| **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 of 1934**  |
|--------------------------|-----------------------------------------------------------|----------------------------------------------------------------------------------------------|
|                          | **For the quarterly period ended September 30, 2007**     |
|                          | **or**                                                    |
| **[   ]** |                                                           | **Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934** |
|                          | **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 or organization)*                              | **             ** | **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, if changed since last report)*

            Indicate by check mark whether the registrant (1) has filedall reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (orfor such shorter period that the registrant was required to file such reports), and (2) has been subject to such filingrequirements for the past 90 days.

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

            Indicate by check mark whether the registrant isa large accelerated filer, an accelerated filer, or a non-accelerated filter.  See definition of “accelerated filer andlarge accelerated filer” in Rule 12b-2 of the Exchange Act.  (Check one):

| Large accelerated filer  | [   ] |      Accelerated filer  | [ X ]  |     Non-accelerated filer  | [   ]  |
|-------------------------------|-----------------|-------------------------------------------------------|-----------------------|-----------------------------------------------------|-----------------------|

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

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

As of October 23, 2007, 54,739,575 shares of common stock were outstanding.

----

**TABLE OF CONTENTS**

| ** **        | ** **   |                                                                                                            |              |          |
|-------------------|--------------|------------------------------------------------------------------------------------------------------------|--------------|----------|
| **PART I.**       |         | **FINANCIAL INFORMATION**                                                                                  |              | **PAGE** |
| Item 1.           |         | Financial Statements:                                                                                      |              |          |
|              |         | Consolidated Statements of Operations (Unaudited): Three and nine months ended September 30, 2007 and 2006 |              | 1        |
|              |    | Consolidated Balance Sheets: September 30, 2007 (Unaudited) and December 31, 2006                          |              | 4        |
|                   |              | Condensed Consolidated Statements of Cash Flows (Unaudited): Nine months ended September 30, 2007 and 2006 |              | 5        |
|                   |              | Notes to Condensed Consolidated Financial Statements (Unaudited)                                           |              | 6        |
| Item 2.           |         | Management’s Discussion and Analysis of Financial Condition and Results of Operations                |    | 21       |
|   Item 3.    |         | Quantitative and Qualitative Disclosures About Market Risk                                                 |              | 31       |
| **** Item 4.      |              | Controls and Procedures                                                                                    |              | 32       |
| **PART II.** |         | **OTHER INFORMATION**                                                                                      |              |          |
| Item 1.           |              | Legal Proceedings                                                                                          |              | 33       |
| Item 1A.          |              | Risk Factors                                                                                               |              | 33       |
| Item 2.           |              | Unregistered Sales of Equity Securities and Use of Proceeds                                                |              | 33       |
| Item 3.           |              | Defaults Upon Senior Securities                                                                            |              | 33       |
| Item 4.           |              | Submission of Matters to a Vote of Security Holders                                                        |              | 34       |
| Item 5.           |              | Other Information                                                                                          |              | 34       |
| Item 6.           |              | Exhibits                                                                                                   |              | 34       |
|                   |              | Signatures                                                                                                 |              | 35       |
|              |              | Index to Exhibits                                                                                          |              | 36       |

----

Table of Contents

**PART I. FINANCIAL INFORMATION**

**Item 1. Financial Statements**

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

|                                                                                                                                                    |  |   | **Three Months Ended September 30,** |   |
|----------------------------------------------------------------------------------------------------------------------------------------------------|--|---|--------------------------------------|---|
|                                                                                                                                                    |  |   |                                      |   |
|                                                                                                                                                    |  |   | **2007**                             |   |  |  | **2006** |  |
|                                                                                                                                               |  |   |                                      |   |  |  |  |  |
| Operating Revenue:                                                                                                                                 |  |   |                                      |   |  |  |  |  |
|      Passenger..........................................................                                                  |  | $ | 431,140                              |   |  | $ | 426,397 |  |
|      Ground handling and other....................................                                                        |  |   | 10,205                               |   |  |  | 2,237 |  |
|                                                                                                                                                    |  |   |                                      |   |  |  |  |  |
|                                                                                                                                                    |  |   | 441,345                              |   |  |  | 428,634 |  |
|                                                                                                                                               |  |   |                                      |   |  |  |  |  |
| Operating Expenses:                                                                                                                                |  |   |                                      |   |  |  |  |  |
|      Wages, salaries and related costs........................                                                            |  |   | 112,697                              |   |  |  | 98,631 |  |
|      Aircraft rentals.....................................................                                                |  |   | 86,675                               |   |  |  | 83,860 |  |
|      Aircraft fuel and related taxes................................                                                      |  |   | 98,782                               |   |  |  | 59,884 |  |
|      Maintenance, materials and repairs.......................                                                            |  |   | 52,674                               |   |  |  | 48,621 |  |
|      Ground handling..................................................                                                    |  |   | 24,824                               |   |  |  | 26,045 |  |
|      Other rentals and landing fees...............................                                                        |  |   | 33,198                               |   |  |  | 30,562 |  |
|      Outside services..................................................                                                   |  |   | 11,218                               |   |  |  | 13,367 |  |
|      Marketing and distribution.....................................                                                      |  |   | 8,275                                |   |  |  | 49 |  |
|      Depreciation and amortization...............................                                                         |  |   | 6,668                                |   |  |  | 6,399 |  |
|      Other operating expenses.....................................                                                        |  |   | 42,990                               |   |  |  | 26,660 |  |
|                                                                                                                                               |  |   |                                      |   |  |  |  |  |
|                                                                                                                                               |  |   | 478,001                              |   |  |  | 394,078 |  |
|                                                                                                                                               |  |   |                                      |   |  |  |  |  |
| Operating Income (Loss)...........................................                                                                                 |  |   | (36,656                              | ) |  |  | 34,556 |  |
|                                                                                                                                               |  |   |                                      |   |  |  |  |  |
| Nonoperating Income (Expense):                                                                                                                     |  |   |                                      |   |  |  |  |  |
|      Interest expense..................................................                                                   |  |   | (2,320                               | ) |  |  | (1,804 | ) |
|      Interest income....................................................                                                  |  |   | 3,969                                |   |  |  | 4,181 |  |
|      Capitalized interest..............................................                                                   |  |   | 373                                  |   |  |  | 71 |  |
|      Equity investments loss, net. ..............................                                               |  |   | (564                                 | ) |  |  | (757 | ) |
|      Other, net...........................................................                                                |  |   | 4                                    |   |  |  | 143 |  |
|                                                                                                                                               |  |   |                                      |   |  |  |  |  |
|                                                                                                                                                    |  |   | 1,462                                |   |  |  | 1,834 |  |
|                                                                                                                                                    |  |   |                                      |   |  |  |  |  |
| Income (Loss) before Income Taxes...........................                                                                                       |  |   | (35,194                              | ) |  |  | 36,390 |  |
| Income Tax Benefit (Expense)...................................                                                                                    |  |   | 12,866                               |   |  |  | (13,667 | ) |
|                                                                                                                                               |  |   |                                      |   |  |  |  |  |
| Net Income (Loss)....................................................                                                                              |  | $ | (22,328                              | ) |  | $ | 22,723 |  |
|                                                                                                                                               |  |   |                                      |   |  |  |  |  |
| Basic Earnings (Loss) per Common Share..................                                                                                           |  | $ | (0.41                                | ) |  | $ | 0.42 |  |
|                                                                                                                                               |  |   |                                      |   |  |  |  |  |
| Diluted Earnings (Loss) per Common Share................                                                                                           |  | $ | (0.41                                | ) |  | $ | 0.38 |  |
|                                                                                                                                               |  |   |                                      |   |  |  |  |  |
| Shares Used in Computing Basic Earnings (Loss) per      Common Share...................................................   |  |   | 54,063                               |   |  |  | 53,898 |  |
| Shares Used in Computing Diluted Earnings (Loss) per      Common Share................................................... |  |   | 54,063                               |   |  |  | 61,553 |  |

The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.

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Table of Contents

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

|                                                                                             |  |   | **Nine Months Ended September 30,** |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--|---|-------------------------------------|---|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |  |   |                                     |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |  |   |                                     |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |  |   | **2007**                            |   |  |  | **2006** |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |  |   |                                     |   |  |  |  |  |
| Operating Revenues:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |  |   |                                     |   |  |  |  |  |
|      Passenger.............................................................                                                                                                                                                                                                                                                                                                                                                                                                                                                               |  | $ | 1,223,598                           |   |  | $ | 1,248,225 |  |
|      Ground handling and other.......................................                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |  |   | 25,949                              |   |  |  | 5,627 |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |  |   |                                     |   |  |  |  |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |  |   | 1,249,547                           |   |  |  | 1,253,852 |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |  |   |                                     |   |  |  |  |  |
| Operating Expenses:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |  |   |                                     |   |  |  |  |  |
|      Wages, salaries and related costs...........................                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |  |   | 324,516                             |   |  |  | 285,837 |  |
|      Aircraft rentals........................................................                                                                                                                                                                                                                                                                                                                                                                                                                                                             |  |   | 257,408                             |   |  |  | 248,578 |  |
|      Aircraft fuel and related taxes...................................                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |  |   | 226,006                             |   |  |  | 170,354 |  |
|      Maintenance, materials and repairs..........................                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |  |   | 152,712                             |   |  |  | 141,911 |  |
|      Ground handling.....................................................                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |  |   | 72,994                              |   |  |  | 75,020 |  |
|      Other rentals and landing fees..................................                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |  |   | 90,863                              |   |  |  | 87,793 |  |
|      Outside services.....................................................                                                                                                                                                                                                                                                                                                                                                                                                                                                                |  |   | 43,494                              |   |  |  | 38,055 |  |
|      Marketing and distribution........................................                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |  |   | 18,176                              |   |  |  | 72 |  |
|      Depreciation and amortization..................................                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |  |   | 19,277                              |   |  |  | 19,333 |  |
|      Other operating expenses........................................                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |  |   | 109,146                             |   |  |  | 79,413 |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |  |   |                                     |   |  |  |  |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |  |   | 1,314,592                           |   |  |  | 1,146,366 |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |  |   |                                     |   |  |  |  |  |
| Operating Income (Loss)..............................................                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |  |   | (65,045                             | ) |  |  | 107,486 |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |  |   |                                     |   |  |  |  |  |
| Nonoperating Income (Expense):                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |  |   |                                     |   |  |  |  |  |
|      Interest expense.....................................................                                                                                                                                                                                                                                                                                                                                                                                                                                                                |  |   | (5,904                              | ) |  |  | (5,529 | ) |
|      Interest income.......................................................                                                                                                                                                                                                                                                                                                                                                                                                                                                               |  |   | 12,515                              |   |  |  | 10,495 |  |
|      Capitalized interest.................................................                                                                                                                                                                                                                                                                                                                                                                                                                                                                |  |   | 926                                 |   |  |  | 172 |  |
|      Equity investments loss, net....................................                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |  |   | (946                                | ) |  |  | (1,254 | ) |
|      Other, net..............................................................                                                                                                                                                                                                                                                                                                                                                                                                                                                             |  |   | 14                                  |   |  |  | 227 |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |  |   |                                     |   |  |  |  |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |  |   | 6,605                               |   |  |  | 4,111 |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |  |   |                                     |   |  |  |  |  |
| Income (Loss) before Income Taxes..............................                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |  |   | (58,440                             | ) |  |  | 111,597 |  |
| Income Tax Benefit (Expense)......................................                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |  |   | 19,875                              |   |  |  | (41,849 | ) |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |  |   |                                     |   |  |  |  |  |
| Net Income (Loss).......................................................                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |  | $ | (38,565                             | ) |  | $ | 69,748 |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |  |   |                                     |   |  |  |  |  |
| Basic Earnings (Loss) per Common Share.....................                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |  | $ | (0.71                               | ) |  | $ | 1.30 |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |  |   |                                     |   |  |  |  |  |
| Diluted Earnings (Loss) per Common Share...................                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |  | $ | (0.71                               | ) |  | $ | 1.18 |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |  |   |                                     |   |  |  |  |  |
| Shares Used in Computing Basic Earnings (Loss) per      Common Share......................................................                                                                                                                                                                                                                                                                                                                                                                                                                |  |   | 54,014                              |   |  |  | 53,848 |  |
| Shares Used in Computing Diluted Earnings (Loss) per      Common Share......................................................                                                                                                                                                                                                                                                                                                                                                                                                              |  |   | 54,014                              |   |  |  | 61,501 |  |

The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.

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Table of Contents

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

| **ASSETS**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |        |   | **September 30,** |        |   | **December 31,** |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---|-------------------|--------|---|------------------|---|
|                                                                                            |   |   | **2007**          |        |   | **2006**         |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |        |   |                   |        |   |                  |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |        |   | (Unaudited)       |   |   |                  |   |
| Current Assets:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |        |   |                   |        |   |                  |   |
|      Cash and cash equivalents.......................................                                                                                                                                                                                                                                                                                                                                                                                                                                                               |        | $ | 238,488           |        | $ | 291,633          |   |
|      Restricted cash.......................................................                                                                                                                                                                                                                                                                                                                                                                                                                                                         |        |   | 15,341            |        |   | 11,227           |   |
|      Accounts receivable, net...........................................                                                                                                                                                                                                                                                                                                                                                                                                                                                            |        |   | 19,891            |        |   | 7,603            |   |
|      Spare parts and supplies, net....................................                                                                                                                                                                                                                                                                                                                                                                                                                                                              |        |   | 24,842            |        |   | 23,717           |   |
|      Income tax receivable...............................................                                                                                                                                                                                                                                                                                                                                                                                                                                                           |        |   | 32,797            |        |   | 8,863            |   |
|      Deferred income tax.................................................                                                                                                                                                                                                                                                                                                                                                                                                                                                           |        |   | 7,293             |        |   | —          |   |
|      Prepayments and other............................................                                                                                                                                                                                                                                                                                                                                                                                                                                                              |        |   | 7,262             |        |   | 5,751            |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |        |   |                   |        |   |                  |   |
|         Total Current Assets.............................................                                                                                                                                                                                                                                                                                                                                                                                                                                            |        |   | 345,914           |        |   | 348,794          |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |        |   |                   |        |   |                  |   |
| Property and Equipment:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |        |   |                   |        |   |                  |   |
|      Owned property and equipment:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |        |   |                   |        |   |                  |   |
|         Flight equipment...................................................                                                                                                                                                                                                                                                                                                                                                                                                                                          |        |   | 234,642           |        |   | 213,682          |   |
|         Other...................................................................                                                                                                                                                                                                                                                                                                                                                                                                                                     |        |   | 165,575           |        |   | 143,815          |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |        |   |                   |        |   |                  |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |        |   | 400,217           |        |   | 357,497          |   |
|         Less:  Accumulated depreciation............................                                                                                                                                                                                                                                                                                                                                                                                                                                        |        |   | (129,843          | )      |   | (113,195         | ) |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |        |   |                   |        |   |                  |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |        |   | 270,374           |        |   | 244,302          |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |        |   |                   |        |   |                  |   |
|      Capital Leases:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |        |   | 4,338             |        |   | 4,338            |   |
|         Less:  Accumulated amortization...........................                                                                                                                                                                                                                                                                                                                                                                                                                                         |        |   | (4,053            | )      |   | (3,557           | ) |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |        |   |                   |        |   |                  |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |        |   | 285               |        |   | 781              |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |        |   |                   |        |   |                  |   |
|         Total Property and Equipment................................                                                                                                                                                                                                                                                                                                                                                                                                                                                 |        |   | 270,659           |        |   | 245,083          |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |        |   |                   |        |   |                  |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |        |   |                   |        |   |                  |   |
| Investments in Other Entities.........................................                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |        |   | 17,071            |        |   | 18,017           |   |
| Reorganization Value In Excess of Amounts                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |        |   |                   |        |   |                  |   |
|      Allocable to Identifiable Assets, net...........................                                                                                                                                                                                                                                                                                                                                                                                                                                                               |        |   | 12,932            |        |   | 12,986           |   |
| Airport Operating Rights, net..........................................                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |        |   | 3,503             |        |   | 3,691            |   |
| Debt Issuance Cost, net................................................                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |        |   | 2,816             |        |   | 3,497            |   |
| Other Assets, net.........................................................                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |        |   | 3,983             |        |   | 4,961            |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |        |   |                   |        |   |                  |   |
|         Total Assets.........................................................                                                                                                                                                                                                                                                                                                                                                                                                                                        |        | $ | 656,878           |        | $ | 637,029          |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |        |   |                   |        |   |                  |   |

