total Revenue %** |  |  |  | **Increase/ (Decrease)** |  |  | **Change %** |  |
|                                                         |          | ****                          |   |        | ****                |   |        |   | ****     |   |  | **** |  |  |  | **** |  |  | **** |  |
| Revenue from customers:                                 |          |                               |   |   |                     |   |        |   |          |   |   |  |  |  |  |  |  |  |  |  |
|    Contract Flying                       | $        | 378,084                       |   |        | 95.4                | % |   | $ | 323,219  |   |  | 95.0 | % |   | $ | 54,865 |  |  | 17.0 | % |
|    Aviation Services                     |          | 22,448                        |   |        | 5.7                 |   |        |   | 21,414   |   |  | 6.3 |  |  |  | 1,034 |  |  | 4.8 |  |
|    Eliminations                          |          | (4,211                        | ) |        | (1.1                | ) |        |   | (4,336   | ) |  | (1.3 | ) |  |  | 125 |  |  | 2.9 |  |
| Total revenue from customers                            |          | 396,321                       |   |        | 100.0               |   |        |   | 340,297  |   |  | 100.0 |  |  |  | 56,024 |  |  | 16.5 |  |
| Direct segment costs:                                   |          |                               |   |        |                     |   |        |   |          |   |  |  |  |  |  |  |  |  |  |  |
|    Contract Flying                       |          | 349,444                       |   |        | 88.2                |   |        |   | 290,983  |   |  | 85.5 |  |  |  | 58,461 |  |  | 20.1 |  |
|    Aviation Services                     |          | 16,416                        |   |        | 4.1                 |   |        |   | 13,125   |   |  | 3.9 |  |  |  | 3,291 |  |  | 25.1 |  |
|    Eliminations                          |          | (4,211                        | ) |        | (1.1                | ) |        |   | (4,336   | ) |  | (1.3 | ) |  |  | 125 |  |  | 2.9 |  |
| Total direct segment costs                              |          | 361,649                       |   |        | 91.3                |   |        |   | 299,772  |   |  | 88.1 |  |  |  | 61,877 |  |  | 20.6 |  |
| Segment profit                                          |          | 34,672                        |   |        | 8.7                 |   |        |   | 40,525   |   |  | 11.9 |  |  |  | (5,853 | ) |  | (14.4 | ) |
| Other shared expenses                                   |          | (54,825                       | ) |        |                     |   |        |   | (62,422  | ) |  |  |  |  |  |  |  |  |  |  |
| Impairment of fixed assets                              |          | (3,075                        | ) |        |                     |   |        |   | —  |   |  |  |  |  |  |  |  |  |  |  |
| Non-operating expenses, net                             |          | (7,411                        | ) |        |                     |   |        |   | (6,154   | ) |  |  |  |  |  |  |  |  |  |  |
|                                                         |          | ****                          |   |        |                     |   |        |   | ****     |   |  |  |  |  |  |  |  |  |  |  |
| Consolidated loss before income    taxes |   $ | (30,639                       | ) |        |                     |   |        | $ | (28,051  | ) |  |  |  |  |  |  |  |  |  |  |
|                                                         |          |                               |   |        |                     |   |        |   |          |   |  |  |  |  |  |  |  |  |  |  |

            The table below (in thousands,except percentage data) sets forth the segment profit for the six months ended June 30, 2010 and for the six months ended June 30,2009 for each segment.

|                        |        |   | **Contract Flying** |            |        | **Aviation Services** |        |
|------------------------|--------|---|---------------------|------------|--------|-----------------------|--------|
|                        |        |   |                     | ** ** |        |                       |        |
|                        |        |   | **2010**            |            |        | **Total Revenue %**   |        |  | **2010** |  |  | **Total Revenue %** |  |
|                        |        |   |                     |            |   |                       |   |  |  |   |  |  |  |
| Revenue from customers |   | $ | 378,084             |            |        | 100.0                 | %      | $ | 22,448 |  |  | 100.0 | % |
| Direct segment costs   |        |   | 349,444             |            |        | 92.4                  |        |  | 16,416 |  |  | 73.1 |  |
|                        |        |   |                     |            |        |                       |        |  |  |  |  |  |  |
| Segment profit         |        | $ | 28,640              |            |        | 7.6                   | %      | $ | 6,032 |  |  | 26.9 | % |

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|                        |        |   | **Contract Flying** |            |        | **Aviation Services** |        |
|------------------------|--------|---|---------------------|------------|--------|-----------------------|--------|
|                        |        |   |                     | ** ** |        |                       |        |
|                        |        |   | **2009**            |            |        | **Total Revenue %**   |        |  | **2009** |  |  | **Total Revenue %** |  |
|                        |        |   |                     |            |   |                       |   |  |  |   |  |  |  |
| Revenue from customers |   | $ | 323,219             |            |        | 100.0                 | %      | $ | 21,414 |  | $ | 100.0 | % |
| Direct segment costs   |        |   | 290,983             |            |        | 90.0                  |        |  | 13,125 |  |  | 61.3 |  |
|                        |        |   |                     |            |        |                       |        |  |  |  |  |  |  |
| Segment profit         |        | $ | 32,236              |            |        | 10.0                  | %      | $ | 8,289 |  |  | 38.7 | % |

**           *****Contract Flying. ***The increase in revenue and direct segment costs within our ContractFlying segment is due primarily to the increased block hours with the addition of flying under the United Express Agreement andhigher aircraft utilization within the Amended Continental CPA.  The decline in overall segment profit margin is primarily dueto certain startup costs associated with the United Express Agreement and $1.9 million in amortization of the warrant we issued toUnited for the purchase of 2.7 million shares of common stock with an exercise price of $0.01 per share of common stock (the“United Warrant”) as a reduction to passenger revenue.

