| **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 June 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 August 6, 2007, 54,722,075 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 six months ended June 30, 2007 and 2006 |              | 1        |
|              |    | Consolidated Balance Sheets: June 30, 2007 (Unaudited) and December 31, 2006                         |              | 4        |
|                   |              | Condensed Consolidated Statements of Cash Flows (Unaudited): Six months ended June 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                                           |              | 30       |
| **** Item 4.      |              | Controls and Procedures                                                                              |              | 31       |
| **PART II.** |         | **OTHER INFORMATION**                                                                                |              |          |
| Item 1.           |              | Legal Proceedings                                                                                    |              | 32       |
| Item 1A.          |              | Risk Factors                                                                                         |              | 32       |
| Item 2.           |              | Unregistered Sales of Equity Securities and Use of Proceeds                                          |              | 32       |
| Item 3.           |              | Defaults Upon Senior Securities                                                                      |              | 32       |
| Item 4.           |              | Submission of Matters to a Vote of Security Holders                                                  |              | 33       |
| Item 5.           |              | Other Information                                                                                    |              | 33       |
| Item 6.           |              | Exhibits                                                                                             |              | 33       |
|                   |              | Signatures                                                                                           |              | 34       |
|              |              | Index to Exhibits                                                                                    |              | 35       |

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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 June 30** |   |
|----------------------------------------------------------------------------------------------------------------------------------------------------|--|---|--------------------------------|---|
|                                                                                                                                                    |  |   |                                |   |
|                                                                                                                                                    |  |   | **2007**                       |   |  |  | **2006** |  |
|                                                                                                                                               |  |   |                                |   |  |  |  |  |
| Operating Revenue:                                                                                                                                 |  |   |                                |   |  |  |  |  |
|      Passenger..........................................................                                                  |  | $ | 387,483                        |   |  | $ | 417,827 |  |
|      Ground handling and other....................................                                                        |  |   | 7,674                          |   |  |  | 1,607 |  |
|                                                                                                                                                    |  |   |                                |   |  |  |  |  |
|                                                                                                                                                    |  |   | 395,157                        |   |  |  | 419,434 |  |
|                                                                                                                                               |  |   |                                |   |  |  |  |  |
| Operating Expenses:                                                                                                                                |  |   |                                |   |  |  |  |  |
|      Wages, salaries and related costs........................                                                            |  |   | 106,836                        |   |  |  | 94,682 |  |
|      Aircraft rentals.....................................................                                                |  |   | 86,150                         |   |  |  | 83,127 |  |
|      Aircraft fuel and related taxes................................                                                      |  |   | 73,638                         |   |  |  | 57,483 |  |
|      Maintenance, materials and repairs.......................                                                            |  |   | 51,485                         |   |  |  | 47,538 |  |
|      Ground handling..................................................                                                    |  |   | 23,945                         |   |  |  | 25,468 |  |
|      Other rentals and landing fees...............................                                                        |  |   | 29,288                         |   |  |  | 29,994 |  |
|      Outside services..................................................                                                   |  |   | 17,384                         |   |  |  | 12,520 |  |
|      Marketing and distribution.....................................                                                      |  |   | 6,981                          |   |  |  | 4 |  |
|      Depreciation and amortization...............................                                                         |  |   | 6,096                          |   |  |  | 6,505 |  |
|      Other operating expenses.....................................                                                        |  |   | 36,084                         |   |  |  | 26,511 |  |
|                                                                                                                                               |  |   |                                |   |  |  |  |  |
|                                                                                                                                               |  |   | 437,887                        |   |  |  | 383,832 |  |
|                                                                                                                                               |  |   |                                |   |  |  |  |  |
| Operating Income (Loss)...........................................                                                                                 |  |   | (42,730                        | ) |  |  | 35,602 |  |
|                                                                                                                                               |  |   |                                |   |  |  |  |  |
| Nonoperating Income (Expense):                                                                                                                     |  |   |                                |   |  |  |  |  |
|      Interest expense..................................................                                                   |  |   | (1,785                         | ) |  |  | (1,794 | ) |
|      Interest income....................................................                                                  |  |   | 4,652                          |   |  |  | 3,339 |  |
|      Capitalized interest..............................................                                                   |  |   | 378                            |   |  |  | 119 |  |
|      Equity investments loss, net. ..............................                                               |  |   | (283                           | ) |  |  | (107 | ) |
|      Other, net...........................................................                                                |  |   | 69                             |   |  |  | 39 |  |
|                                                                                                                                               |  |   |                                |   |  |  |  |  |
|                                                                                                                                                    |  |   | 3,031                          |   |  |  | 1,596 |  |
|                                                                                                                                                    |  |   |                                |   |  |  |  |  |
| Income (Loss) before Income Taxes...........................                                                                                       |  |   | (39,699                        | ) |  |  | 37,198 |  |
| Income Tax Benefit (Expense)...................................                                                                                    |  |   | 13,295                         |   |  |  | (13,927 | ) |
|                                                                                                                                               |  |   |                                |   |  |  |  |  |
| Net Income (Loss)....................................................                                                                              |  | $ | (26,404                        | ) |  | $ | 23,271 |  |
|                                                                                                                                               |  |   |                                |   |  |  |  |  |
| Basic Earnings (Loss) per Common Share..................                                                                                           |  | $ | (0.49                          | ) |  | $ | 0.43 |  |
|                                                                                                                                               |  |   |                                |   |  |  |  |  |
| Diluted Earnings (Loss) per Common Share................                                                                                           |  | $ | (0.49                          | ) |  | $ | 0.39 |  |
|                                                                                                                                               |  |   |                                |   |  |  |  |  |
| Shares Used in Computing Basic Earnings (Loss) per      Common Share...................................................   |  |   | 54,021                         |   |  |  | 53,848 |  |
| Shares Used in Computing Diluted Earnings (Loss) per      Common Share................................................... |  |   | 54,021                         |   |  |  | 61,427 |  |

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)**

|                                                                                             |  |   | **Six Months Ended June 30,** |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--|---|-------------------------------|---|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |  |   |                               |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |  |   |                               |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |  |   | **2007**                      |   |  |  | **2006** |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |  |   |                               |   |  |  |  |  |
| Operating Revenues:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |  |   |                               |   |  |  |  |  |
|      Passenger.............................................................                                                                                                                                                                                                                                                                                                                                                                                                                                                               |  | $ | 792,456                       |   |  | $ | 821,828 |  |
|      Ground handling and other.......................................                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |  |   | 14,757                        |   |  |  | 3,390 |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |  |   |                               |   |  |  |  |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |  |   | 807,213                       |   |  |  | 825,218 |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |  |   |                               |   |  |  |  |  |
| Operating Expenses:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |  |   |                               |   |  |  |  |  |
|      Wages, salaries and related costs...........................                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |  |   | 211,819                       |   |  |  | 187,206 |  |
|      Aircraft rentals........................................................                                                                                                                                                                                                                                                                                                                                                                                                                                                             |  |   | 170,734                       |   |  |  | 164,718 |  |
|      Aircraft fuel and related taxes...................................                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |  |   | 127,224                       |   |  |  | 110,470 |  |
|      Maintenance, materials and repairs..........................                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |  |   | 100,038                       |   |  |  | 93,290 |  |
|      Ground handling.....................................................                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |  |   | 48,170                        |   |  |  | 48,976 |  |
|      Other rentals and landing fees..................................                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |  |   | 57,665                        |   |  |  | 57,231 |  |
|      Outside services.....................................................                                                                                                                                                                                                                                                                                                                                                                                                                                                                |  |   | 32,276                        |   |  |  | 24,688 |  |
|      Marketing and distribution........................................                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |  |   | 9,901                         |   |  |  | 23 |  |
|      Depreciation and amortization..................................                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |  |   | 12,609                        |   |  |  | 12,934 |  |
|      Other operating expenses........................................                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |  |   | 65,166                        |   |  |  | 52,752 |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |  |   |                               |   |  |  |  |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |  |   | 835,602                       |   |  |  | 752,288 |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |  |   |                               |   |  |  |  |  |
| Operating Income (Loss)..............................................                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |  |   | (28,389                       | ) |  |  | 72,930 |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |  |   |                               |   |  |  |  |  |
| Nonoperating Income (Expense):                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |  |   |                               |   |  |  |  |  |
|      Interest expense.....................................................                                                                                                                                                                                                                                                                                                                                                                                                                                                                |  |   | (3,585                        | ) |  |  | (3,844 | ) |
|      Interest income.......................................................                                                                                                                                                                                                                                                                                                                                                                                                                                                               |  |   | 8,546                         |   |  |  | 6,313 |  |
|      Capitalized interest.................................................                                                                                                                                                                                                                                                                                                                                                                                                                                                                |  |   | 553                           |   |  |  | 220 |  |
|      Equity investments loss, net....................................                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |  |   | (382                          | ) |  |  | (497 | ) |
|      Other, net..............................................................                                                                                                                                                                                                                                                                                                                                                                                                                                                             |  |   | 11                            |   |  |  | 85 |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |  |   |                               |   |  |  |  |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |  |   | 5,143                         |   |  |  | 2,277 |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |  |   |                               |   |  |  |  |  |
| Income (Loss) before Income Taxes..............................                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |  |   | (23,246                       | ) |  |  | 75,207 |  |
| Income Tax Benefit (Expense)......................................                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |  |   | 7,009                         |   |  |  | (28,182 | ) |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |  |   |                               |   |  |  |  |  |
| Net Income (Loss).......................................................                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |  | $ | (16,237                       | ) |  | $ | 47,025 |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |  |   |                               |   |  |  |  |  |
| Basic Earnings (Loss) per Common Share.....................                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |  | $ | (0.30                         | ) |  | $ | 0.87 |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |  |   | ****                          |   |  |  |  |  |
| Diluted Earnings (Loss) per Common Share...................                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |  | $ | (0.30                         | ) |  | $ | 0.80 |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |  |   | ****                          |   |  |  |  |  |
| Shares Used in Computing Basic Earnings (Loss) per      Common Share......................................................                                                                                                                                                                                                                                                                                                                                                                                                                |  |   | 53,988                        |   |  |  | 53,823 |  |
| Shares Used in Computing Diluted Earnings (Loss) per      Common Share......................................................                                                                                                                                                                                                                                                                                                                                                                                                              |  |   | 53,988                        |   |  |  | 61,423 |  |