(continued on next page)

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Table of Contents

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

| **LIABILITIES AND**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |  |   | **September 30,** |   |        |   | **December 31,** |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--|---|-------------------|---|--------|---|------------------|---|
| **STOCKHOLDERS' EQUITY**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |  |   | **2007**          |   |        |   | **2006**         |   |
|                                                                                          |  |   |                   |   |        |   |                  |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  |   | (Unaudited)       |   |        |   |                  |   |
| Current Liabilities:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |  |   |                   |   |   |   |                  |   |
|      Current maturities of long-term debt .........................                                                                                                                                                                                                                                                                                                                                                                                                                                                     |  | $ | 140,659           |   |        | $ | 1,668            |   |
|      Current maturities of capital lease obligations............                                                                                                                                                                                                                                                                                                                                                                                                                                                        |  |   | 427               |   |        |   | 821              |   |
|      Accounts payable...................................................                                                                                                                                                                                                                                                                                                                                                                                                                                                |  |   | 17,110            |   |        |   | 8,462            |   |
|      Accrued payroll and related costs.............................                                                                                                                                                                                                                                                                                                                                                                                                                                                     |  |   | 39,378            |   |        |   | 44,122           |   |
|      Air traffic liability......................................................                                                                                                                                                                                                                                                                                                                                                                                                                                        |  |   | 24,341            |   |        |   | —          |   |
|      Amounts due to Continental Airlines, net...................                                                                                                                                                                                                                                                                                                                                                                                                                                                        |  |   | 8,390             |   |        |   | 3,522            |   |
|      Deferred income taxes.............................................                                                                                                                                                                                                                                                                                                                                                                                                                                                 |  |   | —           |   |        |   | 14,785           |   |
|      Accrued other liabilities............................................                                                                                                                                                                                                                                                                                                                                                                                                                                              |  |   | 68,091            |   |        |   | 61,712           |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  |   |                   |   |        |   |                  |   |
|         Total Current Liabilities.........................................                                                                                                                                                                                                                                                                                                                                                                                                                               |  |   | 298,396           |   |        |   | 135,092          |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  |   |                   |   |        |   |                  |   |
| Long-term Debt............................................................                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |  |   | 10,378            |   |        |   | 12,818           |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  |   |                   |   |        |   |                  |   |
| 4.25% Senior Convertible Notes due 2023......................                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |  |   | —           |   |        |   | 137,200          |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  |   |                   |   |        |   |                  |   |
| Capital Lease Obligations.............................................                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |  |   | 15                |   |        |   | 214              |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  |   |                   |   |        |   |                  |   |
| Deferred Income Taxes.................................................                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |  |   | 68,918            |   |        |   | 38,030           |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  |   |                   |   |        |   |                  |   |
| Other Long-term Liabilities............................................                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |  |   | 9,018             |   |        |   | 9,361            |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  |   |                   |   |        |   |                  |   |
| Stockholders’ Equity:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |  |   |                   |   |        |   |                  |   |
|      Preferred stock – $.01 par, 10,000,000 shares         authorized, no shares issued and outstanding,         respectively.........................................................                                                                                                                                                                                                                                            |  |   | —           |   |        |   | —          |   |
|      Common stock – $.01 par, 200,000,000 shares         authorized, and 55,138,692 and 54,653,942         shares issued, respectively...................................                                                                                                                                                                                                                                                         |  |   | 551               |   |        |   | 547              |   |
|      Additional paid-in capital..........................................                                                                                                                                                                                                                                                                                                                                                                                                                                               |  |   | 169,545           |   |        |   | 165,658          |   |
|      Accumulated earnings.............................................                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  |   | 103,460           |   |        |   | 142,349          |   |
|      Accumulated other comprehensive income................                                                                                                                                                                                                                                                                                                                                                                                                                                                             |  |   | 364               |   |        |   | 364              |   |
|      Common stock held in treasury, at cost       408,117 and 487,261 shares, respectively................                                                                                                                                                                                                                                                                                                                                                                                |  |   | (3,767            | ) |        |   | (4,604           | ) |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  |   |                   |   |        |   |                  |   |
|         Total Stockholders’ Equity....................................                                                                                                                                                                                                                                                                                                                                                                                                                             |  |   | 270,153           |   |        |   | 304,314          |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  |   |                   |   |        |   |                  |   |
|         Total Liabilities and Stockholders’ Equity................                                                                                                                                                                                                                                                                                                                                                                                                                                 |  | $ | 656,878           |   |        | $ | 637,029          |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |  |   |                   |   |        |   |                  |   |

The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.

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

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |  |   | **Nine Months Ended September 30,** |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--|---|-------------------------------------|---|
|                                                                                                           |  |   | ****                                |   |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |  |   | **2007**                            |   | **  ** |  | **2006** |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |  |   |                                     |   |  |  |  |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |  |   |                                     |   |  |  |  |  |
| Net Cash Flows provided by (used in) Operating Activities...............                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |  | $ | (8,426                              | ) |  | $ | 86,264 |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |  |   |                                     |   |  |  |  |  |
| Cash Flows from Investing Activities:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  |   |                                     |   |  |  |  |  |
|      Capital expenditures...............................................................                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |  |   | (43,840                             | ) |  |  | (15,577 | ) |
|      Proceeds from disposition of equipment....................................                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |  |   | —                             |   |  |  | 68 |  |
|      Proceeds from the sale of short-term investments......................                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |  |   | —                             |   |  |  | — |  |
|      Investments in and advances to equity ownerships  ..................                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |  |   | —                             |   |  |  | (2,051 | ) |
|      Investments in other entities....................................................                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |  |   | —                             |   |  |  | (4,283 | ) |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |  |   |                                     |   |  |  |  |  |
|         Net cash used in investing activities......................................                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |  |   | (43,840                             | ) |  |  | (21,843 | ) |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |  |   |                                     |   |  |  |  |  |
| Cash Flows from Financing Activities:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  |   |                                     |   |  |  |  |  |
|      Payment on note payable to Continental Airlines.......................                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |  |   | —                             |   |  |  | (17,545 | ) |
|      Payments on long-term debt and capital lease obligations..........                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |  |   | (1,241                              | ) |  |  | (1,005 | ) |
|      Proceeds from issuance of common stock related to         Employee Stock Purchase Plan...........................................                                                                                                                                                                                                                                                                                                                                                                                                                                                |  |   | 362                                 |   |  |  | 879 |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |  |   |                                     |   |  |  |  |  |
|         Net cash used in financing activities......................................                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |  |   | (879                                | ) |  |  | (17,671 | ) |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |  |   |                                     |   |  |  |  |  |
| Net Increase (Decrease) in Cash and Cash Equivalents..................                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |  |   | (53,145                             | ) |  |  | 46,750 |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |  |   |                                     |   |  |  |  |  |
| Cash and Cash Equivalents – Beginning of Period..........................                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |  |   | 291,633                             |   |  |  | 227,285 |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |  |   |                                     |   |  |  |  |  |
| Cash and Cash Equivalents – End of Period...................................                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |  | $ | 238,488                             |   |  | $ | 274,035 |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |  |   |                                     |   |  |  |  |  |
| Supplemental Cash Flow Information:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |  |   |                                     |   |  |  |  |  |
|      Interest paid, net....................................................................                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |  | $ | 6,580                               |   |  | $ | 6,636 |  |
|      Income taxes paid (refunded) – including payments         (refunds) under tax agreement with Continental Airlines...........                                                                                                                                                                                                                                                                                                                                                                                                                                               |  | $ | (4,796                              | ) |  | $ | 49,697 |  |

The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.

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

            ExpressJet Holdings, Inc. (“Holdings”) hasstrategic investments in the air transportation industry.  Our principal asset is all of the issued and outstanding shares ofstock of XJT Holdings, Inc., the sole stockholder of ExpressJet Airlines, Inc. (“Airlines”).  Holdings andAirlines are together referred to as “ExpressJet,” “we,” “us” and “our”. Airlines is one of the largest regional airlines in the world, based on available seat miles, number of regional jets in its fleetand number of passengers flown.  Currently Airlines offers scheduled airline services with approximately 1,550 dailydepartures to 175 cities in the United States, Mexico, Canada and the Caribbean.  We also invest in other entities that permitus to leverage the management experience, efficiencies and economies of scale present in our subsidiaries. 

            Airlines currently operates a fleet of 274 aircraft.  Asof September 30, 2007, we provided the following services:

            Contract Flying

| **      ** | **• ** | 205 aircraft for Continental Airlines, Inc. (“Continental”) as Continental Express pursuant to a capacity purchaseagreement (the “Continental CPA”); |
|------------------------------------------|------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                          | **• ** | 10 aircraft for Delta Air Lines, Inc. (“Delta”) as Delta Connection pursuant to a capacity purchase agreement (the“Delta CPA”);                      |
|                                          | **• ** | 9 aircraft under dedicated charter contracts or ad-hoc charter arrangements.                                                                                                 |

****

            Branded Flying

| **      ** | **• ** | 42 aircraft under our own brand; and                                                                                                                       |
|------------------------------------------|------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                          | **• ** | 8 aircraft under a pro-rate revenue agreement with Delta, where we share passenger revenue risk and incur pricing, schedulingand revenue management costs. |

            We also provide Aviation Services, such as ground-handlingservices at airport locations across the United States, as well as aircraft repair, overhaul, interior refurbishments and paint,through our wholly owned subsidiary, ExpressJet Services, LLC (“Services”), and a majority owned subsidiary, SaltilloJet Center.

            Although we believe that these new operations, including newflying and Aviation Services, will enhance stockholder value in the long term, we incurred significant start-up costs during thetransition period, which we anticipate will result in a consolidated net loss for the full year 2007.  Branded Flying willproduce more volatile financial results than our historical operations, primarily due to fluctuations in the price of fuel,passenger demand and fare levels and the cyclical nature of the airline industry. 

            The accompanying interim condensed consolidated financialstatements have been prepared in conformity with U.S. generally accepted accounting principles and are consistent in all materialrespects with those applied in our annual report on Form 10-K for the year ended December 31, 2006 (the “200610-K”).  The preparation of these financial statements requires us to make estimates and judgments that affect theamounts reported in the financial statements and the related disclosures.  The actual results may differ from ourestimates. 

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            The interim financial information is unaudited, but reflectsall adjustments necessary, in our opinion, to provide a fair presentation of our financial results for the interim periodspresented.  These adjustments are of a normal, recurring nature.  In addition, all intercompany transactions have beeneliminated in consolidation.  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 financialstatements and the notes thereto contained in our 2006 10-K.

**Note 1 *–* Principles of Consolidation**

            The accompanying condensed consolidated financial statementsinclude the accounts of ExpressJet Holdings, Inc. and its subsidiaries.  The following are additions to the accountingpolicies and estimates described in our 2006 10-K.

            Revenue Recognition.  We recognize our operatingrevenue under contractual arrangements, such as the Continental CPA, as described in our 2006 10-K, pursuant to the terms of thecontract.  Operating revenues from these contracts have been reclassified as passenger revenue.  For Branded Flying,tickets are sold and processed internally, with amounts due settled on a monthly basis through an airline clearing house, asappropriate, or pursuant to the terms of our agreements with various credit card service vendors or other agreements, such as ourDelta pro-rate agreement.  We recognize passenger revenue when transportation is provided or when a ticket expiresunused.  Nonrefundable tickets expire on the date of the intended flight, unless the date is extended by notification from thecustomer in advance of the intended flight. The amount of passenger ticket sales not yet recognized as revenue is included in ourconsolidated balance sheets as air traffic liability. We recognize our non-passenger revenue and ground handling and other revenuesas services are provided.

            Transportation taxes.  Various taxes and feesassessed on the sale of tickets to traveling customers are collected by Airlines as agent and are remitted to taxingauthorities.  These taxes and fees are recorded as a liability until remitted to the appropriate taxing authority.

            Frequent Flyer Awards.** ** Our frequent flyerprogram, JetSet, is based on trips flown rather than on mileage.  JetSet customers earn a credit for each one-way trip flownor two credits for each roundtrip flown.  The JetSet Award Ticket (“Award Ticket”) offers one free roundtrip awardvalid to any destination available on our own brand flying after the accumulation of 16 credits.

            Award Tickets are automatically generated when earned by thecustomer rather than allowing the customer to bank credits indefinitely.  Award Tickets must be used to purchase a ticketwithin 12 months after their issuance.  Award Tickets are capacity controlled and may not be available on peak traveldates. We account for our frequent flyer program obligations by recording a liability for the estimated incremental cost of flightawards redemption. The estimated incremental cost includes direct passenger costs such as fuel, food and other operational costs,but does not include any contribution to overhead or profit.  At September 30, 2007, the number of Award Tickets fully earnedsince April 1 was approximately 2,500 of which 85 have been flown.  The liability for free travel awards earned but not usedat September 30, 2007 was not material.

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****

**Note 2 *–* Capacity Purchase Agreements**

**           ****Continental CPA. ** The Continental CPA isdesigned to provide Airlines with a 10% operating margin, subject to certain adjustments, in its Continental Expressoperations.  In addition to the 10% margin, Airlines is entitled to receive incentive payments from Continental if itscontrollable completions are higher than its historical benchmark and is required to pay Continental a penalty for controllablecompletion factors below 99.5%.  Airlines also receives a small per-passenger fee and incentive payments for certain on-timedepartures and baggage handling performance.  For a detailed description of the terms of the Continental CPA, please see Item1. “Business — Capacity Purchase and Other Agreements with Continental Airlines” in our 2006 10-K.

            As a result of the recently concluded arbitration withContinental over our 2007 block hour rates, we adjusted the amounts we are charging Continental in 2007.   The arbitrationpanel determined that the annual 2007 budgeted rates originally presented by Airlines should be reduced in the aggregate by $14.2million, which includes the 10% target operating margin.  As a result of the panel’s decision, we recorded our passengerrevenue under the Continental CPA using the block hour rates determined by the panel for the three and nine months ended September30, 2007.

**            Delta CPA. ** We signed a two-year capacitypurchase agreement effective June 1, 2007, with up to two one-year extension options at Delta’s sole discretion.  TheDelta CPA covers 10 ERJ-145XR aircraft that were placed into service during June 2007.  Delta is responsible for scheduling,marketing, pricing and revenue management on the aircraft and collects all passenger revenues.  Airlines' operates, maintainsand finances the aircraft.

            Airlines receives a base rate for each completed block hourand departure and is reimbursed for certain pass-through costs.  Airlines has the ability to earn incentives for meeting orexceeding completion benchmarks and maintaining high Department of Transportation rankings for on-time arrivals and other aspectsof customer satisfaction.  These incentives are settled on a monthly and semi-annual basis.  For the quarter endingSeptember 30, 2007, we met all of our monthly incentive metrics, except for the on-time benchmark in August.

            A significant portion of our operating expenses are incurredto support our entire fleet of 274 aircraft and are managed for our consolidated operations rather than for the individual segmentsidentified below.  However, in our determination of the rates under our capacity purchase agreements with Continental andDelta, we consider these shared costs in our contracts in order to achieve the agreed rates and applicable operating margins.