**           *****Aviation Services.***  The reduction in our Aviation Segment profitmargin from 38.7% to 26.9% is due to increased labor rates and fringe benefit costs and our transition to new contracts in ourground handling business with Continental.

**Operating Expenses**

**

            Thetablebelow (in thousands, except percentage data) sets forththe changes in operating expenses from the six monthsended June 30, 2010 to the six months ended June 30, 2009.

|                                    |   | **Six Months Ended June 30,** |        |                     |   |        |   |          |        |                     |
|------------------------------------|---|-------------------------------|--------|---------------------|---|--------|---|----------|--------|---------------------|
|                                    |   | ****                          |        |                     |   |        |   |          |        |                     |
|                                    |   | **2010**                      |        | **Total Revenue %** |   |        |   | **2009** |        | **Total Revenue %** |  |  |  | **Increase / (Decrease)** |  |  | **Change %** |  |
|                                    |   |                               |   |                     |   |        |   |          |        |                     |  |  |  |  |  |  |  |  |
| Wages, salaries, and related costs | $ | 182,765                       |        | 46.1                | % |   |   | 159,294  |   | 46.8                | % |   | $ | 23,471 |  |  | 14.7 | % |
| Maintenance, materials and repairs |   | 93,658                        |        | 23.6                |   |        |   | 79,143   |        | 23.3                |  |  |  | 14,515 |  |  | 18.3 |  |
| Other rentals and landing fees     |   | 37,549                        |        | 9.5                 |   |        |   | 29,124   |        | 8.6                 |  |  |  | 8,425 |  |  | 28.9 |  |
| Aircraft fuel and related taxes    |   | 20,679                        |        | 5.2                 |   |        |   | 5,620    |        | 1.7                 |  |  |  | 15,059 |  |  | nm |  |
| Depreciation and amortization      |   | 13,245                        |        | 3.3                 |   |        |   | 15,787   |        | 4.6                 |  |  |  | (2,542 | ) |  | (16.1 | ) |
| Aircraft rentals                   |   | 13,207                        |        | 3.3                 |   |        |   | 10,944   |        | 3.2                 |  |  |  | 2,263 |  |  | 20.7 |  |
| Outside services                   |   | 10,039                        |        | 2.5                 |   |        |   | 13,727   |        | 4.0                 |  |  |  | (3,688 | ) |  | (26.9 | ) |
| Ground handling                    |   | 4,521                         |        | 1.1                 |   |        |   | 5,601    |        | 1.6                 |  |  |  | (1,080 | ) |  | (19.3 | ) |
| Impairment of fixed assets         |   | 3,075                         |        | 0.8                 |   |        |   | —  |        | 0.0                 |  |  |  | 3,075 |  |  | nm |  |
| Other operating expenses           |   | 40,811                        |        | 10.3                |   |        |   | 42,954   |        | 12.6                |  |  |  | (2,143 | ) |  | (5.0 | ) |
|                                    |   |                               |        |                     |   |        |   |          |        |                     |  |  |  |  |  |  |  |  |
| Total operating expenses           | $ | 419,549                       |        | 105.9               | % |        | $ | 362,194  |        | 106.4               | % |  | $ | 57,355 |  |  | 15.8 | % |
|                                    |   |                               |        |                     |   |        |   |          |        |                     |  |  |  |  |  |  |  |  |

**           *****Wages, salaries & related costs***increased 14.7%due primarily to our 14.9% increase in block hours quarter over quarter.  In addition, we experienced higher wage and fringerates due to the increased seniority of our workforce offset by slight productivity gains in certain work groups.

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****

***           ******Maintenance, materials and repairs***increased 18.3% due to our 14.9% increase in block hourscombined with the impact of 2010 scheduled rate increases in many of our long-term maintenance contracts and the increased scope ofrepairs as our aircraft age.

**           *****Other rentals and landing fees***increased 28.9% over 2009 due to a 20.6%increase in departures within our Continental Express and United Express operations in addition to a $1.3 million landing feecredit recorded in 2009.  No such credit was recorded during the same period in 2010.

******

***            Aircraft Fuel and relatedtaxes***increased $15.1 million due to the increased volume attributable to the UnitedExpress Agreement.  These expenses are reimbursed by United.

***            Aircraftrentals ***increased 20.7% due to our subleasing eight aircraft from Continentalstarting in December 2009 that were previously operated as Continental Express under the Amended Continental CPA and for which wewere not recognizing aircraft rental expense in our condensed consolidated financial statements.  The last of the eightaircraft transitioned in April 2010.

**

***           ******Outside services ***decreased 26.9% primarily due to a $1.6million credit from the Transportation Security Administration received in second quarter 2010 for passenger screening chargesincurred in prior periods.  In addition, we recorded a $1.7 million state and local tax settlement received April2010.

