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

**Form 10-Q**

| **[X]**                  |                                                           | **Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934**  |
|--------------------------|-----------------------------------------------------------|----------------------------------------------------------------------------------------------|
|                          | **For the quarterly period ended September 30, 2005**     |
|                          | **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.)* |
|---------------------------------------------------------------------------------------------|------------------------------------------------------------------------------------|------------------------------------------------------|
|                                                                                   |                                                                                    |                                                      |
| **1600 Smith Street, Dept. HQSCE Houston, Texas***(Address of principal executive offices)* |                                                                                    | ******77002***(Zip Code)*                            |

**713-324-2639***(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 isan accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

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

            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 November 7, 2005, 54,056,236 shares of common stock were outstanding.

----

**TABLE OF CONTENTS**

****

| ** **        | ** **   |                                                                                                            |              |          |
|-------------------|--------------|------------------------------------------------------------------------------------------------------------|--------------|----------|
| **PART I.**       |         | **FINANCIAL INFORMATION**                                                                                  |              | **PAGE** |
| Item 1.           |         | Financial Statements:                                                                                      |              |          |
|              |         | Consolidated Statements of Operations (Unaudited): Three and Nine months ended September 30, 2005 and 2004 |              | 1        |
|              |    | Consolidated Balance Sheets: September 30, 2005 (Unaudited) and December 31, 2004                          |              | 3        |
|                   |              | Condensed Consolidated Statements of Cash Flows (Unaudited): Nine months ended September 30, 2005 and 2004 |              | 5        |
|                   |              | Notes to Condensed Consolidated Financial Statements (Unaudited)                                           |              | 6        |
| Item 2.           |         | Management’s Discussion and Analysis of Financial Condition and Results of Operations                |    | 16       |
|   Item 3.    |         | Quantitative and Qualitative Disclosures About Market Risk                                                 |              | 27       |
| **** Item 4.      |              | Controls and Procedures                                                                                    |              | 28       |
| **PART II.** |         | **OTHER INFORMATION**                                                                                      |              |          |
| Item 1.           |              | Legal Proceedings                                                                                          |              | 29       |
| Item 2.           |              | Unregistered Sales of Equity Securities and Use of Proceeds                                                |              | 29       |
| Item 3.           |              | Defaults Upon Senior Securities                                                                            |              | 29       |
| Item 4.           |              | Submission of Matters to a Vote of Security Holders                                                        |              | 29       |
| Item 5.           |              | Other Information                                                                                          |              | 29       |
| Item 6.           |              | Exhibits                                                                                                   |              | 30       |
|                   |              | Signatures                                                                                                 |              | 31       |
|              |              | Index to Exhibits                                                                                          |              | 32       |