**Note 3 *–* Segment Reporting**

            Statement of Financial Accounting Standard No. 131,“Disclosures about Segments of an Enterprise and Related Information,” (“Statement 131”) requiresdisclosures related to components of a company for which separate financial information is available if that segregated informationis evaluated regularly by the company’s chief operating decision makers in deciding the allocation of resources and assessingperformance.  ExpressJet has three major reportable segments: Contract Flying, Branded Flying and Aviation Services.

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            Contract Flying includes our Corporate Aviation (charter)division and our capacity purchase agreements with Continental and Delta.  Under Contract Flying, revenues are contractuallydetermined with Continental, Delta and other parties which insulates some of the underlying operating expenses, such as fuel. Additionally, under these arrangements, we do not have the obligation to market, distribute or sell seats directly to passengers onour aircraft.

            Branded Flying consists of operating under our own brand andunder our pro-rate revenue agreement with Delta.  Revenues for this flying are derived from our scheduled air services solddirectly to passengers.  We are responsible for local market pricing, scheduling and revenue management, and the operation andmaintenance of the aircraft.  Under the pro-rate revenue flying with Delta, we earn a pro-rated portion of the fare plus anincentive for passengers connecting onto Delta's network. 

            Aviation Services include our ground-handling servicespursuant to our contracts with Continental and other airlines at airport locations across the United States, as well as ExpressJetServices, LLC (“Services”), our wholly owned repair and overhaul subsidiary.  During the first half of 2007, werebranded American Composites, LLC (“American Composites”) and InTech Aerospace Services, LP (“InTech”),our wholly owned subsidiaries, and Saltillo Jet Center, a majority-owned subsidiary, under the name ExpressJet Services. These entities provide composite, sheet metal, paint, interior (including seat refurbishment) and thrust reverser repairsthroughout our five facilities in the United States and Mexico.  Revenues are earned and recognized when we complete variousjobs and bill our customers for the products and/or services delivered. 

            As stated above in Note 2, a significant portion of ouroperating expenses and infrastructure (e.g., for maintenance, non-airport facility rentals, outside services, general andadministrative expenses) support our entire fleet of 274 aircraft; therefore, we do not allocate these costs to the individualsegments identified above, but evaluate them for our consolidated operation.  Additionally, since we transitioned all of our69 aircraft released from the Continental CPA during the first nine months of 2007, we incurred approximately $12.9 million intransition expenses associated with painting, maintenance modifications and training to ready our operation for flying outside ofthe Continental CPA.  These costs were not included in our measurement of segment profitability as they are expected to benonrecurring.  We believe that the presentation of our consolidated shared costs and transition costs is more reasonable thanallocating these expenses in a manner not reviewed by our chief operating decision makers.  Consequently, the table belowpresents our operating revenues, including inter-segment revenues, and segment profits/(loss) generated per reportable segment forthe three and nine months ended September 30, 2007.  We also included our reconciliation of the consolidated operating revenueto consolidated net loss before taxes and of our total assets at September 30, 2007.

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|                                                                                           |                          | **Contract Flying** |        |        | **Branded Flying** |   |        |   | **Aviation Services** |        |        | **Eliminations** |   |        |        | **Consolidated** |   |
|-------------------------------------------------------------------------------------------|--------------------------|---------------------|--------|--------|--------------------|---|--------|---|-----------------------|--------|--------|------------------|---|--------|--------|------------------|---|
|                                                                                           | ** **               |                     |        |        |                    |   |        |   |                       |        |        |                  |   |        |        |                  |   |
| **Three months ended September 30, 2007:**                                                |                          |                     |   |   |                    |   |        |   |                       |   |   |                  |   |        |   |                  |   |
| Revenue from customers........................................                            | $                        | 357.4               |   | $      | 75.6               |   |   | $ | 9.9                   |        | $      | (1.6             | ) |        | $      | 441.3            |   |
| Direct segment expenses.......................................                            |                          | 275.2               |        |        | 113.1              |   |        |   | 7.1                   |        |        | (1.6             | ) |        |        | 393.8            |   |
|                                                                                           |                          |                     |        |        |                    |   |        |   |                       |        |        |                  |   |        |        |                  |   |
|     Segment profit / (loss).......................................... | $                        | 82.2                |        | $      | (37.5              | ) |        | $ | 2.8                   |        | $      | —          |   |        | $      | 47.5             |   |
| Shared expenses, including transition costs (1)..                                         |                          |                     |        |        |                    |   |        |   |                       |        |        |                  |   |        |        | (84.2            | ) |
| Interest expense........................................................                  |                          |                     |        |        |                    |   |        |   |                       |        |        |                  |   |        |        | (2.3             | ) |
| Interest Income..........................................................                 |                          |                     |        |        |                    |   |        |   |                       |        |        |                  |   |        |        | 4.3              |   |
| Other............................................................................         |                          |                     |        |        |                    |   |        |   |                       |        |        |                  |   |   |        | (0.5             | ) |
|                                                                                           |                          |                     |        |        |                    |   |        |   |                       |        |        |                  |   |        |        |                  |   |
| Consolidated loss before income taxes...............                                      |                          |                     |        |        |                    |   |        |   |                       |   |        |                  |   |        | $      | (35.2            | ) |
|                                                                                           |      |                     |        |        |                    |   |        |   |                       |        |        |                  |   |        |        | ****             |   |
| **Nine months ended September 30, 2007:**                                                 |                          |                     |        |        |                    |   |        |   |                       |        |        |                  |   |        |        |                  |   |
| Revenue from customers........................................                            | $                        | 1,122.3             |        | $      | 103.8              |   |        | $ | 29.6                  |        | $      | (6.1             | ) |        | $      | 1,249.6          |   |
| Direct segment expenses.......................................                            |                          | 861.4               |        |        | 179.8              |   |        |   | 20.0                  |        |        | (6.1             | ) |        |        | 1,055.1          |   |
|                                                                                           |                          |                     |        |        |                    |   |        |   |                       |        |        |                  |   |        |        |                  |   |
|     Segment profit / (loss).......................................... | $                        | 260.9               |        | $      | (76.0              | ) |        | $ | 9.6                   |        | $      | —          |   |        | $      | 194.5            |   |
| Shared expenses, including transition costs (2)..                                         |                          |                     |        |        |                    |   |        |   |                       |        |        |                  |   |        |        | (259.5           | ) |
| Interest expense........................................................                  |                          |                     |        |        |                    |   |        |   |                       |        |        |                  |   |        |        | (5.9             | ) |
| Interest Income..........................................................                 |                          |                     |        |        |                    |   |        |   |                       |        |        |                  |   |        |        | 13.4             |   |
| Other............................................................................         |                          |                     |        |        |                    |   |        |   |                       |        |        |                  |   |        |        | (0.9             | ) |
|                                                                                           |                          |                     |        |        |                    |   |        |   |                       |        |        |                  |   |        |        |                  |   |
| Consolidated loss before income taxes...............                                      |                          |                     |        |        |                    |   |        |   |                       |        |        |                  |   |        | $      | (58.4            | ) |
|                                                                                           |                          |                     |        |        |                    |   |        |   |                       |        |        |                  |   |        |        | ****             |   |
| **Assets at September 30, 2007:**                                                         |                          |                     |        |        |                    |   |        |   |                       |        |        |                  |   |        |        |                  |   |
| Segment assets........................................................                    | $                        | 191.0               |        | $      | 22.8               |   |        | $ | 15.7                  |        | $      | —          |   |        | $      | 229.5            |   |
| Other shared assets (3)............................................                       |                          |                     |        |        |                    |   |        |   |                       |        |        |                  |   |        |        | 427.4            |   |
|     Total consolidated assets ..................................      |                          |                     |        |        |                    |   |        |   |                       |        |        |                  |   |        |        |                  |   |
|                                                                                           |                          |                     |        |        |                    |   |        |   |                       |        |        |                  |   |        | $      | 656.9            |   |
|                                                                                           |                          |                     |        |        |                    |   |        |   |                       |        |        |                  |   |        |        |                  |   |

| (1) Some of the major components of shared expenses are maintenance labor – $19.8 million; general andadministrative labor and related expenses – $24.2 million; other general and administrative expenses – $26.2 million;outside services – $9.3 million; and non-airport rentals – $4.3 million.  Transition costs incurred wereapproximately $0.4 million.    |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (2) Some of the major components of shared expenses are maintenance labor – $56.5 million; general andadministrative labor and related expenses – $71.9 million; other general and administrative expenses – $73.7 million;outside services – $32.6 million; and non-airport rentals – $11.9 million.  Transition costs incurred wereapproximately $12.9 million. |
| (3)  Other shared assets include assets that are used across segments.                                                                                                                                                                                                                                                                                                                               |

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**Note 4 *–* Investments in Other Entities**

            Investments in unconsolidated companies are accounted for bythe equity method of accounting when we have significant influence over the operation of the companies as prescribed by AccountingPrinciples Board Opinion No. 18 – “The Equity Method of Accounting for Investments in Common Stock” (“APB18”).  The following table details our current non-controlling interests that are accounted for under the equity methodof accounting:

| **Company**                       |                    |                    | **Carrying Amount of Investment at September 30, 2007 (In millions)**                                      |
|-----------------------------------|--------------------|--------------------|------------------------------------------------------------------------------------------------------------|
|                                   |     |     |                                                                                                            |
| Wing Holdings, LLC                |                    |                    |                  14.0      |
| Flight Services and Systems, Inc. |                    |                    |                   3.1 |

            We purchased a 49% interest in Wing Holdings, LLC for $16.0million in June 2005.  The carrying amount of our investment exceeded the amount of the company’s underlying equity byapproximately $8.5 million at the time of our investment.  We evaluated the net book value of the company’s fixed assetsas of June 30, 2005 and identified approximately a $1.9 million difference between net book value and fair value.  Themajority of the difference is being amortized over the remaining average life of the assets identified.  As of September 30,2007, the balance of the fair value difference, net of amortization, was approximately $0.7 million.  The remaining $6.6million of our difference in the underlying investment is considered goodwill and thus is not amortized. * *

            In January 2006, we purchased a 44% interest in FlightServices and Systems, Inc. (“FSS”) for $3.0 million.  At the same time, we loaned FSS $1.0 million which isclassified in Other Assets, net, on the consolidated balance sheets, which could be converted to equity upon the occurrence ofcertain events defined in the agreement.

 

            Our proportionate shares of the results of operations fromthese entities are included in the line “Equity investment loss” on our consolidated statements of operations. Although no impairment losses on the investments have been recognized, an impairment loss will be recorded whenever a decline invalue of an equity investment below its carrying amount is determined to be other than temporary.  In evaluating “otherthan temporary,” we consider the length of time and extent to which the fair value of the investment has been less than thecarrying amount of the equity investment, the near and longer-term operating and financial prospects of the entity and ourlonger-term intention of retaining our investment in the entity.

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**Note 5 *–* Earnings Per Share**

            The following table sets forth the computation of basic anddiluted earnings per share for the three and nine months ended September 30, 2007 and 2006 (in thousands):

|                                                                          |        |   | **Three Months Ended September 30,** |   |   | **Nine Months Ended September 30,** |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---|--------------------------------------|---|---|-------------------------------------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                  |        |   |                                      |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                  |        |   | ****                                 |   |   | ****                                |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                  |        |   | **2007**                             |   |   | **2006**                            |  |  | **2007** |  |  | **2006** |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                  |        |   | ****                                 |   |   | ****                                | ** ** |  | **** |  |  | **** |
| Numerator for basic earnings per share – net      income..................................................                                                                                                                                                                                                                                                                                                        |   | $ | (22,328                              | ) | $ | 22,723                              |  | $ | (38,565 | ) | $ | 69,748 |
| Income impact of assumed conversion of      convertible debt......................................                                                                                                                                                                                                                                                                                                                      |        |   | —                              |   |   | 915                                 |  |  | — |   |  | 2,746 |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                  |        |   |                                      |   |   |                                     |  |  |  |  |  |  |
| Numerator for diluted earnings per share –      adjusted.................................................                                                                                                                                                                                                                                                                                                         |        | $ | (22,328                              | ) | $ | 23,638                              |  | $ | (38,565 | ) | $ | 72,494 |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                  |        |   |                                      |   |   |                                     |  |  |  |  |  |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                  |        |   |                                      |   |   |                                     |  |  |  |  |  |  |
| Denominator for basic earnings per share –       weighted average shares.........................                                                                                                                                                                                                                                                                                                                 |        |   | 54,063                               |   |   | 53,898                              |  |  | 54,014 |  |  | 53,848 |
| Restricted stock and stock options...............                                                                                                                                                                                                                                                                                                                                                                                                |        |   | —                              |   |   | 117                                 |  |  | — |  |  | 115 |
| Assumed conversion of convertible debt.........                                                                                                                                                                                                                                                                                                                                                                                                  |        |   | —                              |   |   | 7,538                               |  |  | — |  |  | 7,538 |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                  |        |   |                                      |   |   |                                     |  |  |  |  |  |  |
| Denominator for diluted earnings per share –      adjusted and assumed conversions..........                                                                                                                                                                                                                                                                                                                      |        |   | 54,063                               |   |   | 61,553                              |  |  | 54,014 |  |  | 61,501 |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                  |        |   |                                      |   |   |                                     |  |  |  |  |  |  |

            We excluded 661,037 ****and 361,102 shares of restrictedstock from the weighted average shares used in computing basic earnings per share for the three and nine months ended September 30,2007 and 2006 since these shares were not vested as of the end of these respective periods.

            Weighted average common shares outstanding for dilutedearnings per share calculation include the incremental effect of shares issuable upon the exercise of stock options and ofrestricted stock not yet vested.  We excluded the following common stock equivalents from our diluted earnings per sharecalculations, because their inclusion would have been anti-dilutive.

****

|        | •  | options to purchase 4.7 million and 3.3 million shares of our common stock for the three and nine months ended September 30,2007, and 2.7 million and 2.3 million shares for the three and nine months ended September 30, 2006.  These options’exercise prices were greater than the average market price of the common shares for the respective periods; |
|--------------------------------------|--------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                      | •  | 0.3 million shares of restricted stock for the three months ended September 30, 2007; and                                                                                                                                                                                                                                                                              |
|                                      | •  | 7.5 million shares of common stock equivalents for the assumed conversion of convertible debt for both the three and nine monthsended September 30, 2007.                                                                                                                                                                                                              |

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****

**Note 6 – Long-Term Debt**

****

**           ** As of September 30, 2007, long-term debt, includingcurrent maturities, totaled $151.0 million, which consisted of secured debt owed to Export Development Canada (“EDC”)and the 4.25% senior convertible notes. 

            EDC loaned us $10.7 million in May 2003 and $6.6 million inSeptember 2003.  The loans are secured by certain of our flight simulators, flight data software and other equipment relatedto the simulators.  We used all the proceeds from the loans to reduce the principal under a note we had issued toContinental.  The amount due to EDC accrues interest at the six-month LIBOR plus 1.75% per annum.  The term of eachadvance to us is 96 months.  The loan agreement has customary representations, warranties and covenants.  Additionally,Continental is the guarantor of this loan, and a default under the guarantee would cause an acceleration of the loan. 

            In July 2003, we completed an offering of $137.2 millionaggregate principal amount of 4.25% convertible notes due 2023 with interest payable semi-annually.  The notes are our generalunsubordinated, unsecured obligations and are guaranteed by Airlines.  Except as otherwise specified in the indenture pursuantto which the notes were issued, there are no restrictions on Airlines’ ability to transfer funds to Holdings in the form ofcash dividends, loans or advances.  General provisions of applicable state law, however, may limit the ability of anysubsidiary to pay dividends or make distributions to its parent in certain circumstances. 