******

***            Impairment of fixedassets***of $3.1 million represents the impairment charge for certain aircraft leaseholdimprovements the carrying values of which were no longer recoverable as of June 30, 2010.  No such charge was incurred duringthe six months ended June 30, 2009.

**Non-Operating Expenses**

**

            The table below (in thousands,except percentage data) sets forth the changes in non-operating expenses from the six months ended June 30, 2010 to the six monthsended June 30, 2009.

|                                                                 |   | **Six Months Ended June 30,** |   |  |                     |    |  |   |          |   |
|-----------------------------------------------------------------|---|-------------------------------|---|--|---------------------|----|--|---|----------|---|
|                                                                 |   | ****                          |   |  |                     |    |  |   |          |   |
|                                                                 |   | **2010**                      |   |  | **Total Revenue %** |    |  |   | **2009** |   |  | **Total Revenue %** |  |  |  | **Increase / (Decrease)** |  |  | **Change %** |  |
|                                                                 |   | ****                          |   |  | ****                |    |  |   | ****     |   |  | **** |  |  |  | **** |  |  | **** |  |
| Gain on sale of short-term    investments, net   | $ | 700                           |   |  | 0.2                 | %  |  | $ | 482      |   |  | 0.1 | % |   | $ | 218 |  |  | 45.2 | % |
| Extinguishment of debt                                          |   | (1,717                        | ) |  | (0.4                | )  |  |   | (83      | ) |  | (0.0 | ) |  |   | (1,634 | ) |  | nm |  |
| Amortization of debt discount                                   |   | (3,289                        | ) |  | (0.8                | )  |  |   | (1,673   | ) |  | (0.5 | ) |  |  | (1,616 | ) |  | (96.6) |  |
| Interest expense, net of capitalized    interest |   | (3,084                        | ) |  | (0.8                | )  |  |   | (4,010   | ) |  | (1.2 | ) |  |  | 926 |  |  | 23.1 |  |
| Interest income                                                 |   | 227                           |   |  | 0.1                 |    |  |   | 636      |   |  | 0.2 |  |  |  | (409 | ) |  | (64.3 | ) |
| Equity investment loss                                          |   | —                       |   |  | 0.0                 |    |  |   | (377     | ) |  | (0.1 | ) |  |  | 377 |  |  | 100.0 |  |
| Other, net                                                      |   | (248                          | ) |  | (0.1                | )  |  |   | (1,129   | ) |  | (0.3 | ) |  |  | 881 |  |  | 78.0 |  |
|                                                                 |   |                               |   |  |                     |    |  |   |          |   |  |  |  |  |  |  |  |  |  |  |
| Total non-operating expenses                                    | $ | (7,411                        | ) |  | (1.9                | %) |  | $ | (6,154   | ) |  | (1.8 | %) |  | $ | (1,257 | ) |  | (20.4 | %) |
|                                                                 |   |                               |   |  |                     |    |  |   |          |   |  |  |  |  |  |  |  |  |  |  |

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**            *Total non-operatingexpenses***increased primarily due to the higher losses recognized from repurchases of our11.25% Convertible Secured Notes due 2023***. ***During the six months ended June 30, 2010, we repurchased $8.6 million par value (book value of $6.6 million) of our 11.25%Convertible Secured Notes due 2023 for $8.3 million, resulting in a net realized loss of $1.7 million compared to a net realizedloss of $0.1 million from debt repurchases during the six months ended June 30, 2009.  Inaddition, we saw a reduction in interest expense due to recent pay downs of our 11.25% Convertible Secured Notes due 2023, offsetpartially by a decline in interest income.   We also incurred losses on disposal of fixed assets in the six months endedJune 30, 2009, which are represented in “Other, net” in the table above.

**Certain Operational Information**

            The following statisticalinformation for the periods indicated is helpful in understanding our financial results:

|                                                                              |        | **For the Three Months Ended June 30,** |
|------------------------------------------------------------------------------|--------|-----------------------------------------|
|                                                                              |        | ****                                    |
|                                                                              |        | **2010**                                |  |  | **2009** |  |  | **Change** |  |  | **%** |  |
|                                                                              |        | ****                                    |  |  | **** |  |  | **** |  |  | **** |  |
| Operating Statistics:                                                        |        |                                         |  |   |  |  |   |  |  |   |  |  |
| Revenue passenger miles (millions) (1)                                       |   | 2,537                                   |  |  | 2,063 |  |  | 474 |  |  | 23.0 | % |
| Available seat miles (millions) (2)                                          |        | 3,132                                   |  |  | 2,624 |  |  | 508 |  |  | 19.4 | % |
| Passenger load factor (3)                                                    |        | 81.0                                    | % |  | 78.6 | % |  | 2.4 | pts |  | 3.1 | % |
| Operating cost per available seat mile (cents) (4)                           |        | 6.89                                    |  |  | 6.92 |  |  | (0.03 | ) |  | (0.4 | %) |
| Block hours (5)                                                              |        | 198,586                                 |  |  | 168,832 |  |  | 29,754 |  |  | 17.6 | % |
| Operating cost per block hour (dollars) (6)                                  |        | 1,087                                   |  |  | 1,075 |  |  | 12 |  |  | 1.1 | % |
| Departures                                                                   |        | 112,207                                 |  |  | 90,955 |  |  | 21,252 |  |  | 23.4 | % |
| Average price per gallon of fuel, including fuel   taxes (dollars) |        | 2.44                                    |  |  | 3.36 |  |  | (0.92) |  |  | (27.4 | %) |
| Fuel gallons consumed (millions)                                             |        | 4,817                                   |  |  | 713 |  |  | 4,104 |  |  | nm |  |
| Average length of aircraft flight (miles)                                    |        | 559                                     |  |  | 578 |  |  | (19 | ) |  | (3.3 | %) |
| Average daily utilization of each aircraft (hours) (7)                       |        | 8.94                                    |  |  | 7.60 |  |  | 1.34 |  |  | 17.6 | % |
| Completion factor                                                            |        | 98.5                                    | % |  | 98.3 | % |  | 0.2 | pts |  | 0.2 | % |
| Revenue passengers (thousands)                                               |        | 4,447                                   |  |  | 3,472 |  |  | 975 |  |  | 28.1 | % |
| Actual aircraft in fleet at end of period                                    |        | 244                                     |  |  | 244 |  |  | — |  |  | nm |  |