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**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |        |   | **June 30,** |        |   | **December 31,** |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---|--------------|--------|---|------------------|---|
|                                                                                            |   |   | **2007**     |        |   | **2006**         |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |        |   |              |        |   |                  |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |        |   | (Unaudited)  |   |   |                  |   |
| Current Assets:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |        |   |              |        |   |                  |   |
|      Cash and cash equivalents.......................................                                                                                                                                                                                                                                                                                                                                                                                                                                                               |        | $ | 279,444      |        | $ | 291,633          |   |
|      Restricted cash.......................................................                                                                                                                                                                                                                                                                                                                                                                                                                                                         |        |   | 14,512       |        |   | 11,227           |   |
|      Accounts receivable, net...........................................                                                                                                                                                                                                                                                                                                                                                                                                                                                            |        |   | 17,074       |        |   | 7,603            |   |
|      Spare parts and supplies, net....................................                                                                                                                                                                                                                                                                                                                                                                                                                                                              |        |   | 22,627       |        |   | 23,717           |   |
|      Income tax receivable...............................................                                                                                                                                                                                                                                                                                                                                                                                                                                                           |        |   | 26,887       |        |   | 8,863            |   |
|      Deferred income tax.................................................                                                                                                                                                                                                                                                                                                                                                                                                                                                           |        |   | 7,379        |        |   | —          |   |
|      Prepayments and other............................................                                                                                                                                                                                                                                                                                                                                                                                                                                                              |        |   | 4,675        |        |   | 5,751            |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |        |   |              |        |   |                  |   |
|         Total Current Assets.............................................                                                                                                                                                                                                                                                                                                                                                                                                                                            |        |   | 372,599      |        |   | 348,794          |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |        |   |              |        |   |                  |   |
| Property and Equipment:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |        |   |              |        |   |                  |   |
|      Owned property and equipment:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |        |   |              |        |   |                  |   |
|         Flight equipment...................................................                                                                                                                                                                                                                                                                                                                                                                                                                                          |        |   | 228,423      |        |   | 213,682          |   |
|         Other...................................................................                                                                                                                                                                                                                                                                                                                                                                                                                                     |        |   | 160,860      |        |   | 143,815          |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |        |   |              |        |   |                  |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |        |   | 389,283      |        |   | 357,497          |   |
|         Less:  Accumulated depreciation............................                                                                                                                                                                                                                                                                                                                                                                                                                                        |        |   | (124,023     | )      |   | (113,195         | ) |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |        |   |              |        |   |                  |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |        |   | 265,260      |        |   | 244,302          |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |        |   |              |        |   |                  |   |
|      Capital Leases:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |        |   | 4,338        |        |   | 4,338            |   |
|         Less:  Accumulated amortization...........................                                                                                                                                                                                                                                                                                                                                                                                                                                         |        |   | (3,890       | )      |   | (3,557           | ) |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |        |   |              |        |   |                  |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |        |   | 448          |        |   | 781              |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |        |   |              |        |   |                  |   |
|         Total Property and Equipment................................                                                                                                                                                                                                                                                                                                                                                                                                                                                 |        |   | 265,708      |        |   | 245,083          |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |        |   |              |        |   |                  |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |        |   |              |        |   |                  |   |
| Investments in Other Entities.........................................                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |        |   | 17,635       |        |   | 18,017           |   |
| Reorganization Value In Excess of Amounts                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |        |   |              |        |   |                  |   |
|      Allocable to Identifiable Assets, net...........................                                                                                                                                                                                                                                                                                                                                                                                                                                                               |        |   | 12,945       |        |   | 12,986           |   |
| Airport Operating Rights, net..........................................                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |        |   | 3,566        |        |   | 3,691            |   |
| Debt Issuance Cost, net................................................                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |        |   | 3,396        |        |   | 3,497            |   |
| Other Assets, net.........................................................                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |        |   | 4,101        |        |   | 4,961            |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |        |   |              |        |   |                  |   |
|         Total Assets.........................................................                                                                                                                                                                                                                                                                                                                                                                                                                                        |        | $ | 679,950      |        | $ | 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**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |  |   | **June 30,** |   |        |   | **December 31,** |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--|---|--------------|---|--------|---|------------------|---|
| **STOCKHOLDERS' EQUITY**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |  |   | **2007**     |   |        |   | **2006**         |   |
|                                                                                          |  |   |              |   |        |   |                  |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  |   | (Unaudited)  |   |        |   |                  |   |
| Current Liabilities:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |  |   |              |   |   |   |                  |   |
|      Current maturities of long-term debt .........................                                                                                                                                                                                                                                                                                                                                                                                                                                                     |  | $ | 2,965        |   |        | $ | 1,668            |   |
|      Current maturities of capital lease obligations............                                                                                                                                                                                                                                                                                                                                                                                                                                                        |  |   | 634          |   |        |   | 821              |   |
|      Accounts payable...................................................                                                                                                                                                                                                                                                                                                                                                                                                                                                |  |   | 12,577       |   |        |   | 8,462            |   |
|      Accrued payroll and related costs.............................                                                                                                                                                                                                                                                                                                                                                                                                                                                     |  |   | 37,196       |   |        |   | 44,122           |   |
|      Air traffic liability......................................................                                                                                                                                                                                                                                                                                                                                                                                                                                        |  |   | 20,707       |   |        |   | —          |   |
|      Amounts due to Continental Airlines, net...................                                                                                                                                                                                                                                                                                                                                                                                                                                                        |  |   | 11,432       |   |        |   | 3,522            |   |
|      Deferred income taxes.............................................                                                                                                                                                                                                                                                                                                                                                                                                                                                 |  |   | —      |   |        |   | 14,785           |   |
|      Accrued other liabilities............................................                                                                                                                                                                                                                                                                                                                                                                                                                                              |  |   | 72,943       |   |        |   | 61,712           |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  |   |              |   |        |   |                  |   |
|         Total Current Liabilities.........................................                                                                                                                                                                                                                                                                                                                                                                                                                               |  |   | 158,454      |   |        |   | 135,092          |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  |   |              |   |        |   |                  |   |
| Long-term Debt............................................................                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |  |   | 11,037       |   |        |   | 12,818           |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  |   |              |   |        |   |                  |   |
| 4.25% Senior Convertible Notes due 2023......................                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |  |   | 137,200      |   |        |   | 137,200          |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  |   |              |   |        |   |                  |   |
| Capital Lease Obligations.............................................                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |  |   | 16           |   |        |   | 214              |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  |   |              |   |        |   |                  |   |
| Deferred Income Taxes.................................................                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |  |   | 73,284       |   |        |   | 38,030           |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  |   |              |   |        |   |                  |   |
| Other Long-term Liabilities............................................                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |  |   | 9,289        |   |        |   | 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...................................                                                                                                                                                                                                                                                               |  |   | 547          |   |        |   | 547              |   |
|      Additional paid-in capital..........................................                                                                                                                                                                                                                                                                                                                                                                                                                                               |  |   | 167,778      |   |        |   | 165,658          |   |
|      Accumulated earnings.............................................                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  |   | 126,127      |   |        |   | 142,349          |   |
|      Accumulated other comprehensive income................                                                                                                                                                                                                                                                                                                                                                                                                                                                             |  |   | 364          |   |        |   | 364              |   |
|      Common stock held in treasury, at cost        438,789 and 487,261 shares, respectively...............                                                                                                                                                                                                                                                                                                                                                                           |  |   | (4,146       | ) |        |   | (4,604           | ) |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  |   |              |   |        |   |                  |   |
|         Total Stockholders’ Equity....................................                                                                                                                                                                                                                                                                                                                                                                                                                             |  |   | 290,670      |   |        |   | 304,314          |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  |   |              |   |        |   |                  |   |
|         Total Liabilities and Stockholders’ Equity................                                                                                                                                                                                                                                                                                                                                                                                                                                 |  | $ | 679,950      |   |        | $ | 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)**

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |  |   | **Six Months Ended June 30,** |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--|---|-------------------------------|---|
|                                                                                                           |  |   | ****                          |   |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |  |   | **2007**                      |   | **  ** |  | **2006** |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |  |   |                               |   |  |  |  |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |  |   |                               |   |  |  |  |  |
| Net Cash Flows provided by Operating Activities............................                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |  | $ | 20,902                        |   |  | $ | 50,339 |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |  |   |                               |   |  |  |  |  |
| Cash Flows from Investing Activities:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  |   |                               |   |  |  |  |  |
|      Capital expenditures...............................................................                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |  |   | (32,289                       | ) |  |  | (9,799 | ) |
|      Proceeds from disposition of equipment....................................                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |  |   | —                       |   |  |  | 69 |  |
|      Proceeds from the sale of short-term investments......................                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |  |   | —                       |   |  |  | — |  |
|      Investments in and advances to equity ownerships  ..................                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |  |   | —                       |   |  |  | (2,051 | ) |
|      Investments in other entities....................................................                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |  |   | —                       |   |  |  | (3,505 | ) |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |  |   |                               |   |  |  |  |  |
|         Net cash used in investing activities......................................                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |  |   | (32,289                       | ) |  |  | (15,286 | ) |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |  |   |                               |   |  |  |  |  |
| Cash Flows from Financing Activities:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  |   |                               |   |  |  |  |  |
|      Payment on note payable to Continental Airlines.......................                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |  |   | —                       |   |  |  | (17,545 | ) |
|      Payments on long-term debt and capital lease obligations..........                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |  |   | (868                          | ) |  |  | (810 | ) |
|      Proceeds from issuance of common stock related to         Employee Stock Purchase Plan...........................................                                                                                                                                                                                                                                                                                                                                                                                                                                                |  |   | 66                            |   |  |  | 275 |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |  |   |                               |   |  |  |  |  |
|         Net cash used in financing activities......................................                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |  |   | (802                          | ) |  |  | (18,080 | ) |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |  |   |                               |   |  |  |  |  |
| Net Increase (Decrease) in Cash and Cash Equivalents..................                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |  |   | (12,189                       | ) |  |  | 16,973 |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |  |   |                               |   |  |  |  |  |
| Cash and Cash Equivalents – Beginning of Period..........................                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |  |   | 291,633                       |   |  |  | 227,285 |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |  |   |                               |   |  |  |  |  |
| Cash and Cash Equivalents – End of Period...................................                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |  | $ | 279,444                       |   |  | $ | 244,258 |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |  |   |                               |   |  |  |  |  |
| Supplemental Cash Flow Information:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |  |   |                               |   |  |  |  |  |
|      Interest paid, net....................................................................                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |  | $ | 3,457                         |   |  | $ | 4,293 |  |
|      Income taxes paid (refunded) - including payments         (refunds) under tax agreement with Continental Airlines...........                                                                                                                                                                                                                                                                                                                                                                                                                                                     |  | $ | (2,119                        | ) |  | $ | 35,948 |  |

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 ofregional jets in its fleet and number of passengers flown.  Currently Airlines offers scheduled airline services withapproximately 1,550 daily departures to 175 cities in the United States, Mexico, Canada and the Caribbean.  We also invest inother entities that permit us to leverage the management experience, efficiencies and economies of scale present in oursubsidiaries. 