            We have the right to redeem the notes for cash, as a whole atany time or from time to time in part, beginning on August 4, 2008, for a price equal to 100% of the principal amount plus accruedand unpaid interest, if any.  In addition, each holder has the right to require that we repurchase their notes on August 1,2008, 2013, and 2018 (“Repurchase Dates”) at a price equal to 100% of the principal amount of the notes to berepurchased plus accrued and unpaid interest, if any.  At our option, we may pay the repurchase price for any such notes incash, shares of our common stock, or any combination thereof.  If we elect to use shares of common stock, the number of shareswill equal the repurchase price divided by 97.5% of the average closing sales price of the stock for the five trading days endingon the third business day prior to the applicable Repurchase Date (adjusted to take into account the occurrence of certain eventsrequiring adjustment of the conversion rate).  In certain circumstances, the notes are convertible into our common stock, at aratio of 54.9451 shares of common stock per $1,000 principal amount notes, which is equivalent to an initial conversion price ofapproximately $18.20 per common share.  The ratio is subject to adjustments if certain events take place, and holders mayconvert only if the closing sale price per common share exceeds 120% of the conversion price for at least 20 trading days in the 30consecutive trading day period ending on the last trading day of the preceding calendar quarter.  As oneof the Repurchase Dates is within a year of September 30, 2007, we have reclassed these notes, with an aggregate principal amountof $137.2 million, from long-term debt to current liabilities.  We are evaluating our available options to satisfy theholders should they require us to repurchase their notes.

            Additionally, as of September 30, 2007 and December 31, 2006,we estimated the fair value of our $137.2 million (carrying value) fixed-rate debt to be $132.4 million and $127.9 million,respectively, based upon quoted market prices.

****

            The following condensed consolidated balance sheets, resultsof 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.

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|                                                                                                                                                                                                                                                                                                                                                              |   | **Condensed Consolidated Balance Sheet** |     |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------------------------|----------|
|                                                                                                                                                                                                                                                                                                                                                              |        | **September 30, 2007**                   |          |
|                                                                                                                                                                                                                                                                                                                                                              |        | **(In thousands)**                       |          |
|                                                                                                                                                                                                                                                                                                                                                         |   |                                          |     |
|                                                            |   |                                     |     |   |   |  |   |   | **Other Non- Guarantor** |   |   |   |   |   |   | **Consolidated** |   |
|                                                                                                                                                                                                                                                                                                                                                              |        | **Holdings**                             |          |  | **Airlines** |  |  | **Subsidiaries** |  |  | **Eliminations** |  |  | **Totals** |  |
|                                                                                                                                                                                                                                                                                                                                                         |   |                                          |     |   |  |   |   |  |   |   |  |   |   |  |   |
| Current assets.................................                                                                                                                                                                                                                                                                                                              |   | $                                        | 20       |   |   | $ | 338,282 |   |   | $ | 7,612 |   |   | $ | — |  |   | $ | 345,914 |   |
| Property and equipment, net.............                                                                                                                                                                                                                                                                                                                     |   |                                     | 113      |   |   |   | 255,482 |   |   |   | 15,064 |   |   |   | — |  |   |   | 270,659 |   |
| Investments in other entities..............                                                                                                                                                                                                                                                                                                                  |   |                                     | 3,112    |   |   |   | — |   |   |   | 13,959 |   |   |   | — |  |   |   | 17,071 |   |
| Other assets....................................                                                                                                                                                                                                                                                                                                             |   |                                     | 21,975   |   |   |   | 6,182 |   |   |   | 437 |  |   |   | (5,360 | ) |   |   | 23,234 |   |
|                                                                                                                                                                                                                                                                                                                                                              |   |                                     |          |   |   |   |  |   |   |   |  |  |   |   |  |  |   |   |  |   |
| Total assets.....................................                                                                                                                                                                                                                                                                                                            |   |                                          | 25,220   |   |   |  | 599,946 |   |   |  | 37,072 |   |   |  | (5,360 | ) |   |  | 656,878 |   |
|                                                                                                                                                                                                                                                                                                                                                              |        |                                          |          |  |  |  |  |  |  |  |  |  |  |  |  |
| Current liabilities..............................                                                                                                                                                                                                                                                                                                            |   |                                          | 138,200  |  |   |  | 156,983 |   |   |  | 3,213 |   |   |  | — |  |  |  | 298,396 |   |
| Intercompany payables     (receivables)................................                                                                                                                                                                                                                                                                  |   |                                          | (337,830 | ) |   |  | 332,492 |   |   |   | 5,338 |  |   |   | — |   |  |  | — |   |
| Long-term debt.................................                                                                                                                                                                                                                                                                                                              |   |                                          | —  |  |   |  | 10,378 |   |   |   | 15 |   |   |   | — |   |  |  | 10,393 |   |
| Other liabilities.................................                                                                                                                                                                                                                                                                                                           |   |                                          | —  |  |   |  | 82,948 |   |   |   | 348 |   |   |   | (5,360 | ) |  |  | 77,936 |   |
| Stockholders’ equity.........................                                                                                                                                                                                                                                                                                                          |   |                                          | 224,850  |  |   |  | 17,145 |  |   |   | 28,158 |   |   |   | — |  |  |  | 270,153 |   |
|                                                                                                                                                                                                                                                                                                                                                              |   |                                     |          |   |   |   |  |   |   |   |  |  |   |   |  |  |   |   |  |   |
| Total liabilities and stockholders’     equity..........................................                                                                                                                                                                                                                                           |   | $                                        | 25,220   |  |  | $ | 599,946 |  |  | $ | 37,072 |  |  | $ | (5,360 | ) |  | $ | 656,878 |  |
|                                                                                                                                                                                                                                                                                                                                                         |   |                                          |     |   |  |   |   |  |   |   |  |   |   |  |   |

|                                                                                                                                                                                                                                                                                                                                                                           |   | **Condensed Consolidated Balance Sheet** |     |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------------------------|----------|
|                                                                                                                                                                                                                                                                                                                                                                                |        | **December 31, 2006**                    |          |
|                                                                                                                                                                                                                                                                                                                                                                                |        | **(In thousands)**                       |          |
|                                                                                                                                                                                                                                                                                                                                                                           |   |                                          |     |
|                                                               |   |                                     |     |   |   |  |   |   | **Other Non- Guarantor** |   |   |   |   |   |   | **Consolidated** |   |
|                                                                                                                                                                                                                                                                                                                                                                                |        | **Holdings**                             |          |  | **Airlines** |  |  | **Subsidiaries** |  |  | **Eliminations** |  |  | **Totals** |  |
|                                                                                                                                                                                                                                                                                                                                                                           |   |                                          |     |   |  |   |   |  |   |   |  |   |   |  |   |
| Current assets.................................                                                                                                                                                                                                                                                                                                                                |   | $                                        | 37       |   |   | $ | 341,990 |   |   | $ | 6,902 |   |   | $ | (135 | )  |   | $ | 348,794 |   |
| Property and equipment, net.............                                                                                                                                                                                                                                                                                                                                       |   |                                     | —  |   |   |   | 229,377 |   |   |   | 15,706 |   |   |   | — |  |   |   | 245,083 |   |
| Investments in other entities..............                                                                                                                                                                                                                                                                                                                                    |   |                                     | 3,194    |   |   |   | — |   |   |   | 14,823 |   |   |   | — |  |   |   | 18,017 |   |
| Other assets....................................                                                                                                                                                                                                                                                                                                                               |   |                                     | 17,567   |   |   |   | 7,285 |   |   |   | 283 |   |   |   | — |  |   |   | 25,135 |   |
|                                                                                                                                                                                                                                                                                                                                                                           |   |                                          |     |   |  |   |   |  |   |   |  |   |   |  |   |
| Total assets.....................................                                                                                                                                                                                                                                                                                                                              |   | $                                        | 20,798   |   |   | $ | 578,652 |   |   | $ | 37,714 |   |   | $ | (135 | ) |   | $ | 637,029 |   |
|                                                                                                                                                                                                                                                                                                                                                                                |        |                                          |          |  |  |  |  |  |  |  |  |  |  |  |  |
| Current liabilities..............................                                                                                                                                                                                                                                                                                                                              |   | $                                        | 9,418    |   |   | $ | 125,913 |   |   | $ | 276 |   |   | $ | (515 | ) |   | $ | 135,092 |   |
| Intercompany payables     (receivables)................................                                                                                                                                                                                                                                                                                    |   |                                     | (336,128 | ) |   |   | 330,624 |  |   |   | (236 | ) |   |   | 5,740 |  |   |   | — |   |
| Long-term debt.................................                                                                                                                                                                                                                                                                                                                                |   |                                     | 137,200  |   |   |   | 12,981 |   |   |   | 51 |   |   |   | — |   |   |   | 150,232 |   |
| Other liabilities.................................                                                                                                                                                                                                                                                                                                                             |   |                                     | —  |   |   |   | 52,412 |   |   |   | 339 |   |   |   | (5,360 | ) |   |   | 47,391 |   |
| Stockholders’ equity.........................                                                                                                                                                                                                                                                                                                                            |   |                                     | 210,308  |   |   |   | 56,722 |   |   |   | 37,284 |   |   |   | — |  |   |   | 304,314 |   |
|                                                                                                                                                                                                                                                                                                                                                                           |   |                                          |     |   |  |   |   |  |   |   |  |   |   |  |   |
| Total liabilities and stockholders’     equity..........................................                                                                                                                                                                                                                                                             |   | $                                        | 20,798   |   |   | $ | 578,652 |   |   | $ | 37,714 |   |   | $ | (135 | ) |   | $ | 637,029 |   |
|                                                                                                                                                                                                                                                                                                                                                                                |        |                                          |          |  |  |  |  |  |  |  |  |  |  |  |  |

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|   |                                                                                                                                                                                                                                                                                                                                                                                                         | **Condensed Consolidated Results of Operations** |         |    |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------------------------------------------------|--------------|---------|
|        |                                                                                                                                                                                                                                                                                                                                                                                                              | **Three Months Ended September 30, 2007**        |              |    |
|        |                                                                                                                                                                                                                                                                                                                                                                                                              | **(In thousands)**                               |              |    |
|   |                                                                                                                                                                                                                                                                                                                                                                                                         |                                                  |         |    |
|   |                                                                    |                                             |         |    |   |   |  |   |   | **Other Non- Guarantor** |   |   |   |   |   |   | **Consolidated** |  |
|   |                                                                                                                                                                                                                                                                                                                                                                                                              |                                                  | **Holdings** |         |  | **Airlines** |  |  | **Subsidiaries** |  |  | **Eliminations** |  |  | **Totals** |  |
|   |                                                                                                                                                                                                                                                                                                                                                                                                         |                                             |              |    |   |  |   |   |  |   |   |  |   |   |  |  |
|   | Operating revenue................................                                                                                                                                                                                                                                                                                                                                                            |                                             | $            | — |   |   | $ | 438,395 |   |   | $ | 4,496 |   |   | $ | (1,546 | )  |   | $ | 441,345 |  |
|   | Operating expenses.............................                                                                                                                                                                                                                                                                                                                                                              |                                             |         | 198     |   |   |   | 473,892 |   |   |   | 5,487 |   |   |   | (1,576 | )  |   |   | 478,001 |  |
|   |                                                                                                                                                                                                                                                                                                                                                                                                              |                                             |              |    |   |  |   |   |  |   |   |  |   |   |  |  |
|   | Operating income (loss).......................                                                                                                                                                                                                                                                                                                                                                               |                                             |         | (198    | )  |   |   | (35,497 | )  |   |   | (991 | )  |   |   | 30 |   |   |   | (36,656 | ) |
|   |                                                                                                                                                                                                                                                                                                                                                                                                              |                                             |              |    |   |  |   |   |  |   |   |  |   |   |  |  |
|   | Interest expense..................................                                                                                                                                                                                                                                                                                                                                                           |                                             |         | (2,038  | )  |   |   | (4,734 | )  |   |   | — |  |   |   | 4,452 |   |   |   | (2,320 | ) |
|   | Interest income...................................                                                                                                                                                                                                                                                                                                                                                           |                                             |         | 4,499   |  |   |   | 3,952 |   |   |   | — |  |   |   | (4,482 | )  |   |   | 3,969 |  |
|   | Capitalized Interest..............................                                                                                                                                                                                                                                                                                                                                                           |                                                  |              | — |  |  |  | 373 |  |  |  | — |  |  |  | — |  |  |  | 373 |  |
|   | Equity investment (loss).......................                                                                                                                                                                                                                                                                                                                                                              |                                                  |              | (48     | ) |  |  | — |  |  |  | (516 | ) |  |  | — |  |  |  | (564 | ) |
|   | Other, net...........................................                                                                                                                                                                                                                                                                                                                                                        |                                             |         | — |  |   |   | 2 |   |   |   | 2 |  |   |   | — |   |   |   | 4 |  |
|   |                                                                                                                                                                                                                                                                                                                                                                                                              |                                             |              |    |   |  |   |   |  |   |   |  |   |   |  |  |
|   | Income (loss) before income taxes........                                                                                                                                                                                                                                                                                                                                                                    |                                             | 2,215        |         |   | (35,904 | )  |   | (1,505 | )  |   | — |   |   | (35,194 | ) |
|   | Income tax benefit (expense)................                                                                                                                                                                                                                                                                                                                                                                 |                                             |         | (951    | ) |   |   | 13,649 |  |   |   | 168 |   |   |   | — |   |   |   | 12,866 |  |
|   |                                                                                                                                                                                                                                                                                                                                                                                                              |                                             |              |    |   |  |   |   |  |   |   |  |   |   |  |  |
|   | Net income (loss)................................                                                                                                                                                                                                                                                                                                                                                            |                                             | $            | 1,264   |   |   | $ | (22,255 | ) |   | $ | (1,337 | )  |   | $ | — |  |   | $ | (22,328 | ) |
|   |                                                                                                                                                                                                                                                                                                                                                                                                              |                                                  |              |         |  |  |  |  |  |  |  |  |  |  |  |  |

|   |                                                                                                                                                                                                                                                                                                                                                                                                         | **Condensed Consolidated Results of Operations** |         |    |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------------------------------------------------|--------------|---------|
|        |                                                                                                                                                                                                                                                                                                                                                                                                              | **Three Months Ended September 30, 2006**        |              |    |
|        |                                                                                                                                                                                                                                                                                                                                                                                                              | **(In thousands)**                               |              |    |
|   |                                                                                                                                                                                                                                                                                                                                                                                                         |                                                  |         |    |
|   |                                                                    |                                             |         |    |   |   |  |   |   | **Other Non- Guarantor** |   |   |   |   |   |   | **Consolidated** |  |
|   |                                                                                                                                                                                                                                                                                                                                                                                                              |                                                  | **Holdings** |         |  | **Airlines** |  |  | **Subsidiaries** |  |  | **Eliminations** |  |  | **Totals** |  |
|   |                                                                                                                                                                                                                                                                                                                                                                                                         |                                             |              |    |   |  |   |   |  |   |   |  |   |   |  |  |
|   | Operating revenue.................................                                                                                                                                                                                                                                                                                                                                                           |                                             | $            | — |   |   | $ | 427,272 |   |   | $ | 2,276 |   |   | $ | (914 | )  |   | $ | 428,634 |  |
|   | Operating expenses..............................                                                                                                                                                                                                                                                                                                                                                             |                                             |         | 787     |   |   |   | 391,364 |   |   |   | 2,841 |   |   |   | (914 | )  |   |   | 394,078 |  |
|   |                                                                                                                                                                                                                                                                                                                                                                                                              |                                             |              |    |   |  |   |   |  |   |   |  |   |   |  |  |
|   | Operating income (loss).........................                                                                                                                                                                                                                                                                                                                                                             |                                             |         | (787    | )  |   |   | 35,908 |   |   |   | (565 | )  |   |   | — |   |   |   | 34,556 |  |
|   |                                                                                                                                                                                                                                                                                                                                                                                                              |                                             |              |    |   |  |   |   |  |   |   |  |   |   |  |  |
|   | Interest expense...................................                                                                                                                                                                                                                                                                                                                                                          |                                             |         | (1,507  | )  |   |   | (4,747 | )  |   |   | (2 | ) |   |   | 4,452 |   |   |   | (1,804 | ) |
|   | Interest income.....................................                                                                                                                                                                                                                                                                                                                                                         |                                             |         | 4,482   |  |   |   | 4,151 |   |   |   | — |  |   |   | (4,452 | )  |   |   | 4,181 |  |
|   | Capitalized Interest...............................                                                                                                                                                                                                                                                                                                                                                          |                                                  |              | — |  |  |  | 71 |  |  |  |  |  |  |  | — |  |  |  | 71 |  |
|   | Equity investment income (loss).............                                                                                                                                                                                                                                                                                                                                                                 |                                                  |              | 109     |  |  |  | — |  |  |  | (1,596 | ) |  |  | 730 |  |  |  | (757 | ) |
|   | Other, net.............................................                                                                                                                                                                                                                                                                                                                                                      |                                             |         | — |  |   |   | 61 |   |   |   | 82 |  |   |   | — |   |   |   | 143 |  |
|   |                                                                                                                                                                                                                                                                                                                                                                                                              |                                             |              |    |   |  |   |   |  |   |   |  |   |   |  |  |
|   | Income (loss) before income taxes.........                                                                                                                                                                                                                                                                                                                                                                   |                                             | 2,297        |    |   | 35,444 |   |   | (2,081 | )  |   | 730 |   |   | 36,390 |  |
|   | Income tax benefit (expense).................                                                                                                                                                                                                                                                                                                                                                                |                                             |         | (796    | ) |   |   | (13,061 | ) |   |   | 190 |   |   |   | — |   |   |   | (13,667 | ) |
|   |                                                                                                                                                                                                                                                                                                                                                                                                              |                                             |              |    |   |  |   |   |  |   |   |  |   |   |  |  |
|   | Net income (loss)..................................                                                                                                                                                                                                                                                                                                                                                          |                                             | $            | 1,501   |   |   | $ | 22,383 |  |   | $ | (1,891 | )  |   | $ | 730 |  |   | $ | 22,723 |  |
|   |                                                                                                                                                                                                                                                                                                                                                                                                              |                                                  |              |         |  |  |  |  |  |  |  |  |  |  |  |  |