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|                                                                              |        | **For the Six Months Ended June 30,** |
|------------------------------------------------------------------------------|--------|---------------------------------------|
|                                                                              |        | ****                                  |
|                                                                              |        | **2010**                              |  |  | **2009** |  |  | **Increase / (Decrease)** |  |  | **% Increase / (Decrease)** |  |
|                                                                              |        | ****                                  |  |  | **** |  |  | **** |  |  | **** |  |
| **Operating Statistics:**                                                    |        |                                       |  |   |  |  |   |  |  |   |  |  |
| Revenue passenger miles (millions) (1)                                       |   | 4,629                                 |  |  | 3,796 |  |  | 833 |  |  | 21.9 | % |
| Available seat miles (millions) (2)                                          |        | 5,921                                 |  |  | 5,062 |  |  | 859 |  |  | 17.0 | % |
| Passenger load factor (3)                                                    |        | 78.2                                  | % |  | 75.0 | % |  | 3.2 | % |  | 4.3 | % |
| Operating cost per available seat mile (cents) (4)                           |        | 7.09                                  |  |  | 7.14 |  |  | (0.05 | ) |  | (0.7 | %) |
| Block hours (5)                                                              |        | 378,868                               |  |  | 329,668 |  |  | 49,200 |  |  | 14.9 | % |
| Operating cost per block hour (dollars) (6)                                  |        | 1,107                                 |  |  | 1,096 |  |  | 11 |  |  | 1.0 | % |
| Departures                                                                   |        | 210,226                               |  |  | 174,355 |  |  | 35,871 |  |  | 20.6 | % |
| Average price per gallon of fuel, including fuel   taxes (dollars) |        | 2.43                                  |  |  | 2.86 |  |  | (0.43) |  |  | (15.0 | %) |
| Fuel gallons consumed (millions)                                             |        | 8,508                                 |  |  | 1,963 |  |  | 6,545 |  |  | nm |  |
| Average length of aircraft flight (miles)                                    |        | 565                                   |  |  | 582 |  |  | (17 | ) |  | (2.9 | %) |
| Average daily utilization of each aircraft (hours) (7)                       |        | 8.58                                  |  |  | 7.46 |  |  | 1.12 |  |  | 15.0 | % |
| Completion factor                                                            |        | 97.4                                  | % |  | 97.8 | % |  | (0.4 | )pts |  | (0.4 | %) |
| Revenue passengers (thousands)                                               |        | 8,006                                 |  |  | 6,303 |  |  | 1,703 |  |  | 27.0 | % |
| Actual aircraft in fleet at end of period                                    |        | 244                                   |  |  | 244 |  |  | — |  |  | nm |  |

|    | (1)  | Revenue passenger miles are the number of scheduled miles flown by revenue passengers.                                             |
|--------------|-----------|------------------------------------------------------------------------------------------------------------------------------------|
|              | (2)  | Available seat miles are the number of passenger seats available multiplied by the number ofscheduled miles those seats are flown. |
|              | (3)  | Passenger load factor equals revenue passenger miles divided by available seat miles.                                              |
|              | (4)  | Operating cost per available seat mile is operating costs divided by available seatmiles.                                          |
|              | (5)  | Block hours are the hours from gate departure to gate arrival.                                                                     |
|              | (6)  | Operating cost per block hour is operating costs divided by block hours.                                                           |
|              | (7)  | Average daily utilization of each aircraft is the average number of block hours per day that anaircraft is operated.               |

**Future Costs**

            We remain committed to providingcompetitively priced services by controlling our costs; however, we believe that our costs are likely to increase in the future dueto: 

| **        ** | **• ** | increases in seniority of our workforce given our recent low attrition rates;                                                                                                                     |
|------------------------------------------------------|------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                      | **• ** | changes in our self-insured fringe benefit costs;                                                                                                                                                 |
|                                                      | **• ** | requirements under our collective bargaining agreements;                                                                                                                                          |
|                                                      | **• ** | aging of our fleet, resulting in higher aircraft maintenance costs;                                                                                                                               |
|                                                      | **• ** | changes in the costs of materials and outside services, including our information technology costs;and                                                                                            |
|                                                      | **• ** | changes in governmental regulations, such as costs associated with extended tarmac delays, war riskinsurance, environmental legislation, or costs attributed to heightened security requirements. |

            In the long term, failure tocontrol our costs diminishes our competitiveness and reduces our ability to limit losses.