            Airlines currently operates a fleet of 274 aircraft.  Asof June 30, 2007, we performed scheduled airline services with

|        | •  | 208 aircraft for Continental Airlines, Inc. (“Continental”) as Continental Express pursuant to a capacity purchaseagreement (the “Continental CPA”), |
|--------------------------------------|--------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                      | •  | 42 aircraft under our own brand, and                                                                                                                                         |
|                                      | •  | 10 aircraft for Delta Air Lines, Inc. (“Delta”) as Delta Connection pursuant to a capacity purchase agreement (the“Delta CPA”).                      |

Additionally, eight of our aircraft, previously dedicated to charters, were being positioned to fly under a pro-rate revenueagreement with Delta, beginning on July 1, pursuant to which we share passenger revenue risk and incur pricing, scheduling andrevenue management costs.  We operated our remaining aircraft under dedicated charter contracts or ad-hoc charterarrangements.

            We also provide other aviation services, such asground-handling services at airport locations across the United States, as well as aircraft repair, overhaul, interiorrefurbishments and paint, through our wholly owned subsidiary, ExpressJet Services, LLC (“Services”), and a majorityowned subsidiary, Saltillo Jet Center.

            Although we believe that these new operations will enhancestockholder value in the long term, we are incurring significant start-up costs during the transition period, which willsignificantly reduce our overall profitability for 2007 and may result in a loss for the year.  Our branded flying, includingpro-rate operations with Delta, will produce more volatile financial results than our historical operations, primarily due tofluctuations 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.  Please see the 2006 10-K for a detailed description of our critical accounting estimates as well as Note 1below.  The SEC has defined critical accounting estimates as those most important to the portrayal of a company's financialcondition and results of operations and that require a company to make its most difficult and subjective judgments, often as aresult of the need to make estimates of matters that are inherently uncertain.

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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 our 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.  Such operating revenues from contracts have been reclassified as passenger revenue.  We recognize ourunrelated passenger revenue and ground handling and other revenues as services are provided.  For our branded flying,including pro-rate arrangements, tickets are sold and processed internally, with amounts due settled on a monthly basis through theairline clearing house, as appropriate, or pursuant to the terms of our agreements with various credit card service vendors. We recognize passenger revenue when transportation is provided or when the ticket expires unused.  Nonrefundable ticketsexpire on the date of intended flight, unless the date is extended by notification from the customer in advance of the intendedflight. The amount of passenger ticket sales not yet recognized as revenue is included in our consolidated balance sheets as airtraffic 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 have been recorded as a liability until remitted to the appropriate taxing authority.

**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.

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            As previously disclosed, in January 2007, ExpressJet andContinental submitted their disagreements over the rates to be charged Continental in 2007 under the Continental CPA to bindingarbitration in accordance with the terms of the agreement.  On July 27, 2007, the arbitration panel issued its decision. The panel considered various components related to the proposed rates that we charge Continental in connection with regional jetservice, including the costs that formed the basis for our 2007 rates and the allocation of certain costs between theparties.  The panel determined that the annual 2007 budgeted rates originally presented by Airlines should be reduced in theaggregate by $14.2 million (including the 10% operating margin).  As a result of the panel’s decision, we recorded ourpassenger revenue under the Continental CPA using the block hour rates determined by the panel for the six months ended June 30,2007.  Since the resulting rates were lower than the 2006 rates used to record that revenue prior to the decision, the changein rates resulted in an unfavorable adjustment of $4.3 million, net of tax benefits, to our results of operations for the three andsix months ended June 30, 2007 (a decrease of $0.08 to our earnings per share).  Additionally, we incurred over $2.5 millionin legal fees during the three months ended June 30, 2007, primarily driven by costs associated with this arbitration.  Legalfees associated with the arbitration are not reimbursed under the Continental CPA.

**            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 will be responsible forscheduling, marketing, pricing and revenue management on the aircraft and will collect all passenger revenues.  Airlines willoperate, maintain and finance 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 first month ofoperation, we met the monthly incentive goals.

            A significant portion of our operating expenses are incurredto support our entire fleet of 274 aircraft and are managed for the consolidated operation and not to 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 aviationservices.   

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            The contract flying segment includes our Corporate Aviation(charter) division and our capacity purchase agreements with Continental and Delta as of June 2007. Under the contract flyingsegment revenues are contractually determined with Continental, Delta and various corporations, aircraft brokers, hospitalitycompanies, sports teams and schools, which insulates some of the underlying operating expenses, such as fuel.  Additionally,under these arrangements, we do not have the obligation to market, distribute and sell any of the seats on our aircraft.

            Branded flying consists of operating under our own brand,which began April 2007, and our pro-rate revenue agreement with Delta, which began on July 1, 2007. Revenues for this flying arederived from our scheduled air services sold directly to passengers.  We are responsible for local market pricing, schedulingand revenue management, and the operation and maintenance of the aircraft.  Under the pro-rate revenue flying with Delta, weexpect to earn a pro-rated portion of the ticket fare plus an incentive 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,we rebranded 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 transitionedsubstantially all of our 69 aircraft released from the Continental CPA during the first six months of 2007, we incurred over $12million in transition expenses associated with painting, maintenance modifications and training to ready our operation for flyingoutside of the Continental CPA.  These costs were not included in our measurement of segment profitability as they areexpected to be nonrecurring.  We believe that the presentation of our consolidated shared costs and transition costs is morereasonable than allocating these expenses in a manner not reviewed by our chief operating decision maker.   Consequently,the table below presents our operating revenues, including inter-segment revenues, and segment profits/(loss) generated perreportable segment for the three and six months ended June 30, 2007.  We also included our reconciliation of the consolidatedoperating revenue to consolidated net income/(loss) before taxes and of our total assets at June 30, 2007.

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|                                                                                           |                          | **Contractual Flying** |        |        | **Branded Flying** |   |        |   | **Aviation Services** |        |        | **Eliminations** |   |        |        | **Consolidated** |   |
|-------------------------------------------------------------------------------------------|--------------------------|------------------------|--------|--------|--------------------|---|--------|---|-----------------------|--------|--------|------------------|---|--------|--------|------------------|---|
|                                                                                           | ** **               | ****                   |        |        | ****               |   |        |   | ****                  |        |        | ****             |   |        |        | ****             |   |
| **Three months ended June 30, 2007:**                                                     |                          |                        |   |   |                    |   |        |   |                       |   |   |                  |   |        |   |                  |   |
| Revenue from customers........................................                            | $                        | 360.1                  |   | $      | 28.2               |   |   | $ | 9.3                   |        | $      | (2.4             | ) |        | $      | 395.2            |   |
| Direct segment expenses.......................................                            |                          | 280.4                  |        |        | 59.3               |   |        |   | 6.1                   |        |        | (2.4             | ) |        |        | 343.4            |   |
|                                                                                           |                          |                        |        |        |                    |   |        |   |                       |        |        |                  |   |        |        |                  |   |
|     Segment profit / (loss).......................................... | $                        | 79.7                   |        | $      | (31.1              | ) |        | $ | 3.2                   |        | $      | —          |   |        | $      | 51.8             |   |
| Shared expenses, including transition costs (1)..                                         |                          |                        |        |        |                    |   |        |   |                       |        |        |                  |   |        |        | (94.4            | ) |
| Interest expense........................................................                  |                          |                        |        |        |                    |   |        |   |                       |        |        |                  |   |        |        | (1.8             | ) |
| Interest Income..........................................................                 |                          |                        |        |        |                    |   |        |   |                       |        |        |                  |   |        |        | 4.6              |   |
| Other............................................................................         |                          |                        |        |        |                    |   |        |   |                       |        |        |                  |   |   |        | 0.1              |   |
|                                                                                           |                          |                        |        |        |                    |   |        |   |                       |        |        |                  |   |        |        |                  |   |
| Consolidated loss before income taxes...............                                      |                          |                        |        |        |                    |   |        |   |                       |   |        |                  |   |        | $      | (39.7            | ) |
|                                                                                           |      |                        |        |        |                    |   |        |   |                       |        |        |                  |   |        |        |                  |   |
| **Six months ended June 30, 2007:**                                                       |                          |                        |        |        |                    |   |        |   |                       |        |        |                  |   |        |        |                  |   |
| Revenue from customers........................................                            | $                        | 764.9                  |        | $      | 28.2               |   |        | $ | 18.6                  |        | $      | (4.5             | ) |        | $      | 807.2            |   |
| Direct segment expenses.......................................                            |                          | 586.1                  |        |        | 60.6               |   |        |   | 11.7                  |        |        | (4.5             | ) |        |        | 653.9            |   |
|                                                                                           |                          |                        |        |        |                    |   |        |   |                       |        |        |                  |   |        |        |                  |   |
|     Segment profit / (loss).......................................... | $                        | 178.8                  |        | $      | (32.4              | ) |        | $ | 6.9                   |        | $      | —          |   |        | $      | 153.3            |   |
| Shared expenses, including transition costs (2)..                                         |                          |                        |        |        |                    |   |        |   |                       |        |        |                  |   |        |        | (181.8           | ) |
| Interest expense........................................................                  |                          |                        |        |        |                    |   |        |   |                       |        |        |                  |   |        |        | (3.6             | ) |
| Interest Income..........................................................                 |                          |                        |        |        |                    |   |        |   |                       |        |        |                  |   |        |        | 8.5              |   |
| Other............................................................................         |                          |                        |        |        |                    |   |        |   |                       |        |        |                  |   |        |        | 0.4              |   |
|                                                                                           |                          |                        |        |        |                    |   |        |   |                       |        |        |                  |   |        |        |                  |   |
| Consolidated loss before income taxes...............                                      |                          |                        |        |        |                    |   |        |   |                       |        |        |                  |   |        | $      | (23.2            | ) |
|                                                                                           |                          |                        |        |        |                    |   |        |   |                       |        |        |                  |   |        |        |                  |   |
| **Assets at June 30, 2007:**                                                              |                          |                        |        |        |                    |   |        |   |                       |        |        |                  |   |        |        |                  |   |
| Segment assets........................................................                    | $                        | 207.3                  |        | $      | 67.1               |   |        | $ | 50.5                  |        | $      | —          |   |        | $      | 324.9            |   |
| Other shared assets (3)............................................                       |                          |                        |        |        |                    |   |        |   |                       |        |        |                  |   |        |        | 355.0            |   |
|     Total consolidated assets ..................................      |                          |                        |        |        |                    |   |        |   |                       |        |        |                  |   |        |        |                  |   |
|                                                                                           |                          |                        |        |        |                    |   |        |   |                       |        |        |                  |   |        | $      | 679.9            |   |
|                                                                                           |                          |                        |        |        |                    |   |        |   |                       |        |        |                  |   |        |        |                  |   |

| (1) Some of the major components of shared expenses are maintenance labor - $18.6 million; general andadministrative labor and related expenses - $19.7 million; other general and administrative expenses – $17.8 million; outsideservices - $13.2 million; and non-airport rentals - $3.8 million.  Transition costs incurred were approximately $8.8million. |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (2) Some of the major components of shared expenses are maintenance labor - $37.3 million; general andadministrative labor and related expenses - $40.2 million; other general and administrative expenses - $26.4 million; outsideservices - $22.2 million; and non-airport rentals - $7.5 million.  Transition costs incurred were approximately $12.6million.      |
| (3)  Other shared assets include assets that are interchangeable between segments.                                                                                                                                                                                                                                                                                         |