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|   |                                                                                                                                                                                                                                                                                                                                                                                                         | **Condensed Consolidated Results of Operations** |         |    |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------------------------------------------------|--------------|---------|
|        |                                                                                                                                                                                                                                                                                                                                                                                                              | **Nine Months Ended September 30, 2007**         |              |    |
|        |                                                                                                                                                                                                                                                                                                                                                                                                              | **(In thousands)**                               |              |    |
|   |                                                                                                                                                                                                                                                                                                                                                                                                         |                                                  |         |    |
|   |                                                                    |                                             |         |    |   |   |  |   |   | **Other Non- Guarantor** |   |   |   |   |   |   | **Consolidated** |  |
|   |                                                                                                                                                                                                                                                                                                                                                                                                              |                                                  | **Holdings** |         |  | **Airlines** |  |  | **Subsidiaries** |  |  | **Eliminations** |  |  | **Totals** |  |
|   |                                                                                                                                                                                                                                                                                                                                                                                                         |                                             |              |    |   |  |   |   |  |   |   |  |   |   |  |  |
|   | Operating revenue.................................                                                                                                                                                                                                                                                                                                                                                           |                                             | $            | — |   |   | $ | 1,242,871 |   |   | $ | 12,741 |   |   | $ | (6,065 | ) |   | $ | 1,249,547 |  |
|   | Operating expenses..............................                                                                                                                                                                                                                                                                                                                                                             |                                             |         | 508     |   |   |   | 1,303,076 |   |   |   | 17,103 |   |   |   | (6,095 | ) |   |   | 1,314,592 |  |
|   |                                                                                                                                                                                                                                                                                                                                                                                                              |                                             |              |    |   |  |   |   |  |   |   |  |  |   |  |  |
|   | Operating income (loss).........................                                                                                                                                                                                                                                                                                                                                                             |                                             |         | (508    | )  |   |   | (60,205 | )  |   |   | (4,362 | )  |   |   | 30 |  |   |   | (65,045 | ) |
|   |                                                                                                                                                                                                                                                                                                                                                                                                              |                                             |              |    |   |  |   |   |  |   |   |  |  |   |  |  |
|   | Interest expense...................................                                                                                                                                                                                                                                                                                                                                                          |                                             |         | (5,055  | )  |   |   | (14,203 | )  |   |   | (2 | ) |   |   | 13,356 |  |   |   | (5,904 | ) |
|   | Interest income.....................................                                                                                                                                                                                                                                                                                                                                                         |                                             |         | 13,454  |  |   |   | 12,447 |   |   |   | — |  |   |   | (13,386 | ) |   |   | 12,515 |  |
|   | Capitalized Interest...............................                                                                                                                                                                                                                                                                                                                                                          |                                                  |              | — |  |  |  | 926 |  |  |  | — |  |  |  | — |  |  |  | 926 |  |
|   | Equity investment income (loss).............                                                                                                                                                                                                                                                                                                                                                                 |                                                  |              | (82     | ) |  |  | — |  |  |  | (864 | ) |  |  | — |  |  |  | (946 | ) |
|   | Other, net.............................................                                                                                                                                                                                                                                                                                                                                                      |                                             |         | — |  |   |   | 8 |   |   |   | 6 |  |   |   | — |  |   |   | 14 |  |
|   |                                                                                                                                                                                                                                                                                                                                                                                                              |                                             |              |    |   |  |   |   |  |   |   |  |  |   |  |  |
|   | Income (loss) before income taxes.........                                                                                                                                                                                                                                                                                                                                                                   |                                             | 7,809        |    |   | (61,027 | ) |   | (5,222 | )  |   | — |  |   | (58,440 | ) |
|   | Income tax benefit (expense).................                                                                                                                                                                                                                                                                                                                                                                |                                             |         | (2,913  | ) |   |   | 21,519 |  |   |   | 1,269 |   |   |   | — |   |   |   | 19,875 |  |
|   |                                                                                                                                                                                                                                                                                                                                                                                                              |                                             |              |    |   |  |   |   |  |   |   |  |   |   |  |  |
|   | Net income (loss)..................................                                                                                                                                                                                                                                                                                                                                                          |                                             | $            | 4,896   |   |   | $ | (39,508 | ) |   | $ | (3,953 | )  |   | $ | — |  |   | $ | (38,565 | ) |
|   |                                                                                                                                                                                                                                                                                                                                                                                                              |                                                  |              |         |  |  |  |  |  |  |  |  |  |  |  |  |

|   |                                                                                                                                                                                                                                                                                                                                                                                                   | **Condensed Consolidated Results of Operations** |         |    |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------------------------------------------------|--------------|---------|
|        |                                                                                                                                                                                                                                                                                                                                                                                                        | **Nine Months Ended September 30, 2006**         |              |    |
|        |                                                                                                                                                                                                                                                                                                                                                                                                        | **(In thousands)**                               |              |    |
|   |                                                                                                                                                                                                                                                                                                                                                                                                   |                                                  |         |    |
|   |                                                                   |                                             |         |    |   |   |  |   |   | **Other Non- Guarantor** |   |   |   |   |   |   | **Consolidated** |  |
|   |                                                                                                                                                                                                                                                                                                                                                                                                        |                                                  | **Holdings** |         |  | **Airlines** |  |  | **Subsidiaries** |  |  | **Eliminations** |  |  | **Totals** |  |
|   |                                                                                                                                                                                                                                                                                                                                                                                                   |                                             |              |    |   |  |   |   |  |   |   |  |   |   |  |  |
|   | Operating revenue.................................                                                                                                                                                                                                                                                                                                                                                     |                                             | $            | — |   |   | $ | 1,250,684 |   |   | $ | 5,906 |   |   | $ | (2,738 | )  |   | $ | 1,253,852 |  |
|   | Operating expenses..............................                                                                                                                                                                                                                                                                                                                                                       |                                             |         | 1,335   |   |   |   | 1,141,299 |   |   |   | 6,470 |   |   |   | (2,738 | )  |   |   | 1,146,366 |  |
|   |                                                                                                                                                                                                                                                                                                                                                                                                        |                                             |              |    |   |  |   |   |  |   |   |  |   |   |  |  |
|   | Operating income (loss).........................                                                                                                                                                                                                                                                                                                                                                       |                                             |         | (1,335  | )  |   |   | 109,385 |   |   |   | (564) |   |   |   | — |   |   |   | 107,486 |  |
|   |                                                                                                                                                                                                                                                                                                                                                                                                        |                                             |              |    |   |  |   |   |  |   |   |  |   |   |  |  |
|   | Interest expense...................................                                                                                                                                                                                                                                                                                                                                                    |                                             |         | (4,405  | )  |   |   | (14,478 | )  |   |   | (2 | ) |   |   | 13,356 |   |   |   | (5,529 | ) |
|   | Interest income.....................................                                                                                                                                                                                                                                                                                                                                                   |                                             |         | 13,577  |  |   |   | 10,274 |   |   |   | — |  |   |   | (13,356 | )  |   |   | 10,495 |  |
|   | Capitalized Interest...............................                                                                                                                                                                                                                                                                                                                                                    |                                                  |              | — |  |  |  | 172 |  |  |  | — |  |  |  | — |  |  |  | 172 |  |
|   | Equity investment income (loss).............                                                                                                                                                                                                                                                                                                                                                           |                                                  |              | 143     |  |  |  | — |  |  |  | (2,126 | ) |  |  | 729 |  |  |  | (1,254 | ) |
|   | Other, net.............................................                                                                                                                                                                                                                                                                                                                                                |                                             |         | — |  |   |   | 145 |   |   |   | 82 |  |   |   | — |   |   |   | 227 |  |
|   |                                                                                                                                                                                                                                                                                                                                                                                                        |                                             |              |    |   |  |   |   |  |   |   |  |   |   |  |  |
|   | Income (loss) before income taxes.........                                                                                                                                                                                                                                                                                                                                                             |                                             | 7,980        |    |   | 105,498 |   |   | (2,610 | )  |   | 729 |   |   | 111,597 |  |
|   | Income tax benefit (expense).................                                                                                                                                                                                                                                                                                                                                                          |                                             |         | (2,821  | ) |   |   | (39,317 | ) |   |   | 289 |   |   |   | — |   |   |   | (41,849 | ) |
|   |                                                                                                                                                                                                                                                                                                                                                                                                        |                                             |              |    |   |  |   |   |  |   |   |  |   |   |  |  |
|   | Net income (loss)..................................                                                                                                                                                                                                                                                                                                                                                    |                                             | $            | 5,159   |   |   | $ | 66,181 |  |   | $ | (2,321 | )  |   | $ | 729 |  |   | $ | 69,748 |  |
|   |                                                                                                                                                                                                                                                                                                                                                                                                        |                                                  |              |         |  |  |  |  |  |  |  |  |  |  |  |  |

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|                                                                                                                                                                                                                                                                                                                                                               |   | **Condensed Consolidated Cash Flows Nine Months Ended September 30, 2007 (In thousands)** |  |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------------------------------------------------------------------|--|
|                                                                                                                                                                                                                                                                                                                                                                    |        |                                                                                           |  |
|                                                             |   | **Holdings**                                                                              |  |  |  | **Airlines** |  |  |  | **Other Non- Guarantor Subsidiaries** |  |  |  | **Eliminations** |  |  |  | **Consolidated Totals** |  |
|                                                                                                                                                                                                                                                                                                                                                                    |        |                                                                                           |  |   |  |  |  |   |  |  |  |  |  |  |  |   |  |  |  |
| Operating activities..........................                                                                                                                                                                                                                                                                                                                     | $      | —                                                                                   |  |  | $ | (7,681 | ) |  | $ | (745 | ) |  | $ | — |  |  | $ | (8,426 | ) |
| Investing activities............................                                                                                                                                                                                                                                                                                                                   |        | —                                                                                   |  |  |  | (44,828 | ) |  |  | (23 | ) |  |  | 1,011 |  |  |  | (43,840 | ) |
| Financing activities..........................                                                                                                                                                                                                                                                                                                                     |        | 838                                                                                       |  |  |  | (1,683 | ) |  |  | 977 |  |  |  | (1,011 | ) |  |  | (879 | ) |
|                                                                                                                                                                                                                                                                                                                                                                    |        |                                                                                           |  |  |  |  |  |  |  |  |  |   |  |  |  |  |  |  |  |
| Net increase (decrease) in cash........                                                                                                                                                                                                                                                                                                                            |        | 838                                                                                       |  |  |  | (54,192 | ) |  |  | 209 |  |  |  | — |  |  |  | (53,145 | ) |
| Cash at the beginning of the period...                                                                                                                                                                                                                                                                                                                             |        | —                                                                                   |  |  |  | 291,148 |  |  |  | 485 |  |  |  | — |  |  |  | 291,633 |  |
|                                                                                                                                                                                                                                                                                                                                                                    |        |                                                                                           |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Cash at the end of the period............                                                                                                                                                                                                                                                                                                                          | $      | 838                                                                                       |  |  | $ | 236,956 |  |  | $ | 694 |  |  | $ | — |  |  | $ | 238,488 |  |
|                                                                                                                                                                                                                                                                                                                                                                    |        |                                                                                           |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

|                                                                                                                                                                                                                                                                                                                                                         |   | **Condensed Consolidated Cash Flows Nine Months Ended September 30, 2006 (In thousands)** |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------------------------------------------------------------------|---|
|                                                                                                                                                                                                                                                                                                                                                              |        |                                                                                           |   |
|                                                            |   | **Holdings**                                                                              |   |  |  | **Airlines** |  |  |  | **Other Non- Guarantor Subsidiaries** |  |  |  | **Eliminations** |  |  |  | **Consolidated Totals** |  |
|                                                                                                                                                                                                                                                                                                                                                              |        |                                                                                           |   |   |  |  |  |   |  |  |  |  |  |  |  |   |  |  |  |
| Operating activities........................                                                                                                                                                                                                                                                                                                                 | $      | —                                                                                   |   |  | $ | 84,587 |  |  | $ | 4,604 |  |  | $ | (2,927 | ) |  | $ | 86,264 |  |
| Investing activities..........................                                                                                                                                                                                                                                                                                                               |        | (10,975                                                                                   | ) |  |  | (10,736 | ) |  |  | (4,505 | ) |  |  | 4,373 |  |  |  | (21,843 | ) |
| Financing activities........................                                                                                                                                                                                                                                                                                                                 |        | 2,327                                                                                     |   |  |  | (18,551 | ) |  |  | (1 | ) |  |  | (1,446 | ) |  |  | (17,671 | ) |
|                                                                                                                                                                                                                                                                                                                                                              |        |                                                                                           |   |  |  |  |  |  |  |  |  |   |  |  |  |  |  |  |  |
| Net increase (decrease) in cash......                                                                                                                                                                                                                                                                                                                        |        | (8,648                                                                                    | ) |  |  | 55,300 |  |  |  | 98 |  |  |  | — |  |  |  | 46,750 |  |
| Cash at the beginning of the period....                                                                                                                                                                                                                                                                                                                      |        | 9,492                                                                                     |   |  |  | 217,669 |  |  |  | 124 |  |  |  | — |  |  |  | 227,285 |  |
|                                                                                                                                                                                                                                                                                                                                                              |        |                                                                                           |   |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Cash at the end of the period..........                                                                                                                                                                                                                                                                                                                      | $      | 844                                                                                       |   |  | $ | 272,969 |  |  | $ | 222 |  |  | $ | — |  |  | $ | 274,035 |  |
|                                                                                                                                                                                                                                                                                                                                                              |        |                                                                                           |   |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

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****

**Note 7 – Income Taxes **

            In conjunction with our initial public offering in April2002, the tax basis of our tangible and intangible assets was adjusted to fair value.  This adjustment to tax basis shouldresult in additional tax deductions being available to us through 2017.  In accordance with our tax agreement withContinental, to the extent we generate taxable income sufficient to realize the additional tax deductions, we are required to payContinental a percentage of the amount of tax savings actually realized, excluding the effect of any loss carrybacks.  We arerequired to pay Continental 100% of the first third of the anticipated tax benefit, 90% of the second third and 80% of the lastthird.  However, if these tax benefits are not realized by the end of 2018, we will be obligated to pay Continental 100% ofthese benefits realized after that date.  Since these payments are solely dependent on our ability to generate sufficienttaxable income to realize these deferred tax assets, they are recorded as an obligation to Continental within the deferred taxasset accounts, and the portion we may retain in the future is offset by a valuation allowance.  At the time of the initialpublic offering, the valuation allowance and the obligation to Continental offset the step-up in basis of assets in our long-termdeferred tax asset account.  During the nine months ended September 30, 2006, we made net payments to Continental under thetax agreement of approximately $18.8 million.  No tax payments under the tax agreement related to the additional taxdeductions were made by either Continental or us during the nine months ended September 30, 2007.