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**Liquidity, Capital Resources and Financial Position**

            ***Sources and Uses ofCash***

            At June 30, 2010, our availableliquidity, including restricted and unrestricted cash and our ARS was $108.2 million.  For the six months ended June 30, 2010and 2009, our operations provided $18.3 million and used $8.5 million, respectively, in cash flow.  As of June 30, 2010 andDecember 31, 2009, we had $20.4 million and $17.7 million of restricted cash, respectively, which is comprised of collateral forour workers’ compensation coverage, customer deposits for future charter flights and letters of credit.

            We spent$1.8 million and $2.8 million on capital expenditures during the six months ended June 30, 2010 and 2009, respectively.  Thesecapital expenditures related primarily to aircraft spare parts and technology needed to support our various lines ofbusiness.  We anticipate capital expenditures for the remainder of 2010 to be approximately $2.5 million.

******

            Our 2010 cash flow as of the dateof this filing have included the following sources of cash outside of normal operating revenues:

| **        ** | **• ** | received $16.5 million tax refund in March 2010 from the "Worker, Homeownership, and BusinessAssistance Act of 2009," which allows taxpayers to elect to carry back either their 2008 or 2009 net operating loss for a period ofup to five years; |
|------------------------------------------------------|------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                      | **• ** | sold $10.0 million of our ARS for 87% of par value in the second quarter of 2010;and                                                                                                                                                              |
|                                                      | **• ** | collected a $1.7 million state and local tax settlement in April 2010.                                                                                                                                                                            |

            Subsequent to June 30, 2010, webegan the process to complete our previously announced plans to redeem $10.0 million of the principal balance of our 11.25%Convertible Secured Notes due 2023.  The redemptions are to be carried out in three separate transactions and are part of ouroverall strategy to reduce our debt balances and future interest expense.

           We believestrict budgeting and cash preservation are crucial to sustain our liquidity and meet our financial obligations through the nexttwelve months. We believe that our existing liquidity and projected 2010 cash flow, including theincremental sources of liquidity described above, if needed, will be sufficient to fund current operations and our financialobligations through the twelve months ending June 30, 2011.  However, factors outside our control may dictate that we alterour current plans and expectations.

            In late 2009, the federalgovernment passed the "Worker, Homeownership, and Business Assistance Act of 2009," which allows taxpayers to elect to carry backeither their 2008 or 2009 net operating loss for a period of up to five years.  We elected to carry back our 2008 netoperating loss and recover a portion of federal regular and alternative minimum taxes paid in prior years.  We filed a carryback claim with the Internal Revenue Service and received $16.5 million in March 2010 and, in the process, fully exhausted anybenefit available to us under the Act.

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            ***Securities RepurchaseProgram***

            In July 2005, our Board ofDirectors authorized the expenditure of up to $30 million to repurchase shares of our common stock.  In February 2006, theBoard authorized the inclusion of our Original 4.25% Convertible Notes due 2023 (now our 11.25% Convertible Secured Notes due2023), within the previously announced program.  Since that time, our Board has authorized an additional $15 million in 2008,$10 million in 2009 and $20 million in April 2010 to be utilized for purchases within this program.  Purchases have been madefrom time to time in the open market and in privately negotiated transactions.  The timing of any repurchases under theprogram depends on a variety of factors, including market conditions, and the program may be suspended or discontinued at anytime.  Including the $10 million redemption of our 11.25% Convertible Secured Notes due 2023, which was made after June 30,2010, the balance remaining within the program as of the date of this filing is $11.8 million.

**

***            Long-termDebt***

            We did not enter into anymaterial financing transactions during the six months ended June 30, 2010.  As of June 30, 2010, total debt, including currentmaturities, totaled $39.4 million net of a discount of $8.3 million.  Our debt consisted of the 11.25% Convertible SecuredNotes due 2023 and a series of secured loan agreements with Export Development Canada (“EDC”), which consist of a $10.7million loan entered into in May 2003 and a $6.6 million loan entered into in September 2003 (the “EDCLoans”).

            The EDC Loans are secured bycertain of our flight simulators, flight data software and other equipment related to the simulators.  The amount due to EDCaccrues interest at the six-month LIBOR plus 1.75% per annum.  Each of the EDC Loans has a term of 96 months and each containscustomary representations, warranties and covenants.  Additionally, Continental is the guarantor of the EDC Loans, and adefault under the guarantee would cause an acceleration of the loans.  During the three months ended June 30, 2010, we madepayments in the amount of $1.8 million on the EDC Loans, primarily related to principal.  As of June 30, 2010, the outstandingprincipal balance of the EDC Loans was $4.1 million.

            In March 2009, weentered into and drew down fullya$5 million revolving line of credit(the “Citigroup Credit Facility”) with Citigroup Global Markets Inc. (“Citigroup”)to increase our liquidity.  The Citigroup Credit Facility, had a five year term and was pre-payable at any timeat our election, and was secured by $10 million of our ARS holdings that were purchased from Citigroup. The amount due to Citigroup accrued interest using the open federal rateplus a variablespread. Since the credit facility was secured by a portion of our ARS holdings, weclassified the liability as current on our Consolidated Balance Sheet.  During the quarter ended June 30, 2010, we sold $10.0million of the secured ARS that were purchased from Citigroup and repaid the entire $5.0 million of theCitigroup Credit Facility with the proceeds from the sales.