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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 September 30,** |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--|---|--------------------------------------|---|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |  |   |                                      |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |  |   |                                      |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |  |   | **2005**                             |   |  |  | **2004** |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |  |   |                                      |   |  |  |  |  |
| Operating Revenue.......................................................                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |  | $ | 393,789                              |   |  | $ | 385,666 |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |  |   |                                      |   |  |  |  |  |
| Operating Expenses:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |  |   |                                      |   |  |  |  |  |
|      Wages, salaries and related costs...........................                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |  |   | 87,609                               |   |  |  | 82,960 |  |
|      Aircraft rentals........................................................                                                                                                                                                                                                                                                                                                                                                                                                                                                             |  |   | 78,320                               |   |  |  | 71,565 |  |
|      Aircraft fuel and related taxes...................................                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |  |   | 55,050                               |   |  |  | 48,336 |  |
|      Maintenance, materials and repairs..........................                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |  |   | 45,061                               |   |  |  | 40,251 |  |
|      Ground handling.....................................................                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |  |   | 24,353                               |   |  |  | 27,412 |  |
|      Other rentals and landing fees..................................                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |  |   | 26,293                               |   |  |  | 23,844 |  |
|      Outside services.....................................................                                                                                                                                                                                                                                                                                                                                                                                                                                                                |  |   | 5,389                                |   |  |  | 6,044 |  |
|      Depreciation and amortization..................................                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |  |   | 8,010                                |   |  |  | 6,027 |  |
|      Other operating expenses........................................                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |  |   | 25,707                               |   |  |  | 27,596 |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |  |   |                                      |   |  |  |  |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |  |   | 355,792                              |   |  |  | 334,035 |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |  |   |                                      |   |  |  |  |  |
| Operating Income........................................................                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |  |   | 37,997                               |   |  |  | 51,631 |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |  |   |                                      |   |  |  |  |  |
| Nonoperating Income (Expense):                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |  |   |                                      |   |  |  |  |  |
|      Interest expense.....................................................                                                                                                                                                                                                                                                                                                                                                                                                                                                                |  |   | (2,610                               | ) |  |  | (3,105 | ) |
|      Interest income.......................................................                                                                                                                                                                                                                                                                                                                                                                                                                                                               |  |   | 2,177                                |   |  |  | 1,099 |  |
|      Capitalized interest.................................................                                                                                                                                                                                                                                                                                                                                                                                                                                                                |  |   | 127                                  |   |  |  | 158 |  |
|      Other, net..............................................................                                                                                                                                                                                                                                                                                                                                                                                                                                                             |  |   | (153                                 | ) |  |  | (3 | ) |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |  |   |                                      |   |  |  |  |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |  |   | (459                                 | ) |  |  | (1,851 | ) |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |  |   |                                      |   |  |  |  |  |
| Income before Income Taxes........................................                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |  |   | 37,538                               |   |  |  | 49,780 |  |
| Income Tax Expense...................................................                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |  |   | 12,044                               |   |  |  | 19,016 |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |  |   |                                      |   |  |  |  |  |
| Net Income.................................................................                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |  | $ | 25,494                               |   |  | $ | 30,764 |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |  |   |                                      |   |  |  |  |  |
| Basic Earnings per Common Share...............................                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |  | $ | 0.47                                 |   |  | $ | 0.57 |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |  |   |                                      |   |  |  |  |  |
| Diluted Earnings per Common Share.............................                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |  | $ | 0.43                                 |   |  | $ | 0.51 |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |  |   |                                      |   |  |  |  |  |
| Shares Used in Computing Basic Earnings per      Common Share......................................................                                                                                                                                                                                                                                                                                                                                                                                                                       |  |   | 54,093                               |   |  |  | 54,236 |  |
| Shares Used in Computing Diluted Earnings per      Common Share......................................................                                                                                                                                                                                                                                                                                                                                                                                                                     |  |   | 61,717                               |   |  |  | 61,781 |  |

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