            Our tax agreement increases our dependence onContinental’s financial condition.  If it were determined that any of the tax benefits related to the basis increaseshould not have been available at the time of utilization and, as a result, we were required to pay additional taxes, interest andpenalties, then we could be adversely affected if Continental were unable or unwilling to perform its indemnification under theagreement.

            Effective January 1, 2007, we adopted the provisions ofFinancial Accounting Standards Board issued Interpretation No. 48, “Accounting for Uncertainty in Income Taxes, aninterpretation of FASB Statement No. 109”, which clarifies the accounting for uncertainty in income taxes recognized infinancial statements if a position is more likely than not of being sustained by a taxing authority.  As of September 30,2007, there were no material unrecognized tax benefits or associated accrued interest and penalties under the interpretation. The calendar tax years 2004 through 2006 remain subject to examination by the Internal Revenue Service.

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**Note 8 – Stock Based Compensation Plans**

****

            As of September 30, 2007, we had three stock-basedcompensation plans: our 2002 and 2007 Stock Incentive Plans (the “Incentive Plans”) and our 2003 Employee StockPurchase Plan (the “ESPP”).  We account for our stock-based compensation arrangements using the fair valuerecognition provisions of Financial Accounting Standards Board Statement No. 123(R), *Share-Based Payments* (“Statement123(R)”) using the modified-prospective transition method.  The fair value of Holdings’ options granted during thenine months ended September 30, 2007 was estimated at the date of grant using the Black-Scholes option pricing model, whichrequires us to make several assumptions.  The table below summarizes the weighted-average of these assumptions for the ninemonths ended September 30, 2007:

| Risk-free interest rate...................................................................    |    | 4.7  | % |
|-----------------------------------------------------------------------------------------------|--------------|------|---|
| Dividend yield............................................................................... |              | 0.0  | % |
| Expected market price volatility of our common stock................                          |              | 49.5 | % |
| Expected life of options (years)....................................................          |              | 7.0  |   |

            The risk-free interest rate is based on the U.S. Treasuryyield curve in effect for the expected term of the option at the time of grant.  The dividend yield on our common stock isassumed to be zero since we do not pay dividends and have no current plan to do so in the future.  The market price volatilityof our common stock was based on historical volatility since April 23, 2002.  The expected life of the options is based uponour anticipated expectations of exercise behavior since only a nominal number of options have been exercised since the initialpublic offering to provide relevant historical data.  

            Based upon the assumptions above, the weighted-average fairvalue of the options granted during the nine months ended September 30, 2007 was determined to be $3.5 million. 

            The table below summarizes stock option transactions pursuantto the Incentive Plans (Share data in thousands):

|                                                                                                |  | **Options** |   |   |          | **Weighted Average Exercise Price** |  |
|------------------------------------------------------------------------------------------------|--|-------------|---|--------|----------|-------------------------------------|--|
| ****                                                                                           |  | ****        |   |        |          | ****                                |  |
| Outstanding at Beginning of Year..................................................             |  | 2,702       |   |        | $        | 10.90                               |  |
| Granted....................................................................................... |  | 2,122       |   |        | $        | 6.12                                |  |
| Exercised....................................................................................  |  | (5          | ) |        | $        | 5.40                                |  |
| Cancelled....................................................................................  |  | (67         | ) |        | $        | 7.59                                |  |
|                                                                                                |  |             |   |        |          |                                     |  |
| Outstanding at September 30, 2007...............................................               |  | 4,752       |   |        |   $ | 8.82                                |  |
|                                                                                                |  |             |   |        |          |                                     |  |
| Options Exercisable at September 30, 2007...................................                   |  | 1,969       |   |        | $        | 12.60                               |  |
|                                                                                                |  |             |   |        |          |                                     |  |

            In January and July 2007, we issued 39,472 and 44,020 sharesof our common stock to our employees pursuant to the ESPP at $6.02 and $5.13 per share, respectively.  In January and July2006, 39,985 and 35,035 shares of our common stock were issued to our employees at $6.88 and $5.70 per share,respectively.

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**Note 9 – Commitments and Contingencies**

***Purchase Commitments and Contingencies***

******

            As shown in the following table, our fleet consisted of 274regional jets at September 30, 2007.  We had no aircraft purchase commitments (firm orders), but did have options to purchase100 ERJ-145XR aircraft or other types of aircraft within the ERJ-145 family.

| **Type**                                               |  | **Total Leased Aircraft** |              | **Seats in Standard Configuration** |
|--------------------------------------------------------|--|---------------------------|--------------|-------------------------------------|
|                                                        |  |                           |    |                                     |
|   ERJ-145XR..................                |  | 104                       |              | 50                                  |
|   ERJ-145......................              |  | 140                       |              | 50                                  |
|   ERJ-135......................              |  | 30                        |              | 37                                  |
|                                                        |  |                           |              |                                     |
|     Total......................... |  | 274                       |              |                                     |
|                                                        |  |                           |              |                                     |

***Collective Bargaining Agreements***

            As of September 30, 2007, approximately 70% of our employeeswere covered by collective bargaining agreements.  Our contracts with our pilots, dispatchers, flight attendants and mechanicswill be amendable in December 2010, July 2009, August 2010 and August 2009, respectively.  Our other employees are not coveredby collective bargaining agreements. 

***Credit Card Holdback***

            Under our American Express credit card processing agreement,certain proceeds from advance ticket sales are held back to serve as collateral to cover any possible chargebacks or other disputedcharges that may occur. These holdbacks, which are included in accounts receivable in our consolidated balance sheets, totaledapproximately $3.4 million as of September 30, 2007.  The funds held back by American Express are interest-bearing and aresubsequently made available to us as air travel is completed.

            The agreement with our Visa and MasterCard processor alsocontains financial triggers that require, among other things, that we maintain certain financial ratios and levels of operatingincome and unrestricted cash.  The level of credit card holdback is subject to adjustments based on specific financialtriggers as discussed in the preceding sentence.  As of September 30, 2007, we did not meet some of the financial ratios setforth in the agreement.  As a result, we anticipate being subject to a 50% holdback of our Visa and MasterCard advance ticketsales until our next measurement date for these ratios. The funds held back will be interest-bearing and will be made available tous as air travel is completed.  We anticipate that our monthly receivable as a result of these holdbacks will approximate $9.0million initially.

***General Guarantees and Indemnifications***

            We are party to many contracts in which we agree to indemnifythird parties for tort liabilities that arise out of or relate to the subject matter of the contract.  In some cases, thisindemnity extends to related liabilities arising from the negligence of the indemnified parties, but typically excludes liabilitiescaused by gross negligence or willful misconduct.  We cannot estimate the potential amount of future payments under theseindemnities until events arise that would trigger a liability under the indemnities.  However, we expect to be covered byinsurance for a material portion of these liabilities, subject to deductibles, policy terms and other conditions.

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***Aircraft Fuel***

            Branded Flying operations can be significantly impacted bychanges in the price and availability of aircraft fuel.  Efforts to reduce our exposure to increases in the price andavailability of aviation fuel consist of the utilization of forward-purchase contracts at fixed prices and fuel tankering, wherefeasible.  Fixed-price arrangements consist of an agreement to purchase defined quantities of aviation fuel from a third partyat a stated price, limiting our exposure to market volatility.  As of September 30, 2007, we had committed to purchase 14.7million gallons, or 85% of our anticipated Branded Flying fuel needs for the fourth quarter of 2007, at a weighted average priceper gallon of $2.19, excluding taxes and into-plane fees.  Additionally, we have committed to purchase 8.8 million gallons forthe first quarter of 2008 and 11.7 ****million gallons for each of the second and third quarters of 2008.  This representsapproximately 85% and 40% of our anticipated Branded Flying fuel needs for the remaining months of 2007 and first nine months of2008, respectively.  For the three months ended September 30, 2007, Airlines’ fuel cost, including related fuel taxes,was $1.13 per gallon.  This is due to approximately 78% of our fuel consumption being capped at lower rates per gallon underour capacity purchase agreements.

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

            The following discussion and analysis contain a number offorward-looking statements that are based on our current expectations and involve a number of risks and uncertainties, many ofwhich are outside of our control.  Specifically, statements regarding our future results of operations, operating costs,business prospects, growth and capital expenditures, including plans with respect to our fleet, are forward-lookingstatements.  Important factors that could cause actual results to differ materially from the expectations expressed or impliedin the forward-looking statements include known and unknown risks.  Some of the known risks that could significantly impactour revenues, operating results, and capacity include, but are not limited to:  

****

|        | •  | our dependence on the financial and operational stability of Continental and Delta;                                                                                                                                                     |
|--------------------------------------|--------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                      | •  | the possibility that the Continental CPA could be terminated with 12 months notice;                                                                                                                                                     |
|                                      | •  | the possibility that we could lose access to our aircraft, facilities and regulatory authorizations, as well as anyairport-related and other services that Continental currently provides to us if the Continental CPA were terminated; |
|                                      | •  | our new operations, including the Delta CPA, our Branded Flying and our Aviation Services, could be less profitable than ourhistorical results;                                                                                         |
|                                      | •  | the possibility that competitive pressures on Branded Flying could make our service unprofitable;                                                                                                                                       |
|                                      | •  | the possibility that we may be unable to obtain all of the aircraft, parts or related support services we need from Embraer tooperate our aircraft;                                                                                     |
|                                      | •  | the likely increase in maintenance and other costs as the average age of our aircraft increases;                                                                                                                                        |
|                                      | •  | the possibility that our future cost structure may not be competitive with some low-cost or  other regional carriers;                                                                                                              |
|                                      | •  | extensive government regulation of our business and additional costs to comply with such regulations;                                                                                                                                   |
|                                      | •  | other adverse factors, including weather conditions and the availability and cost of fuel;                                                                                                                                              |
|                                      | •  | our reliance on technology could be harmful in the event of system failure; and                                                                                                                                                         |
|                                      | •  | any adverse effects on our operations and financial condition from an aviation accident.                                                                                                                                                |

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            For further discussion of these risks, please see the“Risk Factors” section in our 2006 10-K.  The statements in this report are made as of October 26, 2007**,**and the events described in the forward-looking statements might not occur or might occur to a materially different extent thandescribed in this report.  We undertake no duty to update or revise any of our forward-looking statements, whether as a resultof new information, future events or otherwise.

            Our website address is *www.expressjet.com*.  Allour SEC filings, together with exhibits, are available free of charge through our website as soon as reasonably practicable afterwe file them with, or furnish them to, the SEC.

**2007 Outlook**

            ***Operational Review***

****

            This year marks a year of significant transition for us, aswe have diversified our flying portfolio within our fleet of 274 aircraft.  Airlines currently offers scheduled airlineservices with approximately 1,550 daily departures to 175 cities in the United States, Mexico, Canada and the Caribbean.  Forthe three and nine months ended September 30, 2007, Airlines operated under the Continental CPA at a 99.9% and 99.8% controllablecompletion factor, respectively, which excludes cancellations due to weather and air traffic control.  System-wide, Airlinesachieved overall completion factors of 98.0% and 97.5%, respectively, for the same periods.  Our current plan for aircraftallocation as of September 30, 2007 follows:

|                                                                                         | **Aircraft Allocation** |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-------------------------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |                         |
| Contract Flying.......................................................................                                                                                                                                                                                                                                                                                                                                                                                                                                                     | 224                     |
| Branded Flying.......................................................................                                                                                                                                                                                                                                                                                                                                                                                                                                                      |  50                |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |                         |
| Total Aircraft...........................................................................                                                                                                                                                                                                                                                                                                                                                                                                                                                  | 274                     |

            As a result of our diversification activities in 2007, wehave identified three reportable segments under Statement 131 as follows:

|        | •  | The Contract Flying segment includes our flying under capacity purchase agreements as Continental Express and Delta Connectionand our Corporate Aviation (charter) division;                                                                                                                                       |
|--------------------------------------|--------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                      | •  | the Branded Flying segment consists of flying as ExpressJet and our pro-rate revenue flying with Delta; and                                                                                                                                                                                                        |
|                                      | •  | the Aviation Services segment includes our ground-handling services under contracts with Continental and other airlines atairport locations across the United States, as well as Services, our  aircraft repair and overhaul business, comprised ofAmerican Composites, InTech and Saltillo Jet Center.  |

In addition to our discussion and analysis of the reportable segments that follows, we now include information with respect tothe segments in our financial statements.

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***            Contract Flying***

***            Continental CPA.**** * Our relationshipwith Continental remains important to our success as 75% of our fleet is engaged in support of Continental’s network,operating as Continental Express.  We believe the service we provide Continental has been effective in helping Continental tofully develop its route network and gain recognition as a premier service provider.  We provide Continental seamless serviceto more than 150 markets in the U.S., Mexico, Canada and the Caribbean.  We believe our operations will continue to meet allof Continental’s reliability measurements, and we expect our results of operations to generate steady cash flow.

***            Delta CPA. *** Airlines currently operates 10aircraft as Delta Connection pursuant to the Delta CPA, which began June 1, 2007.  The agreement has a two-year term and issubject to two one-year extensions at Delta’s option.  Delta is responsible for scheduling, marketing, pricing andrevenue management on the aircraft and collects all passenger revenue.  Airlines operates, maintains and finances theaircraft.

            Airlines receives a base rate for each completed block hourand departure and is reimbursed for certain pass-through costs, such as fuel expenses and certain airport costs.  During thequarter ended September 30, 2007, Airlines earned incentive payments for exceeding completion and on-time benchmarks, except forAugust, in which only the completion benchmark was met.  Additionally, on a semi-annual basis, Airlines has the ability toearn additional incentive payments by maintaining a high completion factor and high Department of Transportation rankings foron-time arrivals and customer satisfaction.  We anticipate that we will meet these incentives at the upcoming measurementdate.  We expect our results of operations under the Delta CPA to generate steady cash flow. 

***            Corporate Aviation. *** Our CorporateAviation (charter) division currently operates nine aircraft, providing distinctive travel solutions for corporations, aircraftbrokers, hospitality companies, sports teams, schools and others, including short-term flying solutions for other carriers, such asJetBlue Airways during March and April 2007 and Frontier Airlines starting in November 2007.  As with our branded aircraft,our charter aircraft are configured with 50 redesigned seats for enhanced passenger comfort, and each seat includes complimentaryXM Satellite radio with over 100 channels of audio entertainment.  Customized flight service options give customers anopportunity to create a unique flight experience.  Based on recent trends, we anticipate that Contract Flying will be mostconsistent during the period from October through April.  For the summer months, we experience more ad-hoc charter flying.