            Subsequent to June30, 2010, webegan the process to redeem$10.0million of our 11.25% Convertible Secured Notes due 2023 in three separate transactions at 100% of the aggregate principalamount. 

            Other than our 11.25% ConvertibleSecured Notes due 2023 and the EDC Loans we do not have any other material borrowings or available lines of credit.

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***            Off-Balance SheetArrangements***

            In the ordinary course ofbusiness, we enter into operating leases related to our aircraft, spare engines and facilities.  In accordance with U.S.generally accepted accounting principles, these arrangements are not reflected on our balance sheet; however, they are reasonablylikely to have a material effect on our future financial statements and financial outlook.

            We enter into these arrangementsto gain access to aircraft, equipment and facilities without requiring significant capital up front.  Since these assets areused in connection with our consolidated operations, these assets are required to generate substantially all of our passengerrevenue.

           ***Aircraft, Simulator and Spare Engine Leases*****. **As of June 30,2010, we had lease and sublease obligations for aircraft, flight training devices and spare engines that are classified asoperating leases, which are not reflected as assets or liabilities on our balance sheet.  These leases expire between 2013 and2022.  As of June 30, 2010, our expected total minimum annual rental payments under current and future non-cancelable aircraftoperating leases for aircraft operating outside of the Continental Express operations, simulator operating leases and spare engineoperating leases for 2010 was approximately $30.1 million.  Under the Amended Continental CPA, Continental will bear all therent expense for aircraft operating for Continental under that arrangement.  For the aircraft retained outside of the AmendedContinental CPA, we incur rent expense at reduced rental rates.  As of June 30, 2010, our expected total 2010 minimum rentalexpense for aircraft operating outside of the Continental Express operations was approximately $26.8 million.  A substantialportion of our aircraft are leased directly by Continental from third parties and subleased to us by Continental.  IfContinental were to default under these leases, our ability to retain access to the aircraft could be adversely affected. Pursuant to the terms of the amended indenture governing our 11.25% Convertible Secured Notes due 2023, we granted a securityinterest on certain of our property, including spare parts and spare aircraft engines.  We agreed that if certain collateralratios are greater than the applicable maximum, we will pledge additional spare parts, spare aircraft engines and/or cash and cashequivalents. Conversely, as the 11.25% Convertible Secured Notes due 2023 are repurchased or redeemed the collateral pool can bereduced proportionately under the terms of the indenture.

****

**Item 3.  Quantitative and Qualitative Disclosure about Market Risk**

            We have been and are subject tomarket risks, including commodity price risk (such as, to a limited extent, aircraft fuel prices) and interest rate risk.  Themarket risk sensitive instruments we entered into are for other than trading purposes.

**Aircraft Fuel**

            Under the AmendedContinental CPA, Continental is directly responsible for the cost of providing fuel for all flights operating as ContinentalExpress; therefore, the related fuel expense is not included in our Consolidated Statements of Operations for periods subsequent toJuly 1, 2008.

            Under the United ExpressAgreement, we agreed to a fuel risk sharing program with United where our mark-up is tied to an index consisting of the gap betweenincreases in the price of fuel and increases in United’s regional affiliate’s passenger revenue per available seatmile.

            As of June 30, 2010, we heldapproximately $3.5 million in deposits with fuel vendors for future fuel purchases for flights performing outside of theContinental Express operations.

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**Interest Rates**

            We have potential interestrate exposure under the EDC Loans which bear interest at the six-month LIBOR plus 1.75% per annum.  The interest ratesapplicable to these variable rate notes may rise, increasing our interest expense.  The impact of market risk is estimatedusing a hypothetical increase in interest rates by 100 basis points for our variable rate long-term debt.  Based on thishypothetical assumption, any additional amounts incurred in interest expense for our EDC Loans for all periods presented would notbe material.

           As of June 30, 2010 and December 31, 2009, we estimated the fair value of our $43.6 million and $52.1 million (carryingvalues) convertible notes to be $41.8 million and $50.3 million, respectively, based upon a fair valuation model that consideredquoted market prices.  Changes in the fair market value of our fixed-rate debt could be affected by a variety of factorsincluding general investor behavior, industry specific risks and interest rate risks.  In 2008, we recorded a $27.8 milliondiscount in connection with our 11.25% Convertible Secured Notes due 2023 that is being accreted to “Amortization of debtdiscount” in our Condensed Consolidated Statements of Operations and will continue until August 1, 2011.  Subsequent torepurchases made through June 30, 2010, our interest expense, calculated using the effective interest method, related to thenon-cash debt discount will be $3.5 million in 2010 and $4.8 million for the seven months ending July 31, 2011. In conjunction withthe amortization of debt discount, we are currently amortizing $2.0 million of capitalized fees associated with the convertibledebt refinancing to interest expense until August 1, 2011.

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**Item 4. Controls and Procedures**

*           **(a) Evaluation of disclosure controls and procedures*.  Based on their evaluation of ourdisclosure controls and procedures as of the end of the period covered by this report, our Chief Executive Officer and ChiefFinancial Officer have concluded that our disclosure controls and procedures are effective.