**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” (“ABP18”).  The following table details our current non-controlling interests that are accounted for under the equity methodof accounting:

| Company                           |        |        | Carrying Amount of Investment at June 30, 2007 (In millions)                                               |
|-----------------------------------|--------|--------|------------------------------------------------------------------------------------------------------------|
|                                   |   |   |                                                                                                            |
| Wing Holdings, LLC                |        |        |                  14.5      |
| Flight Services and Systems, Inc. |        |        |                   3.2 |

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            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 June 30, 2007,the balance of the fair value difference, net of amortization, was approximately $0.8 million.  The remaining $6.6 million ofour 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 million.  At the same time, we loaned FSS $1 million which is classifiedin Other Assets, net, on the consolidated balance sheets.  The note is due and payable in full on September 30, 2007 withinterest due and payable quarterly on the 15th day following the close of each calendar quarter.  The note provides that ifInternational Total Services, Inc. (“ITS”) (also owned by the non-ExpressJet owners of FSS) emerges from bankruptcy andFSS can utilize ITS’s federal income tax attributes through a transaction or series of transactions, then any unpaid balanceof the note may be deemed paid in full as a contribution by us to the capital of FSS.  The loan interest rate is equal to thelesser of 7% per annum or the three-month LIBOR plus 150 basis points.  We received the interest payment that was due April15, 2007.  We have accrued and reserved fully the interest payment that was due on July 15, 2007, as we are waiting for thefinal legal opinion on the survival of ITS’s federal income tax attributes following the emergence of ITS from bankruptcy andthe ability for FSS to utilize such tax attributes.  We expect to receive our principal value on this note, either as paymentin cash or as our contribution to the capital of FSS. 

            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 six months ended June 30, 2007 and 2006 (in thousands):

|                                                                          |        |   | **Three Months Ended June 30,** |   |   | **Six Months Ended June 30,** |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---|---------------------------------|---|---|-------------------------------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                  |        |   |                                 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                  |        |   | ****                            |   |   | ****                          |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                  |        |   | **2007**                        |   |   | **2006**                      |  |  | **2007** |  |  | **2006** |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                  |        |   | ****                            |   |   | ****                          | ** ** |  | **** |  |  | **** |
| Numerator for basic earnings per share – net      income..................................................                                                                                                                                                                                                                                                                                                        |   | $ | (26,404                         | ) | $ | 23,271                        |  | $ | (16,237 | ) | $ | 47,025 |
| Income impact of assumed conversion of      convertible debt......................................                                                                                                                                                                                                                                                                                                                      |        |   | —                         |   |   | 915                           |  |  | — |   |  | 1,831 |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                  |        |   |                                 |   |   |                               |  |  |  |  |  |  |
| Numerator for diluted earnings per share –      adjusted.................................................                                                                                                                                                                                                                                                                                                         |        | $ | (26,404                         | ) | $ | 24,186                        |  | $ | (16,237 | ) | $ | 48,856 |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                  |        |   |                                 |   |   |                               |  |  |  |  |  |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                  |        |   |                                 |   |   |                               |  |  |  |  |  |  |
| Denominator for basic earnings per share –       weighted average shares.........................                                                                                                                                                                                                                                                                                                                 |        |   | 54,021                          |   |   | 53,848                        |  |  | 53,988 |  |  | 53,823 |
| Restricted stock and stock options...............                                                                                                                                                                                                                                                                                                                                                                                                |        |   | —                         |   |   | 41                            |  |  | — |  |  | 62 |
| Assumed conversion of convertible debt.........                                                                                                                                                                                                                                                                                                                                                                                                  |        |   | —                         |   |   | 7,538                         |  |  | — |  |  | 7,538 |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                  |        |   |                                 |   |   |                               |  |  |  |  |  |  |
| Denominator for diluted earnings per share –      adjusted and assumed conversions..........                                                                                                                                                                                                                                                                                                                      |        |   | 54,021                          |   |   | 61,427                        |  |  | 53,988 |  |  | 61,423 |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                  |        |   |                                 |   |   |                               |  |  |  |  |  |  |

            We excluded 653,755 ****and 321,567 shares of restrictedstock from the weighted average shares used in computing basic earnings per share for the three and six months ended June 30, 2007and 2006, as 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 3.2 million shares and 2.7 million shares of our common stock for the three months and six months ended June30, 2007, and 1.9 million shares for the three and six months ended June 30, 2006.  These options' exercise prices weregreater than the average market price of the common shares for the respective periods; and |
|--------------------------------------|--------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                      | •  | 0.2 million shares of restricted stock for the three and six months ended June 30, 2006.                                                                                                                                                                                                                                                               |

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****

**Note 6 – Long-Term Debt**

****

**           ** As of June 30, 2007, long-term debt, including currentmaturities, totaled $14.0 million, which consisted of secured debt owed to Export Development Canada (“EDC”). 

            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 our note payable 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. 

            During 2003, Holdings completed the private placement of$137.2 million senior convertible notes due 2023.  Cash interest is payable on the notes at a rate of 4.25% per year on theprincipal amount at maturity payable semiannually in arrears on February 1 and August 1 of each year.   As of June 30, 2007and December 31, 2006, we estimated the fair value of our $137.2 million (carrying value) fixed-rate debt to be $134.0 million and$127.9 million, respectively, based upon quoted market prices. 

****

            Repayment of the convertible notes is jointly and severallyguaranteed on an unconditional basis by Airlines.  Except as otherwise specified in the indenture pursuant to which the noteswere issued, there are no restrictions on Airlines’ ability to transfer funds to Holdings in the form of cash dividends,loans or advances.  General provisions of applicable state law, however, may limit the ability of any subsidiary to paydividends or make distributions to its parent in certain circumstances.

            The following condensed consolidating 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 Consolidating Balance Sheet** |     |
|------------------------------------------------------------------------------------------------------|--------|-------------------------------------------|----------|
|                                                                                                      |        | **June 30, 2007**                         |          |
|                                                                                                      |        | **(In thousands)**                        |          |
|                                                                                                 |   |                                           |     |
|                                                                                                 |   |                                      |     |   |   |  |   |   | **Other Non- Guarantor** |   |   |   |   |   |   | **Consolidated** |   |
|                                                                                                      |        | **Holdings**                              |          |  | **Airlines** |  |  | **Subsidiaries** |  |  | **Eliminations** |  |  | **Totals** |  |
|                                                                                                 |   |                                           |     |   |  |   |   |  |   |   |  |   |   |  |   |
| Current assets.....................                                                                  |   | $                                         | 20       |   |   | $ | 364,990 |   |   | $ | 7,589 |   |   | $ | — |  |   | $ | 372,599 |   |
| Property and equipment, net.                                                                         |   |                                      | 114      |   |   |   | 250,260 |   |   |   | 15,334 |   |   |   | — |  |   |   | 265,708 |   |
| Investments in other entities..                                                                      |   |                                      | 3,159    |   |   |   | — |   |   |   | 14,476 |   |   |   | — |  |   |   | 17,635 |   |
| Other assets........................                                                                 |   |                                      | 22,538   |   |   |   | 6,381 |   |   |   | 449 |  |   |   | (5,360 | ) |   |   | 24,008 |   |
|                                                                                                      |   |                                      |          |   |   |   |  |   |   |   |  |  |   |   |  |  |   |   |  |   |
| Total assets.........................                                                                |   |                                           | 25,831   |   |   |  | 621,631 |   |   |  | 37,848 |   |   |  | (5,360 | ) |   |  | 679,950 |   |
|                                                                                                      |        |                                           |          |  |  |  |  |  |  |  |  |  |  |  |  |
| Current liabilities..................                                                                |   |                                           | 2,446    |  |   |  | 152,677 |   |   |  | 3,331 |   |   |  | — |  |  |  | 158,454 |   |
| Intercompany payables (receivables).......................                                           |   |                                           | (335,387 | ) |   |  | 330,812 |   |   |   | 4,575 |  |   |   | — |   |  |  | — |   |
| Long-term debt.....................                                                                  |   |                                           | 137,200  |  |   |  | 11,037 |   |   |   | 16 |   |   |   | — |   |  |  | 148,253 |   |
| Other liabilities.....................                                                               |   |                                           | —  |  |   |  | 87,588 |   |   |   | 345 |   |   |   | (5,360 | ) |  |  | 82,573 |   |
| Stockholders’ equity.............                                                              |   |                                           | 221,572  |  |   |  | 39,517 |  |   |   | 29,581 |   |   |   | — |  |  |  | 290,670 |   |
|                                                                                                      |   |                                      |          |   |   |   |  |   |   |   |  |  |   |   |  |  |   |   |  |   |
| Total liabilities and stockholders’     equity............................ |   | $                                         | 25,831   |  |  | $ | 621,631 |  |  | $ | 37,848 |  |  | $ | (5,360 | ) |  | $ | 679,950 |  |
|                                                                                                 |   |                                           |     |   |  |   |   |  |   |   |  |   |   |  |   |

|                                                                                                         |   | **Condensed Consolidating 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 Consolidating Results of Operations** |         |    |
|--------|---------------------------------------------------------------------------|---------------------------------------------------|--------------|---------|
|        |                                                                           | **Three Months Ended June 30, 2007**              |              |    |
|        |                                                                           | **(In thousands)**                                |              |    |
|   |                                                                      |                                                   |         |    |
|   |                                                                      |                                              |         |    |   |   |  |   |   | **Other Non- Guarantor** |   |   |   |   |   |   | **Consolidated** |  |
|   |                                                                           |                                                   | **Holdings** |         |  | **Airlines** |  |  | **Subsidiaries** |  |  | **Eliminations** |  |  | **Totals** |  |
|   |                                                                      |                                              |              |    |   |  |   |   |  |   |   |  |   |   |  |  |
|   | Operating revenue......................                                   |                                              | $            | — |   |   | $ | 393,726 |   |   | $ | 3,787 |   |   | $ | (2,356 | )  |   | $ | 395,157 |  |
|   | Operating expenses...................                                     |                                              |         | 309     |   |   |   | 434,093 |   |   |   | 5,841 |   |   |   | (2,356 | )  |   |   | 437,887 |  |
|   |                                                                           |                                              |              |    |   |  |   |   |  |   |   |  |   |   |  |  |
|   | Operating (loss).........................                                 |                                              |         | (309    | )  |   |   | (40,367 | )  |   |   | (2,054 | )  |   |   | — |   |   |   | (42,730 | ) |
|   |                                                                           |                                              |              |    |   |  |   |   |  |   |   |  |   |   |  |  |
|   | Interest expense........................                                  |                                              |         | (1,509  | )  |   |   | (4,728 | )  |   |   | — |  |   |   | 4,452 |   |   |   | (1,785 | ) |
|   | Interest income..........................                                 |                                              |         | 4,469   |  |   |   | 4,635 |   |   |   | — |  |   |   | (4,452 | )  |   |   | 4,652 |  |
|   | Capitalized Interest.....................                                 |                                                   |              | — |  |  |  | 378 |  |  |  | — |  |  |  | — |  |  |  | 378 |  |
|   | Equity investment (loss)..............                                    |                                                   |              | (11     | ) |  |  | — |  |  |  | (272 | ) |  |  | — |  |  |  | (283 | ) |
|   | Other, net..................................                              |                                              |         | — |  |   |   | — |   |   |   | 69 |  |   |   | — |   |   |   | 69 |  |
|   |                                                                           |                                              |              |    |   |  |   |   |  |   |   |  |   |   |  |  |
|   | Income/(loss) before income taxes........................................ |                                              | 2,640        |         |   | (40,082 | )  |   | (2,257 | )  |   | — |   |   | (39,699) |  |
|   | Income tax benefit (expense).......                                       |                                              |         | (928    | ) |   |   | 13,357 |  |   |   | 866 |   |   |   | — |   |   |   | 13,295 |  |
|   |                                                                           |                                              |              |    |   |  |   |   |  |   |   |  |   |   |  |  |
|   | Net income / (loss).....................                                  |                                              | $            | 1,712   |   |   | $ | (26,725 | ) |   | $ | (1,391 | )  |   | $ | — |  |   | $ | (26,404 | ) |
|   |                                                                           |                                                   |              |         |  |  |  |  |  |  |  |  |  |  |  |  |