***            Branded Flying***

******

***            Our Own Brand****.*  As of September 30,2007, we provided scheduled air service to 24 cities in the United States with over 220 daily departures, utilizing 42 of ouraircraft, under the Branded Flying segment.  Customers can access our reservation system through our consumer website,www.xjet.com, reservations call center and all four major global distribution systems.  Being a part of the global computerreservation systems allows travel agents and online distributors, such as Expedia, Orbitz, Travelocity and Cheaptickets.com thevisibility to see and sell our tickets.  We launched sales in the Worldspan global distribution system in February 2007, inthe Sabre and Amadeus global distribution systems in April 2007, and the Galileo global distribution system in July 2007. Recently, we announced that we will provide service to Long Beach Airport, Santa Barbara International Airport and the GreaterReno-Tahoe International Airport beginning in November 2007, connecting these growing cities to important destinations that do notcurrently have non-stop service.  Additionally, we will update our Fall schedule to better align service with consumer demandand add non-stop destinations to Spokane, Washington, Tucson, Arizona, and Omaha, Nebraska.

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            ***Delta Pro-Rate***.  On July 1, 2007, Airlinesbegan scheduled air service with eight aircraft under a pro-rate revenue sharing arrangement with Delta.  Under thisarrangement, we are responsible for scheduling, marketing, pricing, revenue management, as well as the operation and maintenance ofthe aircraft, and earn a pro-rated portion of the fare plus an incentive for passengers connecting onto Delta's network.  Weexpect to transition three additional aircraft for a total of 11 aircraft under this arrangement effective December 17, 2007.

***            Aviation Services***

**

            During the first half of 2007, we rebranded our AviationServices segment, which includes American Composites, InTech and Saltillo Jet Center as ExpressJet Services, which providesthird-party maintenance for interior and exterior work on aircraft.  We also provide third-party ground-handling services toContinental and other airlines at locations across the United States.

***            Financial Review***

            ***Results of Operations***.  For the three andnine months ended September 30, 2007, we reported consolidated operating losses of $36.7 million and $65.0 million,respectively.  Although we believe that our expanded operations will enhance stockholder value in the long term, we haveincurred significant transition costs, such as aircraft modifications, paint and initial training, which will significantly reduceour overall profitability for 2007 and result in a loss for the year.  In addition, Branded Flying is likely to produce morevolatile financial results than our Contract Flying, primarily due to changes in the price of fuel, fluctuations in passengerdemand and fare levels.  Our Branded Flying is also impacted by the cyclical nature of the airline industry to a greaterdegree than our Contract Flying.

            ***Shared Expenses***.  A significant portion ofour operating expenses and infrastructure (e.g., maintenance, non-airport facility rentals, outside services and general andadministrative expenses) support our entire fleet of 274 aircraft; therefore, we do not allocate these costs to the individualsegments identified above, but evaluate them for our consolidated operations.  Additionally, since we transitioned all of our69 aircraft released from the Continental CPA during the first nine months of 2007, we incurred approximately $12.9 million intransition expenses associated with painting, maintenance modifications and training to ready our operation for flying outside ofthe Continental CPA.  These costs were not included in our measurement of segment profitability as they are expected to benonrecurring.  We believe that the presentation of our consolidated shared costs and transition costs is more reasonable thanallocating these expenses in a manner not reviewed by our chief operating decision makers.  

******

            ***Liquidity.* ** As of September 30, 2007, wehad $253.8 ****million in cash and cash equivalents, including $15.3 million in restricted cash, which is used as collateral forour workers’ compensation coverage, letters of credit and charter deposits.  Our cash flow from operating activitiesdecreased approximately $94.7 million for the first nine months of 2007 compared to the same period in 2006.  The decrease isdue mainly to cash used in diversifying our flying portfolio.  Although our cash flows from operations were not sufficient tocover our capital resource and liquidity requirements during the first nine months of 2007, we believe our current liquidity to besufficient to fund our current operations and other financial obligations through 2008 as we will continue to earn a steady cashflow from Contract Flying.

            ***Labor.* ** As of September 30, 2007,approximately 70% of our employees were covered by collective bargaining agreements.  The contracts with our pilots,dispatchers, flight attendants and mechanics will become amendable in December 2010, July 2009, August 2010 and August 2009,respectively.  Similar to our competitors in the airline industry, we are experiencing hiring and training challenges of ourpilots to meet our operational demands.  As a result, our operating expenses in such areas have increased as described in moredetail below.

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**Critical Accounting Policies and Estimates**

****

            The following are additions to our critical accountingpolicies and estimates included in our 2006 10-K.

            Revenue Recognition.  We recognize our operatingrevenue under contractual arrangements, such as the Continental CPA, as described in our 2006 10-K, pursuant to the terms of thecontract.  Operating revenues from these contracts have been reclassified as passenger revenue.  Additionally, werecognize our unrelated passenger revenue and ground handling and other revenues as services are provided.  For BrandedFlying, tickets are sold and processed internally, with amounts due settled on a monthly basis through an airline clearing house,as appropriate, or pursuant to the terms of our agreements with various credit card service vendors.  We recognize passengerrevenue when transportation is provided or when a ticket expires unused, rather than when a ticket is sold.  Nonrefundabletickets expire on the date of intended flight, unless the date is extended by notification from the customer in advance of theintended flight. The amount of passenger ticket sales not yet recognized as revenue is included in our consolidated balance sheetsas air traffic liability.

            Transportation taxes.  Various taxes and feesassessed on the sale of tickets to traveling customers are collected by Airlines as agent and are remitted to taxingauthorities.  These taxes and fees are recorded as a liability until remitted to the appropriate taxing authority. 

**RESULTS OF OPERATIONS**

            The following discussion provides an analysis of our resultsof operations and reasons for material changes therein for the three and nine months ended September 30, 2007, compared to thecorresponding periods ended September 30, 2006.

***Comparison of Three Months Ended September 30, 2007 to Three Months Ended September 30, 2006***

******

***Operating Revenue and Margin***

******

            Our total operating revenue increased 3.0% compared to thesame period in 2006.  Over 80% of our operating revenue was attributable to our Contract Flying under the Continental andDelta CPAs.  Operating revenue from our Branded Flying and Aviation Services contributed to the remaining consolidatedoperating revenue. 

            As a result of our arbitration with Continental over our 2007block hour rates, we adjusted the amounts we are charging Continental in 2007.  The arbitration panel determined that theannual 2007 budgeted rates originally presented by Airlines should be reduced in the aggregate by $14.2 million, which includes the10% target operating margin.  Therefore, our total operating revenue for 2007 will be $14.2 million lower than our plannedoperating revenue from our originally proposed rates.

            We began flying under our own brand on April 2, 2007. Although passenger revenue from such flying was less than 14% of our total operating revenue for third quarter 2007, we believethat our passenger revenue will continue to grow as the communities we serve become more aware of our brand and the services weprovide.  In addition, our tickets only recently became available for sale by all travel agencies since we experienced longerthan anticipated implementation timelines with the global reservation systems.

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            Our third quarter of 2007 reflected an 8.3% operating loss,as compared with an operating profit of 8.1% for the third quarter of 2006.  We expect to incur a loss for the full year, dueto the commencement of our flying outside of the Continental CPA, transitioning our aircraft, re-branding our company anddiversifying our customer base.

***Operating Expenses***

            Certain of our operating expenses (e.g., training,maintenance, corporate rent and general and administrative expenses) and infrastructure support our entire fleet of 274aircraft.  A significant portion of our costs pertain to the consolidated operation and not to individual reportablesegments.  Our shared costs for the three and nine months ended September 30, 2007 were approximately $83.8 million and $246.6million, respectively.  Additionally, since we transitioned substantially all of our 69 aircraft released from the ContinentalCPA during the first nine months of 2007, we incurred approximately $12.9 million in non-recurring transition expenses associatedwith the painting, maintenance modifications and training to ready our operation for flying outside of the Continental CPA.

            For the three months ended September 30, 2007, wages,salaries and related costs increased by $14.1 million, or 14.3%, ****compared with the same period in 2006.  The increaserepresents growth in our work force to support changes in our flight operations and increases in wage rates under some ofAirlines’ collective bargaining agreements.  In conjunction with the increases in base wages, we incurred approximately$2.4 million higher employee benefit costs, such as medical coverage, workers’ compensation costs and 401(k) expenses. In addition, we are continuing to experience anincrease in overtime pay for our pilots as a result of our training backlog in theearly part of this year.  We expect the overtime payments to decrease and normalize for the remainder of the year. 

            During the third quarter of 2007, the final three of 69aircraft transitioned out of the Continental CPA.  Fuel expense increased $38.9 million or 65.0%, from the same period in 2006mainly to support diversification of our flight operations into Branded Flying, corporate aviation and regional service for Delta.Gallons consumed under contract agreements with Continental and Delta represented approximately 78% of our fuel consumption duringthe quarter.  Gallons where we have exposure to market fluctuations represented approximately 21% of our fuel consumptionduring the quarter at an average cost, including related fuel taxes of $2.40 per gallon.

            The decrease of $2.1 million in outside services during thethree months ended September 30, 2007 compared to the same period in 2006 relates mainly to a reduction in estimated legal feesassociated with the Continental arbitration offset slightly by expenses incurred to diversify our operations.  Legal feesassociated with the Continental arbitration were not reimbursed under the Continental CPA.

            During the third quarter of 2007, Marketing and Distributioncost increased $8.2 million when compared to the same period in 2006.  This increase is a result of the infrastructure neededto support and promote our diversification into other lines of business including advertising and promotion, loyalty programs,global distribution systems and reservation call centers.

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            For the three months ended September 30, 2007, otheroperating expenses increased by $16.3 million as compared to the same period in 2006.  This increase related primarily topassenger services, distribution and catering related expenses incurred to support Branded Flying.  Additionally, crew-relatedcharges, such as per diem, hotel cost and relocation expenses because of our transition activities, increased as a result of higherrates and increased flight operations. Likewise, supplies expense related to our Aviation Services operations increased due tohigher sales volume.

***Comparison of Nine Months Ended September 30, 2007 to Nine Months Ended September 30, 2006***

******

***Operating Revenue and Margin***

******

            Our total operating revenue decreased 0.3% compared to thesame period in 2006.  We derived substantially all of our revenues during the nine months ending September 30, 2007 from ourContract Flying.  Operating revenue from our Branded Flying and Aviation Services contributed approximately 10% to theconsolidated operating revenue. 

            We began flying under our own brand on April 2, 2007. We believe that our passenger revenues will continue to grow as the communities we serve become more aware of our brand and theservices we provide.  In addition, our tickets have only recently become available for sale by all travel agencies, since weexperienced longer than anticipated implementation timelines from the global reservation systems.

            For the nine months ended September 30, 2007, our operatingloss was 5.2%, compared to an operating profit of 8.6% for the same period in 2006.  We expect to incur a loss for the year,due to the commencement of our flying outside of the Continental CPA, transitioning our aircraft from Continental flying,re-branding our company and diversifying our customer base.

***Operating Expenses –***

            For the nine months ended September 30, 2007, wages, salariesand related costs increased by $38.7 million, or 13.5%, ****compared to the same period in 2006.  The increase representsgrowth in our work force to support changes in our flight operations and increases in wage rates under some of Airlines’collective bargaining agreements.  In conjunction with the increases in base wages, we incurred approximately $9.4 millionhigher employee benefit costs, such as medical coverage, workers’ compensation costs and 401(k) expenses.  In addition,we are continuing to experience an increase in overtime pay for our pilots as a result of our training backlog in the early part ofthis year.  We expect the overtime payments to decrease and normalize for the remainder of the year. 

            During the nine months ended September 30, 2007, fuel expenseincreased $55.7 million or 32.7%, from the same period in 2006 to support diversification of our flying into Branded Flying,Corporate Aviation and regional service for Delta through the transition of 69 aircraft from the Continental CPA during thosemonths.  For the nine months ended September 30, 2007, 88% of our fuel consumption related to our agreements with Continentaland Delta.  The remaining 12% of our fuel consumption during the period was exposed at an average cost, including related fueltaxes, of $2.33 per gallon.

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            The increase of $5.4 million in outside services during thenine months ended September 30, 2007 compared to the same period in 2006 is due mainly to expenses incurred to support ourdiversification strategy.  In addition, there was an increase in legal fees when compared to 2006 primarily driven by costsassociated with the Continental arbitration.

            During the nine months ended September 30, 2007, Marketingand Distribution costs increased $18.1 million when compared to the same period in 2006.  This increase is a result of theneed to re-brand our company and diversify our customer base to support and promote our diversification into other lines ofbusiness through advertising and promotion, loyalty programs, global distribution systems and reservation call centers.

            For the nine months ended September 30, 2007, other operatingexpenses increased by $29.7 million as compared to the same period in 2006.  This increase is primarily caused by passengerservices, distribution and catering-related expenses incurred to support our operations outside of the Continental CPA. Additionally, crew-related charges, such as per diem, hotel cost and relocation expenses because of our transition activities,increased as a result of higher rates and increased flight operations.  Likewise, supplies expense increased due to highersales volumes within our Aviation Services operations.

***Certain Operational Information***

An analysis of certain statistical information for the periods indicated is as follows:

| **EXPRESSJET HOLDINGS, INC. AND SUBSIDIARIES PRELIMINARY STATISTICS**        |
|------------------------------------------------------------------------------|
|                                                                    |  |  |  |  |  |  |  |
| **Three Months Ended September 30, 2007**                                    |  | **Contract (1)** |  | **Branded (2)** |  | **System (3)** |  |
|                                                                              |  |  |  |  |  |  |  |
| Revenue Passenger Miles (millions)                                           |  | 2,238 |  | 534 |  | 2,775 |  |
| Available Seat Miles (ASM) (millions)                                        |  | 2,817 |  | 882 |  | 3,707 |  |
| Passenger Load Factor                                                        |   | 79.4 | % | 60.5 | % | 74.9 | % |
| Block Hours                                                                  |  | 192,151 |  | 50,068 |  | 242,666 |  |
| Departures                                                                   |  | 102,891 |  | 26,088 |  | 129,233 |  |
| Average Price per Gallon of Fuel, including   fuel taxes (dollars) |  | $0.78 |  | $2.40 |  | $1.13 |  |
| Fuel Gallons Consumed (000)                                                  |  | 68,248 |  | 18,660 |  | 87,115 |  |
| Stage Length (miles)                                                         |   | 565 |  | 678 |   | 588 |  |
|                                                                    |  |  |  |  |  |  |  |
|                                                                    |  |  |  |  |  |  |  |
| **Nine Months Ended September 30, 2007**                                     |  | **Contract (1)** |  | **Branded (2)** |  | **System (3)** |  |
|                                                                    |  |  |  |  |  |  |  |
| Revenue Passenger Miles (millions)                                           |  | 6,747 |  | 734 |  | 7,508 |  |
| Available Seat Miles (ASM) (millions)                                        |  | 8,607 |  | 1,391 |  | 10,047 |  |
| Passenger Load Factor                                                        |  | 78.4 | % | 52.8 | % | 74.7 | % |
| Block Hours                                                                  |  | 600,322 |  | 77,403 |  | 681,728 |  |
| Departures                                                                   |  | 323,365 |  | 39,376 |  | 365,417 |  |
| Average Price per Gallon of Fuel, including   fuel taxes (dollars) |  | $0.74 |  | $2.33 |  | $0.94 |  |
| Fuel Gallons Consumed (000)                                                  |  | 211,044 |  | 28,539 |  | 240,390 |  |
| Stage Length (miles)                                                         |  | 548 |  | 709 |  | 564 |  |

| (1) Excludes charter operations since statistics on charter aircraft do not provide meaningful load factor data because pricingis based on cost versus expected passenger count. |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (2) Operations commenced April 2, 2007 and July 1, 2007.                                                                                                                         |
| (3) Consolidated operations.                                                                                                                                                     |  |  |  |  |  |  |

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***Future Costs***

            We remain committed to providing competitively pricedservices by controlling our costs; however, we believe that our costs have increased in some cases and are likely to increaseoverall in the future due to:

|                                            | •  | reassignment and continuing training costs of employees in order to support all of our flying activities;                                                                                        |
|--------------------------------------------|--------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                            | •  | reassignment of maintenance operations;                                                                                                                                                          |
|                                            | •  | fuel costs for aircraft not flying under the Continental CPA or the Delta CPA;                                                                                                                   |
|                                            | •  | distribution costs, including schedule planning, marketing and sales related to Branded Flying and charter operations;                                                                           |
|                                            | •  | overall higher airport, crew, maintenance and dispatch costs as a result of changes in our flying for our 274 aircraft;                                                                          |
|         | •  | changes in wages, salaries and related fringe benefit costs, including the impact of our stock compensation expenses and changesto our self-insured medical and workers compensation costs;      |
|                                            | •  | changes in the costs of materials and outside services;                                                                                                                                          |
|                                            | •  | changes in governmental regulations, insurance and taxes affecting air transportation and the costs charged for airport access,including new security requirements;                              |
|                                            | •  | higher maintenance costs due to aging of our fleet;                                                                                                                                              |
|                                            | •  | higher aircraft ownership costs as aircraft are released from the Continental CPA or if Continental were to declare bankruptcyor otherwise default under the current financing arrangements; and |
|                                            | •  | changes in the cost of services provided by third parties under various agreements.                                                                                                    |

**LIQUIDITY AND CAPITAL COMMITMENTS**

***Operating Activities***

            Our primary source of liquidity is the cash flow provided byAirlines’ operations.  For the nine months ended September 30, 2007 and 2006, our operations used cash flow of $8.4million and provided $86.3 million, respectively.  The decrease of$94.7 million for the first nine months of 2007 compared tothe same period in 2006 is due mainly to cash used in the commencement of our diversification away from the Continental CPA,including aircraft maintenance, paint, initial systems training and other transition activities.  Although our cash flows fromoperations were not sufficient to cover our capital resource and liquidity requirements during the first nine months of 2007, webelieve our current liquidity to be sufficient to fund our current operations and other financial obligations through 2008 as wewill continue to earn a steady cash flow from Contract Flying.