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

|                                                                                             |  |   | **Nine Months Ended September 30,** |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--|---|-------------------------------------|---|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |  |   |                                     |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |  |   |                                     |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |  |   | **2005**                            |   |  |  | **2004** |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |  |   |                                     |   |  |  |  |  |
| Operating Revenue.......................................................                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |  | $ | 1,157,853                           |   |  | $ | 1,120,549 |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |  |   |                                     |   |  |  |  |  |
| Operating Expenses:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |  |   |                                     |   |  |  |  |  |
|      Wages, salaries and related costs...........................                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |  |   | 258,025                             |   |  |  | 239,434 |  |
|      Aircraft rentals........................................................                                                                                                                                                                                                                                                                                                                                                                                                                                                             |  |   | 228,856                             |   |  |  | 208,766 |  |
|      Aircraft fuel and related taxes...................................                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |  |   | 156,731                             |   |  |  | 138,381 |  |
|      Maintenance, materials and repairs..........................                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |  |   | 134,097                             |   |  |  | 115,066 |  |
|      Ground handling.....................................................                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |  |   | 71,489                              |   |  |  | 78,552 |  |
|      Other rentals and landing fees..................................                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |  |   | 78,127                              |   |  |  | 66,494 |  |
|      Outside services.....................................................                                                                                                                                                                                                                                                                                                                                                                                                                                                                |  |   | 19,777                              |   |  |  | 22,721 |  |
|      Depreciation and amortization..................................                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |  |   | 19,984                              |   |  |  | 17,623 |  |
|      Other operating expenses........................................                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |  |   | 73,727                              |   |  |  | 83,107 |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |  |   |                                     |   |  |  |  |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |  |   | 1,040,813                           |   |  |  | 970,144 |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |  |   |                                     |   |  |  |  |  |
| Operating Income........................................................                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |  |   | 117,040                             |   |  |  | 150,405 |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |  |   |                                     |   |  |  |  |  |
| Nonoperating Income (Expense):                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |  |   |                                     |   |  |  |  |  |
|      Interest expense.....................................................                                                                                                                                                                                                                                                                                                                                                                                                                                                                |  |   | (8,319                              | ) |  |  | (9,145 | ) |
|      Interest income.......................................................                                                                                                                                                                                                                                                                                                                                                                                                                                                               |  |   | 5,648                               |   |  |  | 2,465 |  |
|      Capitalized interest.................................................                                                                                                                                                                                                                                                                                                                                                                                                                                                                |  |   | 449                                 |   |  |  | 391 |  |
|      Other, net..............................................................                                                                                                                                                                                                                                                                                                                                                                                                                                                             |  |   | (254                                | ) |  |  | 130 |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |  |   |                                     |   |  |  |  |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |  |   | (2,476                              | ) |  |  | (6,159 | ) |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |  |   |                                     |   |  |  |  |  |
| Income before Income Taxes........................................                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |  |   | 114,564                             |   |  |  | 144,246 |  |
| Income Tax Expense...................................................                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |  |   | 41,443                              |   |  |  | 55,102 |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |  |   |                                     |   |  |  |  |  |
| Net Income.................................................................                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |  | $ | 73,121                              |   |  | $ | 89,144 |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |  |   |                                     |   |  |  |  |  |
| Basic Earnings per Common Share...............................                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |  | $ | 1.35                                |   |  | $ | 1.64 |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |  |   |                                     |   |  |  |  |  |
| Diluted Earnings per Common Share.............................                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |  | $ | 1.23                                |   |  | $ | 1.49 |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |  |   |                                     |   |  |  |  |  |
| Shares Used in Computing Basic Earnings per      Common Share......................................................                                                                                                                                                                                                                                                                                                                                                                                                                       |  |   | 54,226                              |   |  |  | 54,212 |  |
| Shares Used in Computing Diluted Earnings per      Common Share......................................................                                                                                                                                                                                                                                                                                                                                                                                                                     |  |   | 61,823                              |   |  |  | 61,769 |  |