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|   |                                                                               | **Condensed Consolidating Results of Operations** |         |    |
|--------|------------------------------------------------------------------------------------|---------------------------------------------------|--------------|---------|
|        |                                                                                    | **Three Months Ended June 30, 2006**              |              |    |
|        |                                                                                    | **(In thousands)**                                |              |    |
|   |                                                                               |                                                   |         |    |
|   |                                                                               |                                              |         |    |   |   |  |   |   | **Other Non- Guarantor** |   |   |   |   |   |   | **Consolidated** |  |
|   |                                                                                    |                                                   | **Holdings** |         |  | **Airlines** |  |  | **Subsidiaries** |  |  | **Eliminations** |  |  | **Totals** |  |
|   |                                                                               |                                              |              |    |   |  |   |   |  |   |   |  |   |   |  |  |
|   | Operating revenue.......................                                           |                                              | $            | — |   |   | $ | 418,700 |   |   | $ | 1,752 |   |   | $ | (1,018 | )  |   | $ | 419,434 |  |
|   | Operating expenses....................                                             |                                              |         | (36     | )  |   |   | 383,008 |   |   |   | 1,878 |   |   |   | (1,018 | )  |   |   | 383,832 |  |
|   |                                                                                    |                                              |              |    |   |  |   |   |  |   |   |  |   |   |  |  |
|   | Operating income (loss)..............                                              |                                              |         | 36      |   |   |   | 35,692 |   |   |   | (126 | )  |   |   | — |   |   |   | 35,602 |  |
|   |                                                                                    |                                              |              |    |   |  |   |   |  |   |   |  |   |   |  |  |
|   | Interest expense.........................                                          |                                              |         | (1,389  | )  |   |   | (4,857 | )  |   |   | — |  |   |   | 4,452 |   |   |   | (1,794 | ) |
|   | Interest income..........................                                          |                                              |         | 4,487   |  |   |   | 3,304 |   |   |   | — |  |   |   | (4,452 | )  |   |   | 3,339 |  |
|   | Capitalized Interest.....................                                          |                                                   |              | — |  |  |  | 178 |  |  |  | (59 | ) |  |  | — |  |  |  | 119 |  |
|   | Equity investment income (loss)..                                                  |                                                   |              | 105     |  |  |  | — |  |  |  | (212 | ) |  |  | — |  |  |  | (107 | ) |
|   | Other, net..................................                                       |                                              |         | — |  |   |   | 39 |   |   |   | — |  |   |   | — |   |   |   | 39 |  |
|   |                                                                                    |                                              |              |    |   |  |   |   |  |   |   |  |   |   |  |  |
|   | Income/(loss) before income taxes................................................. |                                              | 3,239        |    |   | 34,356 |   |   | (397 | )  |   | — |   |   | 37,198 |  |
|   | Income tax benefit (expense).......                                                |                                              |         | (2,704  | ) |   |   | (11,257 | ) |   |   | 34 |   |   |   | — |   |   |   | (13,927 | ) |
|   |                                                                                    |                                              |              |    |   |  |   |   |  |   |   |  |   |   |  |  |
|   | Net income / (loss).....................                                           |                                              | $            | 535     |   |   | $ | 23,099 |  |   | $ | (363 | )  |   | $ | — |  |   | $ | 23,271 |  |
|   |                                                                                    |                                                   |              |         |  |  |  |  |  |  |  |  |  |  |  |  |

|   |                                                                               | **Condensed Consolidating Results of Operations** |         |    |
|--------|------------------------------------------------------------------------------------|---------------------------------------------------|--------------|---------|
|        |                                                                                    | **Six Months Ended June 30, 2007**                |              |    |
|        |                                                                                    | **(In thousands)**                                |              |    |
|   |                                                                               |                                                   |         |    |
|   |                                                                               |                                              |         |    |   |   |  |   |   | **Other Non- Guarantor** |   |   |   |   |   |   | **Consolidated** |  |
|   |                                                                                    |                                                   | **Holdings** |         |  | **Airlines** |  |  | **Subsidiaries** |  |  | **Eliminations** |  |  | **Totals** |  |
|   |                                                                               |                                              |              |    |   |  |   |   |  |   |   |  |   |   |  |  |
|   | Operating revenue.......................                                           |                                              | $            | — |   |   | $ | 804,476 |   |   | $ | 7,256 |   |   | $ | (4,519 | ) |   | $ | 807,213 |  |
|   | Operating expenses....................                                             |                                              |         | 310     |   |   |   | 829,184 |   |   |   | 10,627 |   |   |   | (4,519 | ) |   |   | 835,602 |  |
|   |                                                                                    |                                              |              |    |   |  |   |   |  |   |   |  |  |   |  |  |
|   | Operating (loss)..........................                                         |                                              |         | (310    | )  |   |   | (24,708 | )  |   |   | (3,371 | )  |   |   | — |  |   |   | (28,389 | ) |
|   |                                                                                    |                                              |              |    |   |  |   |   |  |   |   |  |  |   |  |  |
|   | Interest expense.........................                                          |                                              |         | (3,017  | )  |   |   | (9,470 | )  |   |   | (2 | ) |   |   | 8,904 |  |   |   | (3,585 | ) |
|   | Interest income...........................                                         |                                              |         | 8,955   |  |   |   | 8,495 |   |   |   | — |  |   |   | (8,904 | ) |   |   | 8,546 |  |
|   | Capitalized Interest.....................                                          |                                                   |              | — |  |  |  | 553 |  |  |  | — |  |  |  | — |  |  |  | 553 |  |
|   | Equity investment income (loss)...                                                 |                                                   |              | (34     | ) |  |  | — |  |  |  | (348 | ) |  |  | — |  |  |  | (382 | ) |
|   | Other, net...................................                                      |                                              |         | — |  |   |   | 7 |   |   |   | 4 |  |   |   | — |  |   |   | 11 |  |
|   |                                                                                    |                                              |              |    |   |  |   |   |  |   |   |  |  |   |  |  |
|   | Income/(loss) before income taxes................................................. |                                              | 5,594        |    |   | (25,123 | ) |   | (3,717 | )  |   | — |  |   | (23,246 | ) |
|   | Income tax benefit (expense).......                                                |                                              |         | (1,962  | ) |   |   | 7,870 |  |   |   | 1,101 |   |   |   | — |   |   |   | 7,009 |  |
|   |                                                                                    |                                              |              |    |   |  |   |   |  |   |   |  |   |   |  |  |
|   | Net income / (loss)......................                                          |                                              | $            | 3,632   |   |   | $ | (17,253 | ) |   | $ | (2,616 | )  |   | $ | — |  |   | $ | (16,237 | ) |
|   |                                                                                    |                                                   |              |         |  |  |  |  |  |  |  |  |  |  |  |  |

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|   |                                                                               | **Condensed Consolidating Results of Operations** |         |    |
|--------|------------------------------------------------------------------------------------|---------------------------------------------------|--------------|---------|
|        |                                                                                    | **Six Months Ended June 30, 2006**                |              |    |
|        |                                                                                    | **(In thousands)**                                |              |    |
|   |                                                                               |                                                   |         |    |
|   |                                                                               |                                              |         |    |   |   |  |   |   | **Other Non- Guarantor** |   |   |   |   |   |   | **Consolidated** |  |
|   |                                                                                    |                                                   | **Holdings** |         |  | **Airlines** |  |  | **Subsidiaries** |  |  | **Eliminations** |  |  | **Totals** |  |
|   |                                                                               |                                              |              |    |   |  |   |   |  |   |   |  |   |   |  |  |
|   | Operating revenue.......................                                           |                                              | $            | — |   |   | $ | 823,413 |   |   | $ | 3,629 |   |   | $ | (1,824 | )  |   | $ | 825,218 |  |
|   | Operating expenses....................                                             |                                              |         | 548     |   |   |   | 749,935 |   |   |   | 3,629 |   |   |   | (1,824 | )  |   |   | 752,288 |  |
|   |                                                                                    |                                              |              |    |   |  |   |   |  |   |   |  |   |   |  |  |
|   | Operating income (loss)..............                                              |                                              |         | (548    | )  |   |   | 73,478 |   |   |   | — |   |   |   | — |   |   |   | 72,930 |  |
|   |                                                                                    |                                              |              |    |   |  |   |   |  |   |   |  |   |   |  |  |
|   | Interest expense.........................                                          |                                              |         | (2,897  | )  |   |   | (9,851 | )  |   |   | — |  |   |   | 8,904 |   |   |   | (3,844 | ) |
|   | Interest income..........................                                          |                                              |         | 9,094   |  |   |   | 6,123 |   |   |   | — |  |   |   | (8,904 | )  |   |   | 6,313 |  |
|   | Capitalized Interest.....................                                          |                                                   |              | — |  |  |  | 220 |  |  |  | — |  |  |  | — |  |  |  | 220 |  |
|   | Equity investment income (loss)..                                                  |                                                   |              | 34      |  |  |  | — |  |  |  | (531 | ) |  |  | — |  |  |  | (497 | ) |
|   | Other, net..................................                                       |                                              |         | — |  |   |   | 85 |   |   |   | — |  |   |   | — |   |   |   | 85 |  |
|   |                                                                                    |                                              |              |    |   |  |   |   |  |   |   |  |   |   |  |  |
|   | Income/(loss) before income taxes................................................. |                                              | 5,683        |    |   | 70,055 |   |   | (531 | )  |   | — |   |   | 75,207 |  |
|   | Income tax benefit (expense).......                                                |                                              |         | (2,026  | ) |   |   | (26,255 | ) |   |   | 99 |   |   |   | — |   |   |   | (28,182 | ) |
|   |                                                                                    |                                              |              |    |   |  |   |   |  |   |   |  |   |   |  |  |
|   | Net income /(loss)......................                                           |                                              | $            | 3,657   |   |   | $ | 43,800 |  |   | $ | (432 | )  |   | $ | — |  |   | $ | 47,025 |  |
|   |                                                                                    |                                                   |              |         |  |  |  |  |  |  |  |  |  |  |  |  |