           *(b) Changes in internal control over financial reporting.*  We have notidentified any material weakness in our internal control over financial reporting as of June 30, 2010.

            No changes in our internalcontrol over financial reporting during our most recent fiscal quarter have materially affected or are reasonably likely tomaterially affect, our internal control over financial reporting.

            *(c)**The Board ofDirectors, acting through its Audit Committee, is responsible for the oversight of our accounting policies, financial reporting andinternal control*.  The Audit Committee, which is comprised entirely of outside directors who are independent, approvesdecisions regarding the appointment or removal of the Director of Internal Audit.  It meets periodically with management, theindependent auditors and the internal auditors to ensure that they are carrying out their responsibilities.  The AuditCommittee is also responsible for performing an oversight role by reviewing the Company’s financial reports.  Theindependent auditors and the internal auditors have full and unlimited access to the Audit Committee, with or without management,to discuss the adequacy of internal control over financial reporting, and any other matters that they believe should be brought tothe attention of the Audit Committee.

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**PART II.  OTHER INFORMATION**

**Item 1.  Legal Proceedings.**

**           ** Please refer to our Form 10-K for theyear ended December 31, 2009 under Part I, Item 3, Legal Proceedings.  There were no material developments to legalproceedings during the quarter ended June 30, 2010. 

            Subsequent to June30, 2010, we entered into a settlement agreement related to our ongoing ARS litigation.  This settlement relates to our finalauction rate securities balance of approximately $1.1 million par value, which was sold for 90% of par value.

**Item 1A.  Risk Factors.**

            Importantfactors that could cause actual results to differ materially from estimates or projections contained in forward-looking statementsare described in our Form 10-K for the year ended December 31, 2009under Part I, Item 1A, Risk Factors.  For the quarter ended June 30, 2010, we note the following additional riskfactors:

**            *TheAcquisition is subject to a number of conditions beyond our control.  Failure to complete the Acquisition within theexpected time frame or at all could adversely affect our stock price and our future business and financialresults.***

            Completion of theAcquisition is subject to conditions beyond our control that may prevent, delay or otherwise materially adversely affect itscompletion, including certain approvals of our stockholders and various approvals or consents that must be obtained from regulatoryentities.  We cannot predict whether and when these conditions will be satisfied.  We will also incur certaintransaction costs whether or not the Acquisition is completed.  Any failure to complete the Acquisition could have amaterial adverse effect on our stock price and our future business and financial results.

***            Prior to the closing of the Acquisition, we faceuncertainties and restrictions on our business, that could adversely affect us or our future business and operations, whether ornot the Acquisition is completed.***

            Prior to theclosing of the Acquisition, we will face additional uncertainties and restrictions on the manner in which we operate our business,including, among other things, that:

|                                                      | **• ** | our operations will be restricted by the terms of the merger agreement relating to theAcquisition, which may cause us to forego otherwise beneficial business opportunities;             |
|------------------------------------------------------|------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| **        ** | **• ** | conditions, terms, obligations or restrictions imposed on us by regulatory authoritiesprior to granting regulatory clearance for the Acquisition may affect our business and operations; |
|                                                      | **• ** | we may lose management personnel and other key employees and be unable to attract andretain such personnel and employees; and                                                            |
|                                                      | **• ** | management's attention and other company resources may be focused on the Acquisitioninstead of on pursuing other opportunities beneficial to us.                                         |

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******

***            The Continental and UnitedMerger Agreement may impact our long-term fleet rationalization plans.***

            In May 2010, Continental andUnited announced their agreement to merge their two companies.  The merger agreement is currently pending required approvalsand if successful could impact United’s decision to further expand the use of our aircraft.

**Item 2.  Unregistered Sales ofEquity Securities and Use of Proceeds.**

            As part of the United ExpressAgreement, on February 17, 2010, we issued a warrant to United for the purchase of 2.7 million shares of common stock with anexercise price of $0.01 per share of common stock (the “United Warrant”).  The United Warrant is fully vested andnon-forfeitable and United has no future performance commitment with respect to the United Warrant.  As of the date of thisfiling, United has not exercised its rights under the United Warrant.  However, as the nominal exercise price of the UnitedWarrant results in the assumption that eventual exercise is assured, we included 2.7 million shares of common stock in our weightedaverage common shares outstanding for purposes of calculating Basic EPS and Diluted EPS for the quarter ended June 30,2010.

            We issued the United Warrant inreliance upon the exemption afforded by the provisions of Section 4(2) of the Securities Act and Regulation D promulgated under theSecurities Act.

Issuer Purchases of Equity Securities

            In July 2005, our Board ofDirectors authorized the expenditure of up to $30 million to repurchase shares of our common stock.  In February 2006, theBoard authorized the inclusion of our Original 4.25% Convertible Notes due 2023 (now our 11.25% Convertible Secured Notes due2023), within the previously announced program.  Since that time, our Board has authorized an additional $15 million in 2008,$10 million in 2009 and $20 million in April 2010 to be utilized for purchases within this program.  Purchases have been madefrom time to time in the open market and in privately negotiated transactions.  The timing of any repurchases under theprogram depends on a variety of factors, including market conditions, and the program may be suspended or discontinued at anytime.  After repurchases of a portion of our 11.25% Convertible Secured Notes due 2023 in March 2010 and adjustments toexclude prepaid interest related to bond repurchases, the program had an available balance remaining of $21.8 million at June 30,2010.  Subsequent to June 30, 2010, we began the process to redeem $10.0 million of our 11.25% ConvertibleSecured Notes due 2023 in three separate transactions at 100% of the aggregate principal amount.  As of the date of thisfiling, there is a balance of $11.8 million remaining within the repurchase program.