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

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Table of Contents

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

| **ASSETS**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |        |   | **September 30,** |        |   | **December 31,** |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---|-------------------|--------|---|------------------|---|
|                                                                                            |   |   | **2005**          |        |   | **2004**         |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |        |   |                   |        |   |                  |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |        |   | (Unaudited)       |   |   |                  |   |
| Current Assets:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |        |   |                   |        |   |                  |   |
|      Cash and cash equivalents.......................................                                                                                                                                                                                                                                                                                                                                                                                                                                                               |        | $ | 201,265           |        | $ | 190,189          |   |
|      Restricted cash.......................................................                                                                                                                                                                                                                                                                                                                                                                                                                                                         |        |   | 6,350             |        |   | 6,312            |   |
|      Short-term investments.............................................                                                                                                                                                                                                                                                                                                                                                                                                                                                            |        |   | —           |        |   | 18,650           |   |
|      Accounts receivable, net...........................................                                                                                                                                                                                                                                                                                                                                                                                                                                                            |        |   | 4,271             |        |   | 5,360            |   |
|      Amounts due from Continental Airlines, Inc., net.........                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |        |   | 1,307             |        |   | —          |   |
|      Note receivable from Wing Holdings, LLC...................                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |        |   | 6,459             |        |   | —          |   |
|      Spare parts and supplies, net....................................                                                                                                                                                                                                                                                                                                                                                                                                                                                              |        |   | 24,809            |        |   | 27,061           |   |
|      Prepayments and other............................................                                                                                                                                                                                                                                                                                                                                                                                                                                                              |        |   | 6,956             |        |   | 6,080            |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |        |   |                   |        |   |                  |   |
|         Total Current Assets.............................................                                                                                                                                                                                                                                                                                                                                                                                                                                            |        |   | 251,417           |        |   | 253,652          |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |        |   |                   |        |   |                  |   |
| Property and Equipment:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |        |   |                   |        |   |                  |   |
|      Owned property and equipment:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |        |   |                   |        |   |                  |   |
|         Flight equipment...................................................                                                                                                                                                                                                                                                                                                                                                                                                                                          |        |   | 226,500           |        |   | 218,916          |   |
|         Other...................................................................                                                                                                                                                                                                                                                                                                                                                                                                                                     |        |   | 121,600           |        |   | 116,523          |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |        |   |                   |        |   |                  |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |        |   | 348,100           |        |   | 335,439          |   |
|         Less:  Accumulated depreciation............................                                                                                                                                                                                                                                                                                                                                                                                                                                        |        |   | (92,045           | )      |   | (78,792          | ) |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |        |   |                   |        |   |                  |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |        |   | 256,055           |        |   | 256,647          |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |        |   |                   |        |   |                  |   |
|      Capital Leases:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |        |   |              |        |   |                  |   |
|         Flight equipment...................................................                                                                                                                                                                                                                                                                                                                                                                                                                                          |        |   | —           |        |   | 4,258            |   |
|         Other...................................................................                                                                                                                                                                                                                                                                                                                                                                                                                                     |        |   | 4,310             |        |   | 4,315            |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |        |   |                   |        |   |                  |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |        |   | 4,310             |        |   | 8,573            |   |
|         Less:  Accumulated amortization...........................                                                                                                                                                                                                                                                                                                                                                                                                                                         |        |   | (2,772            | )      |   | (3,395           | ) |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |        |   |                   |        |   |                  |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |        |   | 1,538             |        |   | 5,178            |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |        |   |                   |        |   |                  |   |
|         Total Property and Equipment................................                                                                                                                                                                                                                                                                                                                                                                                                                                                 |        |   | 257,593           |        |   | 261,825          |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |        |   |                   |        |   |                  |   |
| Investments in Other Entities.........................................                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |        |   | 17,762            |        |   | —          |   |
| Reorganization Value In Excess of Amounts                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |        |   |                   |        |   |                  |   |
|      Allocable to Identifiable Assets, net...........................                                                                                                                                                                                                                                                                                                                                                                                                                                                               |        |   | 12,789            |        |   | 12,789           |   |
| Airport Operating Rights, net..........................................                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |        |   | 4,004             |        |   | 4,192            |   |
| Note Receivable............................................................                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |        |   | —           |        |   | 5,000            |   |
| Debt Issuance Cost, net................................................                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |        |   | 3,746             |        |   | 3,894            |   |
| Other Assets, net.........................................................                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |        |   | 2,154             |        |   | 1,892            |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |        |   |                   |        |   |                  |   |
|         Total Assets.........................................................                                                                                                                                                                                                                                                                                                                                                                                                                                        |        | $ | 549,465           |        | $ | 543,244          |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |        |   |                   |        |   |                  |   |