|                                                               |   | **Condensed Consolidating Cash Flows Six Months Ended June 30, 2007 (In thousands)** |  |
|--------------------------------------------------------------------|--------|--------------------------------------------------------------------------------------|--|
|                                                                    |        |                                                                                      |  |
|                                                               |   | **Holdings**                                                                         |  |  |  | **Airlines** |  |  |  | **Other Non- Guarantor Subsidiaries** |  |  |  | **Eliminations** |  |  |  | **Consolidated Totals** |  |
|                                                                    |        |                                                                                      |  |   |  |  |  |   |  |  |  |  |  |  |  |   |  |  |  |
| Operating activities............                                   | $      | —                                                                              |  |  | $ | 21,846 |  |  | $ | (944 | ) |  | $ | — |  |  | $ | 20,902 |  |
| Investing activities.............                                  |        | —                                                                              |  |  |  | (32,836 | ) |  |  | (23 | ) |  |  | 570 |  |  |  | (32,289 | ) |
| Financing activities............                                   |        | 458                                                                                  |  |  |  | (1,228 | ) |  |  | 538 |  |  |  | (570 | ) |  |  | (802 | ) |
|                                                                    |        |                                                                                      |  |  |  |  |  |  |  |  |  |   |  |  |  |  |  |  |  |
| Net increase/(decrease) in cash................................    |        | 458                                                                                  |  |  |  | (12,218 | ) |  |  | (429 | ) |  |  | — |  |  |  | (12,189 | ) |
| Cash at the beginning of the period............................... |        | —                                                                              |  |  |  | 291,148 |  |  |  | 485 |  |  |  | — |  |  |  | 291,633 |  |
|                                                                    |        |                                                                                      |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Cash at the end of the period...............................       | $      | 458                                                                                  |  |  | $ | 278,930 |  |  | $ | 56 |  |  | $ | — |  |  | $ | 279,444 |  |
|                                                                    |        |                                                                                      |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

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|                                                           |   | **Condensed Consolidating Cash Flows Six Months Ended June 30, 2006 (In thousands)** |   |
|----------------------------------------------------------------|--------|--------------------------------------------------------------------------------------|---|
|                                                                |        |                                                                                      |   |
|                                                           |   | **Holdings**                                                                         |   |  |  | **Airlines** |  |  |  | **Other Non- Guarantor Subsidiaries** |  |  |  | **Eliminations** |  |  |  | **Consolidated Totals** |  |
|                                                                |        |                                                                                      |   |   |  |  |  |   |  |  |  |  |  |  |  |   |  |  |  |
| Operating activities...........                                | $      | —                                                                              |   |  | $ | 50,255 |  |  | $ | 4,057 |  |  | $ | (3,973 | ) |  | $ | 50,339 |  |
| Investing activities............                               |        | (10,975                                                                              | ) |  |  | (5,571 | ) |  |  | (4,159 | ) |  |  | 5,419 |  |  |  | (15,286 | ) |
| Financing activities...........                                |        | 1,723                                                                                |   |  |  | (18,357 | ) |  |  | — |  |  |  | (1,446 | ) |  |  | (18,080 | ) |
|                                                                |        |                                                                                      |   |  |  |  |  |  |  |  |  |   |  |  |  |  |  |  |  |
| Net increase/(decrease) in cash............................... |        | (9,252                                                                               | ) |  |  | 26,327 |  |  |  | (102 | ) |  |  | — |  |  |  | 16,973 |  |
| Cash at the beginning of the period........................    |        | 9,492                                                                                |   |  |  | 217,669 |  |  |  | 124 |  |  |  | — |  |  |  | 227,285 |  |
|                                                                |        |                                                                                      |   |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Cash at the end of the period..............................    | $      | 240                                                                                  |   |  | $ | 243,996 |  |  | $ | 22 |  |  | $ | — |  |  | $ | 244,258 |  |
|                                                                |        |                                                                                      |   |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

**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 six months ended June 30, 2006 we made net payments to Continental under the taxagreement of approximately $12.0 million.   No tax payments under the tax agreement related to the additional taxdeductions were made by either Continental or us during the six months ended June 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 their 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 June 30, 2007,there were no material unrecognized tax benefits or associated accrued interest and penalties under the interpretation.  The calendar tax years 2003 through 2006 remain subject to examination by the Internal Revenue Service.

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**Note 8 – Stock Based Compensation Plans**

****

            As of June 30, 2007, we had three stock-based compensationplans: our 2002 and 2007 Stock Incentive Plans,   (the “Incentive Plans”) and the ExpressJet Holdings, Inc.2003 Employee Stock Purchase Plan (the “ESPP”).  We account for our stock-based compensation arrangements usingthe fair value recognition provisions of Financial Accounting Standards Board Statement No. 123(R), *Share-Based Payments*(“Statement 123(R)”) using the modified-prospective transition method. The fair value of Holdings’ optionsgranted during the six months ended June 30, 2007 was estimated at the date of grant using the Black-Scholes options pricing model,which requires us to make several assumptions.  The table below summarizes the weighted-average of these assumptions for thesix months ended June 30, 2007:

| Risk-free interest rate...................................................................    |    | 4.9  | % |
|-----------------------------------------------------------------------------------------------|--------------|------|---|
| Dividend yield............................................................................... |              | 0.0  | % |
| Expected market price volatility of our common stock................                          |              | 50.5 | % |
| 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 no options have been exercised since the initial public offering to providerelevant historical data.  

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

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

|                                                                                               |              | **Options** |   |   |          | **Weighted Average Exercise Price** |              |
|-----------------------------------------------------------------------------------------------|--------------|-------------|---|--------|----------|-------------------------------------|--------------|
| ****                                                                                          |              | ****        |   |        |          | ****                                |              |
|                                                                                               |    |             |   |        |          |                                     |    |
| Outstanding at Beginning of Year.................................................             |              | 2,702       |   |        | $        | 10.90                               |              |
| Granted...................................................................................... |              | 2,059       |   |        | $        | 6.16                                |              |
| Exercised...................................................................................  |              | (5          | ) |        | $        | 5.40                                |              |
| Cancelled...................................................................................  |              | (41         | ) |        | $        | 6.19                                |              |
|                                                                                               |              |             |   |        |          |                                     |              |
| Outstanding at June 30, 2007.......................................................           |              | 4,715       |   |        |   $ | 8.87                                |              |
|                                                                                               |              |             |   |        |          |                                     |              |
| Options Exercisable at June 30, 2007...........................................               |              | 1,975       |   |        | $        | 12.62                               |              |
|                                                                                               |              |             |   |        |          |                                     |              |

            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 June 30, 2007.  We had no aircraft purchase commitments (firm orders), but did have options to purchase 100ERJ-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 June 30, 2007, approximately 70% of our employees werecovered 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, totaledapproximate $3.9 million as of June 30, 2007. The funds held back by American Express are interest-bearing and are subsequentlymade available to us as air travel is provided.

            Our agreement with Visa and MasterCard processor alsocontains financial triggers which require, among other things, that we maintain a minimum amount of unrestricted cash and maintaincertain financial ratios and levels of operating income. Under the terms, the level of credit card holdback is subject toadjustment based on these specific financial triggers.  As of June 30, 2007, we were in compliance with all of the terms ofthe agreement. If these specific financial triggers are not met in the future, the holdback could increase up to 100% of theapplicable credit card air traffic liability. The funds will be made available to us as air travel is provided.

***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***

            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 June 30, 2007, we had committed to purchase 13.5 milliongallons, or 78 percent of our anticipated branded flying fuel needs, at a weighted average price per gallon, excluding taxes andinto-plane fees, of $2.16 for the third quarter of 2007.  Additionally, we have committed to purchase 8.7 million gallons forthe fourth quarter of 2007 and 12.0 million gallons for the first six months 2008.  This represents approximately 64 percentand 35 percent of our anticipated branded flying fuel needs for the remaining months of 2007 and first six months of 2008,respectively. For the three months ended June 30, 2007, Airlines’ fuel cost, including related fuel taxes, was $0.93 pergallon.  This is due to approximately 90% of our fuel cost being capped by our contract flying partners.

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

            The following discussion and analysis contain a number offorward-looking statements, all of which are based on our current expectations and could involve a number of risks anduncertainties.  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-looking statements.  These statementsreflect our plans and assumptions about future events and are subject to uncertainties, many of which are outside ourcontrol.  Important factors that could cause actual results to differ materially from the expectations expressed or implied inthe forward-looking statements include known and unknown risks.  Some of the known risks that could significantly impact ourrevenues, 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 can still be terminated with 12 months notice;                                                                                                                                             |
|                                      | •  | the possibility that we may 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 is terminated; |
|                                      | •  | the possibility that our new operations, including the Delta CPA, our branded flying and our aviation services, may be lessprofitable than our historical results;                                                                  |
|                                      | •  | the possibility that competitive pressures on our branded flying could make our service less profitable;                                                                                                                            |
|                                      | •  | 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 fleet increases;                                                                                                                                       |
|                                      | •  | the possibility that our cost structure in the future may not be competitive with some low-cost carriers and other regionalcarriers;                                                                                                |
|                                      | •  | extensive government regulation of our business and additional costs to comply with such regulations;                                                                                                                               |
|                                      | •  | other adverse factors beyond our control, 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 statementsin this report are made as of August 9, 2007**,** and the events described in the forward-looking statements might not occur ormight occur to a materially different extent than described in this report.  We undertake no duty to update or revise any ofour forward-looking statements, whether as a result of 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.**  2007 marks a year ofsignificant transition for us, as we diversify our flying portfolio with our fleet of 274 aircraft.  Airlines currently offersscheduled airline services with approximately 1,550 daily departures to 175 cities in the United States, Mexico, Canada and theCaribbean.  For both the three and six months ended June 30, 2007, Airlines operated under the Continental CPA at a 99.8%controllable completion factor, which excludes cancellations due to weather and air traffic control.  System-wide, Airlinesachieved overall completion factors of 97.2% and 97.0%, respectively, for the same periods.  Our current plan for aircraftallocation follows (after the withdrawal in August 2007 of the last three aircraft by Continental):

|                                                                                         | **Aircraft Allocation** |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-------------------------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |                         |
| Contract Flying.......................................................................                                                                                                                                                                                                                                                                                                                                                                                                                                                     | 224                     |
| Branded Flying (ExpressJet brand and pro-rate arrangements).......................................................................                                                                                                                                                                                                                                                                                                                                                                                                         |  50                |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |                         |
| **Total Aircraft........................................................................**                                                                                                                                                                                                                                                                                                                                                                                                                                                 | **274**                 |

            Although we believe that our expanded operations will enhancestockholder value in the long term, we are incurring significant start-up costs, such as aircraft modifications, paint and initialtraining, which will significantly reduce our overall profitability for 2007 and may result in a loss for the year.  Inaddition, our branded flying, which includes flying under the ExpressJet name and our pro-rate arrangement with Delta, is likely toproduce more volatile financial results in the near term than our historical operations under the Continental CPA, primarily due tochanges in the price of fuel and fluctuations in passenger demand and fare levels.  As we transition part of our operations tobranded and charter flying, our results may be affected by the cyclical nature of the airline industry to a greater degree thanthey have historically.