***Investing Activities***

            In the nine months ended September 30, 2007, we spent $43.8million in capital expenditures.  For the remainder of the year, we expect capital expenditures for fleet (primarily relatingto spare parts and engines) and non-fleet (primarily relating to software application and automation infrastructure projects,facility improvements, maintenance and ground equipment) to be $6 million.  Additionally, we anticipate that approximately$1.5 million of our 2007 planned capital expenditures will be carried over as part our 2008 capital expenditures as we solidify ourinfrastructure to support our diversified lines of business.

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***Financing Activities***

            During the nine months ended September 30, 2007, we met allour debt requirements.  There is no covenant under any of our long-term debt agreements that restricts our ability toundertake additional debt or equity financing.

            In July 2003, we completed an offering of $137.2 millionaggregate principal amount of 4.25% convertible notes due 2023 with interest payable semi-annually.  The notes are our generalunsubordinated, unsecured obligations and are guaranteed by Airlines.  Except as otherwise specified in the indenture pursuantto which the notes were issued, there are no restrictions on Airlines’ ability to transfer funds to Holdings in the form ofcash dividends, loans or advances.  General provisions of applicable state law, however, may limit the ability of anysubsidiary to pay dividends or make distributions to its parent in certain circumstances. 

            We have the right to redeem the notes for cash, as a whole atany time or from time to time in part, beginning on August 4, 2008, for a price equal to 100% of the principal amount plus accruedand unpaid interest, if any.  In addition, each holder has the right to require that we repurchase their notes on August 1,2008, 2013, and 2018 (“Repurchase Dates”) at a price equal to 100% of the principal amount of the notes to berepurchased plus accrued and unpaid interest, if any.  At our option, we may pay the repurchase price for any such notes incash, shares of our common stock, or any combination thereof.  If we elect to use shares of common stock, the number of shareswill equal the repurchase price divided by 97.5% of the average closing sales price of the stock for the five trading days endingon the third business day prior to the applicable Repurchase Date (adjusted to take into account the occurrence of certain eventsrequiring adjustment of the conversion rate).  In certain circumstances, the notes are convertible into our common stock, at aratio of 54.9451 shares of common stock per $1,000 principal amount notes, which is equivalent to an initial conversion price ofapproximately $18.20 per common share.  The ratio is subject to adjustments if certain events take place, and holders mayconvert only if the closing sale price per common share exceeds 120% of the conversion price for at least 20 trading days in the 30consecutive trading day period ending on the last trading day of the preceding calendar quarter.  As one of the RepurchaseDates is within a year of September 30, 2007, we have reclassed these notes, with an aggregate principal amount of $137.2 million,from long-term debt to current liabilities.  We are evaluating our available options to satisfy the holders should theyrequire us to repurchase their notes.

            We expect to fund our future capital commitments and otherfinancial obligations, including the potential redemption of the convertible notes, if in cash, through internally generated fundsor appropriate financing transactions.  However, there can be no assurance that sufficient financing will be available or canbe obtained for all aircraft and other capital expenditures not currently covered by firm financing commitments in the future.

***Purchase Commitments and Contingencies***

            We have options to purchase an additional 100 Embraerregional jets.  In October 2005, Continental declined its right to add any of these option aircraft to the ContinentalCPA.  We continue to have the option to take delivery of all or a portion of the aircraft, but have not made a decision as towhether we will do so.

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***Aircraft, Simulator and Spare Engine Leases***

            As of September 30, 2007, we had significant lease andsublease obligations for aircraft, a simulator and spare engines that are classified as operating leases, which are not reflectedas assets or liabilities on our balance sheet.  These leases expire between 2013 and 2022.  As of September 30, 2007, ourexpected total minimum rental expense for the full year 2007 under current and future firm order aircraft, simulator operatingleases and spare engine operating leases was approximately $347.6million, net of deferred credits amortized.  Approximately$8.7 million represents the incremental increase of 200 basis points on the 69 aircraft released from the Continental CPA.  Asubstantial portion of our aircraft is leased directly by Continental from third parties and subleased by Continental to us. If Continental were to default under these leases, our ability to retain access to the aircraft could be adversely affected.

****

**Item 3.  Quantitative and Qualitative Disclosures About Market Risk.**

            We have been and are subject to market risks, includingcommodity price risk, such as aircraft fuel prices, and interest rate risk.  See the Notes to Consolidated FinancialStatements included in our 2006 10-K for a description of our accounting policies and other information related to these financialinstruments.

***Aircraft Fuel***

            Effective January 1, 2001, we entered into the ContinentalCPA, which is scheduled to expire December 31, 2010 (subject to extensions by Continental through 2030, or its right to terminatethe agreement based on 12 months’ notice at any time), and a related fuel purchase agreement with Continental, whichterminates when the Continental CPA terminates.  Under these agreements, Continental provides all of our aircraft fuel needsfor the aircraft covered by the Continental CPA, and we incur fuel expense and fuel tax equal to the lower of the actual cost ofthe fuel and the related taxes or agreed-upon caps of 66.0 cents and 5.2 cents per gallon, respectively.  In addition, underthe Continental CPA, we recover our fuel expense from Continental with a 10% margin.  For the nine months ended September 30,2007 and 2006, our cost of fuel was 71.2 cents per gallon, including fuel tax within this operation.

            Our Branded Flying operations can be significantly impactedby changes in the price and availability of aircraft fuel.  Efforts to reduce our exposure to increases in the price andavailability of aviation fuel consist of the utilization of forward-purchase contracts at fixed prices and fuel tankering, wherefeasible.  Fixed-price arrangements consist of an agreement to purchase defined quantities of aviation fuel from a third partyat a stated price, limiting our exposure to market volatility.  As of September 30, 2007, we had committed to purchase 14.7million gallons, or 85% of our anticipated Branded Flying fuel needs for the fourth quarter of 2007, at a weighted average priceper gallon of $2.19, excluding taxes and into-plane fees.  Additionally, we have committed to purchase 8.8 million gallons forthe first quarter of 2008 and 11.7 ****million gallons for the second and third quarters of 2008.  This representsapproximately 85% and 40% of our anticipated Branded Flying fuel needs for the remaining months of 2007 and first nine months of2008, respectively.

            For the three months ended September 30, 2007,Airlines’ fuel cost, including related fuel taxes, was $1.13 per gallon.  This is due to approximately 78% of our fuelconsumption being capped at lower rates per gallon.

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***Interest Rates***

            The Continental CPA contains a provision for the interestrate implicit in calculating the scheduled lease payments we make to Continental for the aircraft removed from the agreement toincrease by 200 basis points upon their removal.  Additionally, the Continental CPA provides that our block hour rates will beadjusted higher or lower to reflect any changes in the rental rates relating to the aircraft that continue to be covered under theagreement.  We also have potential interest rate exposure with respect to our loan agreement with EDC, which bears interest atthe six-month LIBOR plus 1.75% per annum.  The interest rate applicable to this variable rate note may rise, increasing ourinterest expense.  The impact of market risk is estimated using a hypothetical increase in interest rates by 100 basis pointsfor our variable rate long-term debt.  Based on this hypothetical assumption, we would have incurred an additional $0.1million in interest expense for each of the nine months ended September 30, 2007 and 2006.  However, we believe that interestrate increases on our variable rate, long-term debt would be offset by increases in interest income.

            We do not hold long-term, interest-sensitive assets andtherefore the value of our assets is not subject to interest rate fluctuations.  We do not purchase or hold any derivativefinancial instruments to protect against the effects of changes in interest rates.

            As of September 30, 2007,we estimated the fair value of our $137.2 million (carrying value) fixed-rate debt to be $132.4 million based upon quoted marketprices.  Market risk is not estimable for this debt instrument since its fair market value is based on many factors, includingthe risk-free interest rate, the performance of our common stock and investors’ trading behavior. 

**Item 4.  Controls and Procedures.**

*            (a) Evaluation of disclosure controls andprocedures*.  Based on their evaluation of our disclosure controls and procedures as of the end of the period covered bythis report, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures areeffective.

****

**           ***(b) Changes in internal control over financialreporting.*  Beginning January 1, 2007, we implemented an integrated human resources, payroll and financial system ofrecord, Lawson application software.  Additionally, we are implementing an accounting system to process and record revenuesgenerated from our Branded Flying.  In the interim, we are using alternative processes and procedures to account for theserevenues.  The new system and new processes have resulted in a significant change to our internal control over financialreporting for the year ending December 31, 2007.

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

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**PART II. OTHER INFORMATION**

**Item 1.    Legal Proceedings.**

****

**              ** On July 27, 2007, the three-memberarbitration panel issued its decision relating to the 2007 block hour rates that Continental will pay to Airlines for regional jetservice provided in the 2007 calendar year.  The panel considered various components related to the proposed rates that wecharge Continental in connection with regional jet service, including the costs that formed the basis for our 2007 rate proposaland the allocation of certain costs between the parties.  The panel did not make any changes to the costs included in our 2007budgeted rates except as those costs related to allocation.  The panel determined that the annual 2007 budgeted ratesoriginally presented by Airlines should be reduced in the aggregate by $14.2 million, which includes the 10% operatingmargin.  As a result of the panel’s decision, we recorded our passenger revenue pursuant to the terms of the ContinentalCPA using the block hour rates determined by the panel for the nine months ended September 30, 2007.

**Item 1A. Risk Factors.**

               None.

**Item 2.    Unregistered Sales of Equity Securities andUse of Proceeds.**

****

Issuer Purchases of Equity Securities

****

**              ** In July 2005, our board of directorsauthorized the expenditure of up to $30 million to repurchase shares of our common stock.  In February 2006, the boardauthorized the inclusion of our 4.25% convertible notes due 2023 within the previously announced $30 million program.

| **Period**                                          |              | **Total number of shares purchased(1)** |        |   | **Average price paid per share** | **  ** | **Total number of shares purchased as part of publicly announced program** |        |   | **Maximum value of shares that may yet be purchased under the program   (in millions)(2)** |
|-----------------------------------------------------|--------------|-----------------------------------------|--------|---|----------------------------------|------------------|----------------------------------------------------------------------------|--------|---|-------------------------------------------------------------------------------------------------|
|                                                     |              |                                         |        |   |                                  |             |                                                                            |        |   |                                                                                                 |
| July 1 to July 31, 2007.....................        |    | 82                                      |   | $ | 5.96                             |                  | —                                                                    |   | $ | 24.4                                                                                            |
| Aug 1 to Aug 31, 2007.....................          |              | 82                                      |        | $ | 4.21                             |                  | —                                                                    |        |   | 24.4                                                                                            |
| Sep 1 to Sep 30, 2007.....................          |              | 454                                     |        | $ | 4.25                             |                  | —                                                                    |        |   | 24.4                                                                                            |
|                                                     |              | ****                                    |        |   |                                  |                  | ****                                                                       |        |   |                                                                                                 |
| Total.............................................. |              | 618                                     |        | $ | 4.47                             |                  | —                                                                    |        | $ | 24.4                                                                                            |
|                                                     |              |                                         |        |   |                                  |                  | ****                                                                       |        |   |                                                                                                 |

|    | (1)  | Shares shown were withheld to satisfy tax obligations arising upon the vesting of restricted stock and do not count against oursecurities repurchase program. |
|--------------|-----------|---------------------------------------------------------------------------------------------------------------------------------------------------------------|
|    | (2)  | Amount shown relates to securities repurchase program.                                                                                                        |

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

               None.

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**Item 4.    Submission of Matters to a Vote ofSecurity Holders.**

****

               None.

****

**Item 5.    Other Information.**

****

               None.

**Item 6.    Exhibits**

| 3.1    |     | Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.1 to the Company’s Quarterly Report on Form10-Q for the quarter ended March 31, 2005, 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).                             |
| 10.1   |                    | First Amendment to Long-Term Incentive Plan dated as of September 12, 2007. (1)                                                                                                              |
| 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 Certification by Chief Executive Officer.(2)                                                                                                                               |
| 32.2   |                    | Section 1350 Certification by Chief Financial Officer.(2)                                                                                                                                    |
|   |                    |                                                                                                                                                                                              |
|        |                    | (1) Filed herewith.                                                                                                                                                                     |
|        |                    | (2) Furnished herewith.                                                                                                                                                                 |

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**SIGNATURES**

            Pursuant to the requirements of the Securities Exchange Actof 1934, ExpressJet Holdings, Inc. has duly caused this report to be signed on its behalf by the undersigned hereunto dulyauthorized.

|                         |                              | **EXPRESSJET HOLDINGS, INC.**(Registrant)                                                                                                                                                                                                                                                                                                                                         |
|------------------------------|--------------------------------------------------------------------------------------------------------------------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Date:  October 26, 2007 |                         | **/s/Frederick S.Cromer                                           **                                                                                       |
|                              |                                                                                                         | Frederick S. Cromer Vice President and Chief Financial Officer (Principal Financial Officer)                                                                                                                                                                                                                                                                                      |
|                    |                                                                                                                                            |                                                                                                                                                                                                                                                                                                                                                                                   |
| Date:  October 26, 2007 |                         | **/s/PhungNgo-Burns                                                          ** |
|                              |                                                                                                         | Phung Ngo-Burns Staff Vice President-Finance and Controller (Principal Accounting Officer)                                                                                                                                                                                                                                                                                        |

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**INDEX TO EXHIBITS****OFEXPRESSJET HOLDINGS, INC.**

****

| 3.1    |     | Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.1 to the Company’s Quarterly Report on Form10-Q for the quarter ended March 31, 2005, 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).                             |
| 10.1   |                    | First Amendment to Long-Term Incentive Plan dated as of September 12, 2007. (1)                                                                                                              |
| 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 Certification by Chief Executive Officer.(2)                                                                                                                               |
| 32.2   |                    | Section 1350 Certification by Chief Financial Officer.(2)                                                                                                                                    |
|   |                    |                                                                                                                                                                                              |
|        |                    | (1) Filed herewith.                                                                                                                                                                     |
|        |                    | (2) Furnished herewith.                                                                                                                                                                 |

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