(continued on next page)

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

| **LIABILITIES AND**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |  |   | **September 30,** |   |        |   | **December 31,** |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--|---|-------------------|---|--------|---|------------------|---|
| **STOCKHOLDERS' EQUITY**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |  |   | **2005**          |   |        |   | **2004**         |   |
|                                                                                          |  |   |                   |   |        |   |                  |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  |   | (Unaudited)       |   |        |   |                  |   |
| Current Liabilities:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |  |   |                   |   |   |   |                  |   |
|      Current maturities of long-term debt .........................                                                                                                                                                                                                                                                                                                                                                                                                                                                     |  | $ | 700               |   |        | $ | 865              |   |
|      Current maturities of note payable to         Continental Airlines, Inc. ......................................                                                                                                                                                                                                                                                                                                                                                            |  |   | 44,878            |   |        |   | 81,415           |   |
|      Current maturities of capital lease obligations............                                                                                                                                                                                                                                                                                                                                                                                                                                                        |  |   | 758               |   |        |   | 843              |   |
|      Accounts payable...................................................                                                                                                                                                                                                                                                                                                                                                                                                                                                |  |   | 1,461             |   |        |   | 635              |   |
|      Accrued payroll and related costs.............................                                                                                                                                                                                                                                                                                                                                                                                                                                                     |  |   | 43,281            |   |        |   | 46,524           |   |
|      Amounts due to Continental Airlines, Inc., net............                                                                                                                                                                                                                                                                                                                                                                                                                                                         |  |   | —           |   |        |   | 11,239           |   |
|      Deferred income taxes.............................................                                                                                                                                                                                                                                                                                                                                                                                                                                                 |  |   | 16,093            |   |        |   | 13,473           |   |
|      Accrued other liabilities............................................                                                                                                                                                                                                                                                                                                                                                                                                                                              |  |   | 56,464            |   |        |   | 51,844           |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  |   |                   |   |        |   |                  |   |
|         Total Current Liabilities.........................................                                                                                                                                                                                                                                                                                                                                                                                                                               |  |   | 163,635           |   |        |   | 206,838          |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  |   |                   |   |        |   |                  |   |
| Long-term Debt............................................................                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |  |   | 14,867            |   |        |   | 20,299           |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  |   |                   |   |        |   |                  |   |
| Note Payable to Continental Airlines, Inc........................                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |  |   | —           |   |        |   | 17,389           |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  |   |                   |   |        |   |                  |   |
| 4.25% Senior Convertible Notes due 2023......................                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |  |   | 137,200           |   |        |   | 137,200          |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  |   |                   |   |        |   |             |   |
| Capital Lease Obligations.............................................                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |  |   | 1,232             |   |        |   | 1,805            |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  |   |                   |   |        |   |                  |   |
| Deferred Income Taxes.................................................                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |  |   | 37,685            |   |        |   | 33,148           |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  |   |                   |   |        |   |                  |   |
| Other Long-term Liabilities............................................                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |  |   | 11,552            |   |        |   | 12,521           |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  |   |                   |   |        |   |                  |   |
| Stockholders’ Equity:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |  |   |                   |   |        |   |                  |   |
|      Preferred stock - $.01 par, 10,000,000 shares         authorized, no shares and one share issued         and outstanding, respectively................................                                                                                                                                                                                                                                                             |  |   | —           |   |        |   | —          |   |
|      Common stock - $.01 par, 200,000,000 shares         authorized, and 54,653,942 and 54,375,345 shares         issued, respectively..............................................                                                                                                                                                                                                                                                    |  |   | 546               |   |        |   | 544              |   |
|      Additional paid-in capital..........................................                                                                                                                                                                                                                                                                                                                                                                                                                                               |  |   | 165,055           |   |        |   | 162,418          |   |
|      Accumulated earnings/(deficit)..................................                                                                                                                                                                                                                                                                                                                                                                                                                                                   |  |   | 25,215            |   |        |   | (47,900          | ) |
|      Unearned compensation on restricted stock..............                                                                                                                                                                                                                                                                                                                                                                                                                                                            |  |   | (1,861            | ) |        |   | (996             | ) |
|      Common stock held in treasury, at cost —         597,706 and 1,750 shares, respectively..................                                                                                                                                                                                                                                                                                                                                                            |  |   | (5,661            | ) |        |   | (22              | ) |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  |   |                   |   |        |   |                  |   |
|         Total Stockholders’ Equity....................................                                                                                                                                                                                                                                                                                                                                                                                                                             |  |   | 183,294           |   |        |   | 114,044          |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  |   |                   |   |        |   |                  |   |
|         Total Liabilities and Stockholders’ Equity................                                                                                                                                                                                                                                                                                                                                                                                                                                 |  | $ | 549,465           |   |        | $ | 543,244          |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |  |   |                   |   |        |   |                  |   |