As a result of our diversification activities in the first half of 2007, we have identified three reportable segments underStatement 131.  Effective for the quarter ended June 30, 2007, our three reportable segments are as follows:

|        | •  | The contract flying segment, which includes our flying under capacity purchase agreements as Continental Express and DeltaConnection and our Corporate Aviation (charter) division;                                                                                                                                                                                                           |
|--------------------------------------|--------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                      | •  | The branded flying segment, which consists of flying as ExpressJet and our pro-rate revenue flying with Delta                                                                                                                                                                                                                                                                                 |
|                                      | •  | The aviation services segment, which includes our ground-handling services under our contracts with Continental and otherairlines at airport locations across the United States, as well as, Services, our wholly owned repair and overhaul subsidiary,which includes American Composites, InTech and Saltillo Jet Center, which have been rebranded under the ExpressJet Servicesname.  |

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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.

***            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 to fullydevelop its route network and gain recognition as a premier service provider.  We provide Continental seamless service to morethan 150 markets in the U.S., Mexico, Canada and the Caribbean.  As a result of the recently concluded arbitration withContinental over our 2007 block hour rates, we have 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 (including the 10% operating margin).  See "Legal Proceedings” below for further discussion of the finalarbitration outcome.

***            Delta CPA. *** Airlines currently operates 10aircraft as Delta Connection pursuant to a capacity purchase agreement with Delta that began June 1, 2007.  The agreement is atwo-year capacity purchase agreement that permits up to two one-year extensions at Delta’s option.  Delta is responsiblefor scheduling, marketing, pricing and revenue management on the aircraft and will collect all passenger revenue.  Airlineswill operate, maintain and finance the aircraft.

            Airlines is receiving a base rate for each completed blockhour and departure and is reimbursed for certain pass-through costs, such as fuel expenses and certain airport costs.  InJune, Airlines earned incentive payments for exceeding completion and on-time benchmarks.  Additionally, on a semi-annualbasis, Airlines has the ability to earn additional incentive payments by maintaining a high completion factor and high Departmentof Transportation rankings for on-time arrivals and customer satisfaction.

***            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.  The aircraft are configured with 50 redesigned seats for enhanced passengercomfort, and each seat includes complimentary XM Satellite radio with over 100 channels of audio entertainment.  In additionto the basic service, customized flight service options give customers an opportunity to create a unique flightexperience. 

******

***            Branded Flying****.*  We are providingscheduled air service to 24 cities in the United States and over 220 daily departures, utilizing 42 of our aircraft, under ourbranded flying segment.  Customers can access our reservation system through our consumer website, www.xjet.com, reservationscall center and all four major global distribution systems.  Being a part of the major global computer reservation systemsallows travel agents and online distributors, such as Expedia, Orbitz, Travelocity and Cheaptickets.com the visibility to see andsell our tickets.  We launched sales in the Worldspan global distribution system in February 2007, in the Sabre and Amadeusglobal distribution systems in April 2007 and the Galileo global distribution system in July 2007.

            On July 1, 2007, Airlines began scheduled air servicesutilizing eight aircraft under a pro-rate revenue sharing arrangement with Delta.  Under this arrangement, we are responsiblefor scheduling, marketing, pricing, revenue management as well as the operation and maintenance of the aircraft and earn apro-rated portion of the fare plus an incentive for passengers connecting onto Delta's network. **

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***            Aviation Services****.*  During thefirst half of 2007, we rebranded our aviation services segment, which includes American Composites, InTech and Saltillo Jet Centeras ExpressJet Services, which provides third-party maintenance for interior and exterior work on aircraft.  We also providethird-party ground-handling services to Continental and other airlines at locations across the United States.

******

            **Our Liquidity. ** As of June 30, 2007, we had$294.0 ****million in cash and cash equivalents, including $14.5 million in restricted cash, which is used as collateral for ourworkers’ compensation coverage, letters of credit and charter deposits.  Our cash flow from operating activitiesdecreased approximately $29 million for the first six months of 2007 compared to the same period in 2006.  The decrease is duemainly to cash used in the commencement of our diversification away from the Continental CPA.  Our cash flows from operationswere sufficient to cover our capital resource and liquidity requirements.

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

**Critical Accounting Policies and Estimates**

****

            The following are additions to our critical accountingpolicies and estimates included in the 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.  Such operating revenues from contracts have been reclassified as passenger revenue.  Additionally, werecognize our unrelated passenger revenue and ground handling and other revenues as services are provided.  For our brandedflying, including pro-rate arrangements, tickets are sold and processed internally, with amounts due settled on a monthly basisthrough an airline clearing house, as appropriate, or pursuant to the terms of our agreements with various credit card servicevendors.  We recognize passenger revenue when transportation is provided or when the ticket expires unused, rather than when aticket is sold. Nonrefundable tickets expire on the date of 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.

            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 six months ended June 30, 2007, compared to thecorresponding periods ended June 30, 2006.

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

******

***Operating Revenue and Margin***

******

            Our total operating revenue decreased 5.8% compared to thesame period in 2006.  Over 90% 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 the recently concluded arbitration withContinental over our 2007 block hour rates, we have 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 (including the 10% operating margin).  Therefore, our total operating revenue for 2007 will be $14.2 million lowerthan what we had anticipated based on our planned operating revenue from our originally proposed rates.

            We began our branded flying on April 2, 2007.  Althoughpassenger revenue from branded flying was less than 10% of our total operating revenue, we believe that our passenger revenue willcontinue to grow as the communities we serve become more aware of our brand and the services we provide.  In addition, ourtickets have only become available recently for sale by all travel agencies, since we experienced longer than anticipatedimplementation timelines from the global reservation systems.

            Our second quarter of 2007 reflected a 10.8% operating loss,as compared with an operating profit of 8.5% for the second quarter of 2006.  We may incur a loss for the full year, due tothe commencement of our flying outside of the Continental CPA, transitioning our aircraft from Continental flying, re-branding ourcompany and diversifying 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 six months ended June 30, 2007 were approximately $85.7 million and $169.3million, respectively.  Additionally, since we transitioned substantially all of our 69 aircraft released from the ContinentalCPA during the first six months of 2007, we incurred over $12 million in non-recurring transition expenses associated with thepainting, maintenance modifications and training to ready our operation for flying outside of the Continental CPA.

            For the three months ended June 30, 2007, wages, salaries andrelated costs increased by $12.2 million, or 12.8%, ****compared with 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 addition, the availability of certified pilot trainers has not been sufficient to meetour current training timeline, which has resulted in additional time and expense for pilot trainees to become certified.  Inconjunction with the increases in base wages, we incurred approximately $3.6 million higher employee benefit costs, such as medicalcoverage, workers’ compensation costs and 401(k) expenses. 

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            During the second quarter of 2007, fuel expense increased$16.2 million or 28.1%, from the same period in 2006 mainly to support diversification of our flight operations into our brandedflying, corporate aviation and regional service for Delta through the transition of 30 aircraft from the Continental CPA during thequarter.  Fuel expenses under the Continental CPA and the Delta CPA were capped at $0.71 and $0.50, respectively, during thethree months ended June 30, 2007.

            The increase of $4.9 million in outside services during thethree months ended June 30, 2007 compared to the same period in 2006 relates mainly to expenses incurred to support our brandedflying.  In addition, there was an increase in legal fees primarily driven by costs associated with the Continentalarbitration.  Legal fees associated with this arbitration are not reimbursed under the Continental CPA.

            For the three months ended June 30, 2007, other operatingexpenses increased by $9.6 million as compared to the same period in 2006.  This increase related primarily to marketing,distribution and catering related expenses incurred to support our branded flying.  Additionally, crew related charges, suchas per diem, hotel cost and relocation expenses because of our transition activities, increased as a result of higher rates andincreased flight operations.

***Comparison of Six Months Ended June 30, 2007 to Six Months Ended June 30, 2006***

******

***Operating Revenue and Margin***

******

            Our total operating revenue decreased 2.2% compared to thesame period in 2006.  We derived substantially all of our revenues during the first half of 2007 from our contractflying.  Operating revenue from our branded flying and aviation services contributed less than 5% to the consolidatedoperating revenue. 

            We began our branded flying on April 2, 2007.  Webelieve that our passenger revenues will continue to grow as the communities in which we serve become more aware of our brand andthe services we provide.  In addition, our tickets have only recently become available for sale by all travel agencies, sincewe experienced longer than anticipated implementation timelines from the global reservation systems.

            For the six months ended 2007, our operating loss was 3.5%,compared to an operating profit of 8.8% for the same period in 2006.  We may incur a loss for year, due to the commencement ofour flying outside of the Continental CPA, transitioning our aircraft from Continental flying, re-branding our company anddiversifying our customer base.

***Operating Expenses –***

            For the six months ended June 30, 2007, wages, salaries andrelated costs increased by $24.6 million, or 13.1%, ****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.  The availability of certified pilot trainers was not sufficient to meet our currenttraining timeline, which resulted in additional time and expense for pilot trainees to become certified.  In conjunction withthe increases in base wages, we incurred approximately $7.0 million higher employee benefit costs, such as medical coverage,workers’ compensation costs and 401(k) expenses. 

            During the six months ended June 30, 2007, fuel expenseincreased $16.8 million or 15.2%, from the same period in 2006 to support diversification of our flying into our branded flying,corporate aviation and regional service for Delta through the transition of 66 aircraft from the Continental CPA during thosemonths.

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            The increase of $7.6 million in outside services during thesix months ended June 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 primarily driven by costs associated with theContinental arbitration.

            For the three months ended June 30, 2007, other operatingexpenses increased by $12.4 million as compared to the same period in 2006.  This increase is primarily caused by marketing,distribution and catering related expenses incurred to support our branded flying.  Additionally, crew related charges, suchas per diem, hotel cost and relocation expenses because of our transition activities, increased as a result of higher rates andincreased flight operations.