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| **Period**        |        | **(a) Total number of shares purchased(1)** |        |   | **(b) Average price paid per share** |        |        | **(c) Total number of shares purchased as part of publicly announced program(2)** |        |   | **(d) Maximum value of shares / notes that may yet be purchased under the program (in millions)**(3) |
|-------------------|--------|---------------------------------------------|--------|---|--------------------------------------|--------|--------|-----------------------------------------------------------------------------------|--------|---|------------------------------------------------------------------------------------------------------|
|                   |        |                                             |        |   |                                      |   |        |                                                                                   |        |   |                                                                                                      |
| 4/1/10 to 4/30/10 |   | 18                                          |   | $ | 3.85                                 |        |   | —                                                                           |   | $ | 21.8                                                                                                 |
| 5/1/10 to 5/31/10 |   | 37,890                                      |   |   | 2.97                                 |        |   | —                                                                           |   |   | 21.8                                                                                                 |
| 6/1/10 to 6/30/10 |   | 5                                           |   |   | 3.15                                 |        |   | —                                                                           |   |   | 21.8                                                                                                 |
|                   |        |                                             |        |   |                                      |        |        |                                                                                   |        |   |                                                                                                      |
| Total             |        | 37,913                                      |        | $ |                                      |        |        | —                                                                           |        | $ | 11.8                                                                                                 |
|                   |        |                                             |        |   |                                      |        |        |                                                                                   |        |   |                                                                                                      |

| **        ** | (1)  | Shares shown include shares of our common stock repurchased within our Board approved securitiesrepurchase program as well as shares withheld to satisfy individual employee tax obligations arising upon the vesting of restrictedstock awards.  Shares withheld to satisfy tax obligations do not count against our securities repurchase program.                                                                                 |
|------------------------------------------------------|-----------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                            | (2)  | Amounts shown relate only to shares of our common stock repurchased within our Board approvedsecurities repurchase program.                                                                                                                                                                                                                                                                                                               |
|                                            | (3)  | Amounts shown reflect repurchases of our common stock and repurchases of our 11.25% ConvertibleSecured Notes due 2023 included within our Board approved securities repurchase program.  Subsequent toJune 30, 2010, we began the process to redeem $10.0 million of our 11.25% Convertible Secured Notes due 2023.  As of the dateof this filing, there is a balance of $11.8 million remaining within the repurchase program. |

**Item 3.  Defaults Upon Senior Securities.**

              None.

**Item 4.  (Removed andReserved)**

**Item 5.  Other Information.**

              None.

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**Item 6.  Exhibits.**

| 3.1  |    | Restated Certificate of Incorporation, as amended by the Certificate of Amendment dated July 1, 2008and Certificate of Amendment dated October 1, 2008 (incorporated by reference to Exhibit 3.1 to the Company’s QuarterlyReport on Form 10-Q for the quarter ended September 30, 2008 filed on November 12, 2008, File No. 1-31300). |
|------|--------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 3.2  |    | Amended and Restated Bylaws (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed onMay 24, 2007, File No. 1-31300).                                                                                                                                                                             |
| 31.1 |              | Rule 13a-14(a)/15d-14(a) Certification by Chief Executive Officer.(1)                                                                                                                                                                                                                                                                        |
| 31.2 |              | Rule 13a-14(a)/15d-14(a) Certification by Chief Financial Officer.(1)                                                                                                                                                                                                                                                                        |
| 32.1 |              | Section 1350 Certificationby Chief Executive Officer.(2)                                                                                                                                                                                                                                                                                |
| 32.2 |              | Section 1350 Certificationby Chief Financial Officer.(2)                                                                                                                                                                                                                                                                                     |
|      |              |                                                                                                                                                                                                                                                                                                                                         |
|      |              | (1) Filed herewith.                                                                                                                                                                                                                                                                                                                     |
|      |              | (2) Furnished herewith.                                                                                                                                                                                                                                                                                                                 |

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**SIGNATURES**

            Pursuant to the requirements ofthe Securities Exchange Act of 1934, ExpressJet Holdings, Inc. has duly caused this report to be signed on its behalf by theundersigned hereunto duly authorized.

|                        |                              | **EXPRESSJET HOLDINGS, INC.**(Registrant)                                                                                                                                                                                                                    |
|-----------------------------|--------------------------------------------------------------------------------------------------------------------------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Date:  August 12, 2010 |                         | /s/ PhungNgo-Burns                                                  |
|                             |                                                                                                         | Phung Ngo-Burns Vice President and Chief Financial Officer (Principal Financial Officer)                                                                                                                                                                     |
|                   |                                                                                                                                            |                                                                                                                                                                                                                                                              |
| Date:  August 12, 2010 |                         | /s/ RobertBickmore                                        |
|                             |                                                                                                         | Robert Bickmore Senior Director and Controller (Principal Accounting Officer)                                                                                                                                                                                |

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