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

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****

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

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |  |   | **Nine Months Ended September 30,** |   |                  |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--|---|-------------------------------------|---|------------------|
|                                                                                                           |  |   | ****                                |   |                  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |  |   | **2005**                            |   | **  ** |  | **2004** |  |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |  |   |                                     |   |                  |  |  |  |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |  |   |                                     |   |                  |  |  |  |  |
| Net Cash Flows from Operating Activities......................................                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |  | $ | 96,477                              |   |                  | $ | 115,504 |  |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |  |   |                                     |   |                  |  |  |  |  |
| Cash Flows from Investing Activities:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  |   |                                     |   |                  |  |  |  |  |
|      Capital expenditures...............................................................                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |  |   | (14,397                             | ) |                  |  | (19,137 | ) |  |
|      Proceeds from disposition of equipment....................................                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |  |   | —                             |   |                  |  | 298 |  |  |
|      Proceeds from transfer of flight equipment to         Continental Airlines,Inc.......................................................                                                                                                                                                                                                                                                                                                                                                                                                                                            |  |   | 82                                  |   |                  |  | — |  |  |
|      Purchase of flight equipment from Continental Airlines, Inc.........                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |  |   | —                             |   |                  |  | (11,434 | ) |  |
|      Note receivable from Wing Holdings, LLC..................................                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |  |   | (6,450                              | ) |                  |  | — |  |  |
|      Proceeds from the sale of short-term investments......................                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |  |   | 18,650                              |   |                  |  | — |  |  |
|      Investments in other entities....................................................                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |  |   | (18,064                             | ) |                  |  | — |  |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |  |   |                                     |   |                  |  |  |  |  |
|         Net cash used in investing activities......................................                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |  |   | (20,179                             | ) |                  |  | (30,273 | ) |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |  |   |                                     |   |                  |  |  |  |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |  |   |                                     |   |                  |  |  |  |  |
| Cash Flows from Financing Activities:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  |   |                                     |   |                  |  |  |  |  |
|      Payment on note payable to Continental Airlines, Inc.................                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |  |   | (53,926                             | ) |                  |  | (94,368 | ) |  |
|      Payments on long-term debt and capital lease obligations..........                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |  |   | (6,255                              | ) |                  |  | (1,989 | ) |  |
|      Repurchase of common stock.................................................                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |  |   | (5,643                              | ) |                  |  | — |  |  |
|      Proceeds from issuance of common stock related to 2003         Employee Stock Purchase Plan...........................................                                                                                                                                                                                                                                                                                                                                                                                                                                           |  |   | 602                                 |   |                  |  | 842 |  |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |  |   |                                     |   |                  |  |  |  |  |
|         Net cash used in financing activities......................................                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |  |   | (65,222                             | ) |                  |  | (95,515 | ) |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |  |   |                                     |   |                  |  |  |  |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |  |   |                                     |   |                  |  |  |  |  |
| Net Increase (Decrease) in Cash and Cash Equivalents..................                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |  |   | 11,076                              |   |                  |  | (10,284 | ) |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |  |   |                                     |   |                  |  |  |  |  |
| Cash and Cash Equivalents – Beginning of Period..........................                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |  |   | 190,189                             |   |                  |  | 189,892 |  |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |  |   |                                     |   |                  |  |  |  |  |
| Cash and Cash Equivalents – End of Period...................................                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |  | $ | 201,265                             |   |                  | $ | 179,608 |  |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |  |   |                                     |   |                  |  |  |  |  |
| Supplemental Cash Flow Information:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |  |   |                                     |   |                  |  |  |  |  |
|      Interest paid...........................................................................                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |  | $ | 9,521                               |   |                  | $ | 10,498 |  |  |
|      Income taxes paid (including payments under our          tax agreement with Continental Airlines, Inc.)........................                                                                                                                                                                                                                                                                                                                                                                                                                                             |  | $ | 36,787                              |   |                  | $ | 68,470 |  |  |

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

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

            ExpressJet Holdings, Inc. (“Holdings”) hasstrategic investments in the air transportation sector.  Our principal asset is all of the issued and outstanding shares ofstock of XJT Holdings, Inc., the sole stockholder of ExpressJet Airlines, Inc. (“Airlines”), which operates as“Continental Express”.  Unless the context indicates otherwise, the terms "we," "us" and "our" in this reportrefer collectively to Holdings and its subsidiaries.  Airlines is a regional U.S. air carrier engaged primarily in thebusiness of transporting passengers, cargo and mail, and all of its flying is currently performed on behalf of ContinentalAirlines, Inc. (“Continental”) pursuant to a capacity purchase agreement.  Substantially all of our revenue todate has been received under that agreement.  Airlines is the exclusive regional jet provider for Continental out of NewYork/Newark, Houston and Cleveland and provides additional non-hub service as well.  The capacity purchase agreement coversall of Airlines’ existing fleet and all of its regional jets currently subject to firm aircraft orders.  We areeconomically dependent upon Continental for our operations and cash flows. Airlines has begun its discussions with Continental toreview and revise the scheduled block hour rates for 2006 as per our capacity purchase agreement.  See“Management’s Discussion and Analysis of Financial Condition and Results of Operations – Overview.”

            Airlines owns all of the equity interests of ExpressJetServices, LLC, which provides third-party maintenance services.  We also have invested directly or indirectly, and intend toinvest, in other entities that permit us to maximize the management experience, efficiencies and economies of scale present in oursubsidiaries.

            The accompanying interim consolidated condensed 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, 2004 (the “200410-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 our 2004 10-K for a detailed description of our critical accounting estimates.  The SEC hasdefined critical accounting estimates as the ones that are most important to the portrayal of a company's financial condition andresults of operations and require the company to make its most difficult and subjective judgments, often as a result of the need tomake estimates of matters that are inherently uncertain.

            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 2004 10-K.

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

****

            The accompanying consolidated financial statements includethe accounts of ExpressJet Holdings, Inc. and its subsidiaries.  For the three and six months ended June 30, 2005, weconsolidated the results of operations and financial condition of a European start-up company in which we purchased a minorityinterest in March 2005.  The results of operations of this company are immaterial.  Upon finalization of our analysis ofFinancial Accounting Standards Board Interpretation 46(R) – "Consolidation of Variable Interest Entities (Revised December2003) – an Interpretation of ARB No. 51" ("FIN 46R"), we concluded that this entity is a development stage enterprise anddoes not meet the definition of a variable interest entity.  As a result, we deconsolidated the results of operations andfinancial condition of this entity as of September 30, 2005 and now account for our investment in this entity in accordance withthe equity method of accounting as prescribed by Accounting Principle Board Opinion No. 18, “The Equity Method of Accountingfor Investments in Common Stock” (“APB 18”).