***Certain Operational Information***

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

| **EXPERSSJET HOLDINGS, INC. AND SUBSIDIARIES PRELIMINARY STATISTICS** |
|-----------------------------------------------------------------------|
|                                                             |  |  |  |  |  |  |  |
| Three Months Ending June 30, 2007                                     |  | **Contract (1)** |  | **Branded (2)** |  | **System (3)** |  |
|                                                                       |  |  |  |  |  |  |  |
| Revenue Passenger Miles (millions)                                    |  | 2,258 |  | 200 |  | 2,466 |  |
| Available Seat Miles (ASM) (millions)                                 |  | 2,803 |  | 509 |  | 3,327 |  |
| Passenger Load Factor                                                 |   | 80.6 | % | 39.3 | % | 74.1 | % |
| Block Hours                                                           |  | 196,799 |  | 27,335 |  | 225,358 |  |
| Departures                                                            |  | 106,874 |  | 13,288 |  | 120,918 |  |
| Average Price per Gallon of Fuel (cents)                              |  | 73.8 |  | 221.2 |  | 92.6 |  |
| Fuel Gallons Consumed (000)                                           |  | 69,477 |  | 9,879 |  | 79,551 |  |
| Stage Length (miles)                                                  |   | 541 |  | 771 |   | 566 |  |
|                                                             |  |  |  |  |  |  |  |
|                                                             |  |  |  |  |  |  |  |
| **Six Months Ending June 30, 2007**                                   |  | **Contract (1)** |  | **Branded (2)** |  | **System (3)** |  |
|                                                             |  |  |  |  |  |  |  |
| Revenue Passenger Miles (millions)                                    |  | 4,510 |  | 200 |  | 4,733 |  |
| Available Seat Miles (ASM) (millions)                                 |  | 5,790 |  | 509 |  | 6,339 |  |
| Passenger Load Factor                                                 |  | 77.9 | % | 39.3 | % | 74.7 | % |
| Block Hours                                                           |  | 408,171 |  | 27,335 |  | 439,062 |  |
| Departures                                                            |  | 220,475 |  | 13,288 |  | 236,184 |  |
| Average Price per Gallon of Fuel (cents)                              |  | 72.5 |  | 221.2 |  | 83.0 |  |
| Fuel Gallons Consumed (000)                                           |  | 142,796 |  | 9,879 |  | 153,275 |  |
| Stage Length (miles)                                                  |  | 541 |  | 771 |  | 552 |  |

| (1) Excludes charter since statistics on charter airplanes do not provide meaningful data for forecasting and are not reviewedby management. |
|----------------------------------------------------------------------------------------------------------------------------------------------|
| (2) Operation commenced April 2, 2007.                                                                                                       |  |  |  |  |  |  |
| (3) Consolidated operations.                                                                                                                 |  |  |  |  |  |  |

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***Future Costs*******

               

We remain committed to providing competitively priced services by controlling our costs; however, we believe that our costs haveincreased in some cases and are likely to increase overall in the future due to:

|                                            | •  | transition expenses associated with refurbishing and repainting the aircraft after exiting service under the ContinentalCPA;                                                                     |
|--------------------------------------------|--------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                            | •  | relocation and additional training costs of employees for our branded flying and Delta Connection operations;                                                                                    |
|                                            | •  | reassignment of maintenance operations;                                                                                                                                                          |
|                                            | •  | fuel costs for aircraft not flying under the Continental CPA;                                                                                                                                    |
|                                            | •  | distribution costs, including schedule planning, marketing and sales related to our 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;                              |
|                                            | •  | 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 six months ended June 30, 2007 and 2006, our operations provided cash flow of $20.9million and $50.3 million, respectively.  The decrease of $29.4 million for the first six months of 2007 compared to the sameperiod in 2006 is due mainly to cash used in the commencement of our diversification away from the Continental CPA, includingaircraft maintenance, paint, initial systems training and other transition activities.  We expect that our cash flows fromoperations will be sufficient to cover our capital resource and liquidity requirements.

***Investing Activities***

            During the six months ended June 30, 2007, our capitalexpenditures were $32 million.  For the remainder of the year, we expect capital expenditures for fleet (primarily relating tospare parts and aircraft modifications) and non-fleet (primarily relating to facility build-out or improvements, maintenance andground service equipment) to be approximately $12 million.  The increase in our capital expense in 2007 is due mainly to therequired acquisitions of ground service equipment, hardware, computer software and other toolings in order to support thediversification of our flight operations into branded flying, corporate aviation and regional service for Delta.

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***Financing Activities***

            During the six months ended June 30, 2007, we met all ourdebt requirements.  There is no covenant under any of our long-term debt agreements that restrict our ability to undertakeadditional debt or equity financing.  During 2003, Holdings completed the private placement of $137.2 million seniorconvertible notes due 2023.  Repayment of the convertible notes is jointly and severally guaranteed on an unconditional basisby Airlines.  Except as otherwise specified in the indenture pursuant to which the notes were issued, there are norestrictions on Airlines’ ability to transfer funds to Holdings in the form of cash dividends, loans or advances. General provisions of applicable state law, however, may limit the ability of any subsidiary to pay dividends or make distributionsto its parent in certain circumstances.

            We expect to fund our future capital commitments throughinternally generated funds together with general financings and aircraft financing transactions.  However, there can be noassurance that sufficient financing will be available for all aircraft and other capital expenditures not covered by firm financingcommitments 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 outside of the Continental CPA, buthave not made a decision as to whether we will do so.

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

            As of June 30, 2007, we had significant lease and subleaseobligations for aircraft, a simulator and spare engines that are classified as operating leases, which are not reflected as assetsand liabilities on our balance sheet.  These leases expire between 2013 and 2022.  As of June 30, 2007, our expectedtotal minimum rental expense for the full year 2007 under current and future firm order aircraft, simulator operating leases andspare engine operating leases was approximately $347.6 ****million, net of deferred credits amortized.  Approximately $8.7million 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.

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**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 six months ended June 30, 2007and 2006, our cost of fuel was 71.2 cents per gallon, including fuel tax

            Flying operations, outside of the Continental and Delta CPAs,can be significantly impacted by changes in the price and availability of aircraft fuel.  For our branded flying, we canminimize our exposure to fuel price volatility through contractual arrangements.  Efforts to reduce our exposure to increasesin the price and availability of aviation fuel include the utilization of fuel purchase contracts involving fixed pricecontracts.  Fixed-price arrangements consist of an agreement to purchase defined quantities of aviation fuel from a thirdparty at a stated price, limiting our exposure to market volatility.  As of June 30, 2007, we had committed to purchase 13.5million gallons, or 78% of our anticipated branded flying fuel needs, at a weighted average price per gallon, excluding taxes andinto-plane fees, of $2.16 for the third quarter of 2007.  Additionally, we have committed to purchase 8.7 million gallons forthe fourth quarter of 2007 and 12.0 million gallons for the first six months 2008.  This represents approximately 64% and 35%of our anticipated branded flying fuel needs for the remaining months of 2007 and first six months of 2008, respectively.  Forthe three months ended June 30, 2007, Airlines’ fuel cost, including related fuel taxes, was 93.3 cents per gallon. This is due to approximately 90% of our fuel cost being capped by the Continental CPA at 71.0 cents per gallon.

***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 six months ended June 30, 2007 and 2006.  However, we believe that interest rateincreases on our variable rate, long-term debt would be offset by increases in interest income.

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            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 June 30, 2007, weestimated the fair value of our $137.2 million (carrying value) fixed-rate debt to be $134.0 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 have implemented new processes and procedures to account for revenuesgenerated in connection with our branded flying.  The new system and new processes have resulted in a significant change toour internal control over financial reporting for the year ending December 31, 2007.  We continue working to correct asignificant deficiency previously disclosed.

            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 (including the 10% operating margin).  Asa result of the panel’s decision, we recorded our passenger revenue pursuant to the terms of the Continental CPA using theblock hour rates determined by the panel for the six months ended June 30, 2007.  Since the resulting rates were lower thanthe 2006 rates used to record the Continental CPA revenue prior to this decision, the change in estimates was an unfavorableadjustment of $4.3 million, net of tax benefits, to our results of operations for the six months ended June 30, 2007.

**Item 1A. Risk Factors.**

               None.

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

| **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)** |
|---------------------------------------------------------|--------|-----------------------------------------|--------|---|----------------------------------|------------|----------------------------------------------------------------------------|--------|---|-------------------------------------------------------------------------------------------------|
|                                                         |        |                                         |        |   |                                  |            |                                                                            |        |   |                                                                                                 |
| April 1 to April 30, 2007.......................        |   | 3,014                                   |   | $ | 5.84                             |            | —                                                                    |   | $ | 24.4                                                                                            |
| May 1 to May 31, 2007.......................            |        | 11,677                                  |        | $ | 6.19                             |            | **—**                                                                |        |   | 24.4                                                                                            |
| June 1 to June 30, 2007......................           |        | 41                                      |        | $ | 5.96                             |            | **—**                                                                |        |   | 24.4                                                                                            |
|                                                         |        | ****                                    |        |   |                                  |            | ****                                                                       |        |   |                                                                                                 |
| Total.................................................. |        | 14,732                                  |        | $ | 6.12                             |            | **—**                                                                |        | $ | 24.4                                                                                            |
|                                                         |        |                                         |        |   |                                  |            | ****                                                                       |        |   |                                                                                                 |

|    | (1)  | Shares shown were withheld to satisfy tax obligations arising upon the vesting of restricted stock and do not count against theprogram. |
|--------------|-----------|-----------------------------------------------------------------------------------------------------------------------------------------|
|    | (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.**

****

               Holdings' annualmeeting of stockholders was held on May 23, 2007.  Salvatore J. Badalamenti, Kim A. Fadel, and Judith R. Haberkorn werere-elected to the board of directors as Class III directors with 49,322,633, 48,896,442 and 49,257,059 votes For and 1,109,639,1,535,830 and 1,175,213 votes Withheld, respectively.  Ratification of Ernst & Young LLP as our independent auditorsreceived 49,663,395 votes For, 735,026 votes Against, 33,851 abstentions and zero broker non-votes.  Approval of our 2007Stock Incentive Plan received 35,490,931 votes For, 7,636,700 votes Against, 47,156 abstentions, and 7,257,485 broker non-votes.

**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   |                    | Fourth Amendment to Employee Benefits Separation Agreement among ExpressJet Holdings, Inc., XJT Holdings, Inc., ExpressJetAirlines, Inc. and Continental dated June 18, 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: August 9, 2007       |                         | **/s/Frederick S.Cromer                                           **                                                                                       |
|                            |                                                                                                         | Frederick S. Cromer Vice President and Chief Financial Officer (Principal Financial Officer)                                                                                                                                                                                                                                                                                      |
|                  |                                                                                                                                            |                                                                                                                                                                                                                                                                                                                                                                                   |
| Date:  August 9, 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   |                    | Fourth Amendment to Employee Benefits Separation Agreement among ExpressJet Holdings, Inc., XJT Holdings, Inc., ExpressJetAirlines, Inc. and Continental dated June 18, 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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