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            For accounting treatment of unconsolidated companies that arenot variable interest entities, see Note 3. 

            As of September 30, 2005, only Airlines met the quantitativethreshold of a reportable segment as defined in Statement of Financial Accounting Standards No. 131, “Disclosures aboutSegments of an Enterprise and Related Information.”  As our consolidated results of operations and financial conditionare substantially all related to Airlines, no separate segment disclosures are required.

**Note 2 *–* Capacity Purchase Agreement**

****

**           ****Rate Resetting Process under the Capacity PurchaseAgreement. ** In September 2005, ****Airlines began negotiations with Continental to adjust the scheduled block hourrates for 2006 as required under the capacity purchase agreement.  See more detailed discussion below in“Management’s Discussion and Analysis of Financial Condition and Results of Operations – Overview.” We cannot predict the outcome of these negotiations.  Under the current agreement, we receive payment for each scheduled blockhour in accordance with a formula designed to provide us with a target operating margin of 10.0%. 

****

**           ** As part of the 2005 rate resetting, Airlines agreed tocap the prevailing margin at 10.0%.  Airlines also now includes previously unreconciled costs within the margin band, althoughit is not reimbursed if these costs are higher and cause its prevailing margin to fall below the 8.5% margin floor.  Airlinesis entitled to receive incentive payments from Continental if its rate of controllable completion factor is higher than itshistorical benchmark; however, Airlines is not required to pay Continental a penalty for controllable completion factors below thehistorical benchmark unless the controllable completion factor falls below 99.5%.  Airlines also receives a smallper-passenger fee and incentive payments for certain on-time departures and baggage handling performance.

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            The table below describes how variations betweenAirlines’ actual costs and the estimated costs reflected in the block hour rates are treated under the capacity purchaseagreement effective January 1, 2005:

| **Fully reconciled costs:** reconciliation payment, including 10% margin, to the full extent actual costs differ fromestimated costs.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  • Fuel and into-plane expenses(1)  • Aircraft rent  • Terminal facility rent  • On-time bonuses and 401(k) company    match under current plans  • Taxes (other than income taxes)  • Passenger liability insurance  • Hull insurance  • War risk insurance  • Landing fees  • Ground handling services                                                                                                                                                     |  • Administrative services provided by    Continental  • Third-party security and screening    expenses  • Substantially all regional jet engine    expenses under current long-term    third-party contracts  • Depreciation and amortization(2)  • Glycol, de-icing, snow removal  • International navigational fees |
| **Costs within the margin band:** if actual expenses in this category are sufficiently different from estimates used in theblock hour rates so that the prevailing margin is less than 8.5% or greater than 10.0%, then a reconciliation payment will be madeby either Continental or Airlines to the other so that this prevailing margin will be 8.5% or 10.0%, as applicable.  If theprevailing margin is less than 8.5% due to impact of certain costs, as described below, or if the prevailing margin is above 10%due to other items(3), no reconciliation payments would be made from either Continental or Airlines. |
|  • Maintenance, materials and repairs not    included above  • Passenger services                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    | • Other rental expenses • Other operating expenses |

| (1) |    | Fuel and fuel tax expense are reconciled to the lower of the actual costs or the agreed-upon caps of 66.0 cents per gallon and5.2 cents per gallon, respectively, based on Airlines’ fuel purchase agreement with Continental.  If the fuel purchaseagreement with Continental were not in place, the fuel cost, including related taxes, would have been $1.88 and $1.68 per gallon,respectively, for the three and nine months ended September 30, 2005. |
|-----|--------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (2) |              | Depreciation is reconciled for assets and capital projects accounted for in the capacity purchase agreement or those approved byContinental outside of the capacity purchase agreement.                                                                                                                                                                                                                                                                               |
| (3) |              | The prevailing margin used to calculate the reconciliation payment does not take into account performance incentive payments,including payments from controllable cancellation performance, litigation costs above a historical benchmark and other costs thatare not included in the block hour rates (or covered by adjustments to them) or are not reasonable and customary in theindustry.                                                                        |

            Certain costs that were unreconciled under the capacitypurchase agreement prior to 2005 now require Airlines to make a reconciliation payment to Continental if the differences cause theprevailing margin to be greater than 10.0%.  However, if the differences cause the prevailing margin to be less than 8.5%,they remain unreconciled.  These costs are:

|        | •  | wages and salaries;                           |
|--------------------------------------|--------------|-----------------------------------------------|
|                                      | •  | benefits not included in the table above; and |
|                                      | •  | corporate headquarters rent costs.            |

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            See “Management’s Discussion and Analysis ofFinancial Condition and Results of Operations – Results of Operations” for a comparison of our operating margin for thethree months ended September 30, 2005 versus the same period ended in 2004.

            For a detailed description of the capacity purchaseagreement, please see Item 1. “Business — Capacity Purchase and Other Agreements with Continental Airlines” inour 2004 10-K.

**Note 3 *–* Investments in Other Entities**

****

            Investments in unconsolidated companies that are not variableinterest entities are accounted for by the equity method of accounting when we have significant influence over the operation of thecompanies as prescribed by APB 18.  The following table describes our current non-controlling interests that are accounted forunder the equity method of accounting:

| **Company**                                         |        | **Percentage of Ownership** |        | **Carrying Amount of Investment (in millions)(4)**   |
|-----------------------------------------------------|--------|-----------------------------|--------|------------------------------------------------------|
|                                                     |   |                             |   |                                                      |
| Wing Holdings, LLC(1)............................   |        | 49%                         |        | $     15.9                       |
| American Composites, LLC(2) ................        |        | 49%                         |        |          1.0 |
| JetX Aviation Limited(3)........................... |        | One share less than 50%     |        |          0.7 |

| (1) |    | We purchased our interest in Wing Holdings, LLC (“Wing Holdings”) in June 2005 for $16.0 million in cash.  Thecarrying amount of our investment exceeded the amount of underlying equity of Wing Holdings by approximately $8.5 million as ofSeptember 30, 2005.  Based on our preliminary assessment of this investment, this difference is currently treated as goodwilland thus is not amortized.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|-----|--------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (2) |              | We purchased our interest in American Composites, LLC (“American Composites”) in July 2005 and land and relatedimprovements from a party related to American Composites for approximately $5.8 million in cash.   $4.8 million of thepurchase price was recorded as land and related improvements and the balance was recorded as our non-controlling interest.  Asof September 30, 2005, the carrying amount of our investment exceeded the amount of underlying equity of American Composites byapproximately $0.1 million.  This difference is treated as goodwill and thus is not amortized.  At the same time, weleased the land and related improvements to American Composites for use in its operation.  The lease is accounted for as anoperating lease in accordance with Statement of Financial Accounting Standard No. 13, “Accounting for Leases”. |
| (3) |              | In March 2005, we purchased our investment in JetX Aviation Limited (“JetX”) for approximately $0.9 million. The carrying amount of our investment exceeded the amount of underlying equity of JetX by approximately $0.5 million as ofSeptember 30, 2005.  This difference is treated as goodwill and thus is not amortized.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| (4) |              | Although no impairment losses on these investments have been recognized, an impairment loss would be recorded whenever a declinein value of an equity investment below its carrying amount was determined to be other than temporary.  In judging “otherthan temporary,” we would consider the length of time and extent to which the fair value of the investment has been less thanthe carrying amount of the equity investment, the near-term and longer-term operating and financial prospects of the equity companyand its longer-term intent of retaining the investment in the entity.                                                                                                                                                                                                                                                                                                        |

            Our proportionate shares of the results of operations fromthese entities are included in the line “Other, net” on the consolidated statements of operations.

            In September 2005, we loaned Wing Holdings $6.5 million undera note due in October 2005.  Wing Holdings used the proceeds of the note as a progress payment to purchase a newaircraft.  The note accrued interest based on the three-month LIBOR plus 1.25% per annum.  The principal and relatedinterest were paid to us in full in October 2005.

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****

**Note 4 *–* Earnings Per Share**

            The following table sets forth the computation of basic anddiluted earnings per share for the three and nine months ended September 30, 2005 and 2004 (in thousands):

|                                                                          |        |   | **Three Months Ended September 30,** |        |   | **Nine Months Ended September 30,** |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---|--------------------------------------|--------|---|-------------------------------------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                  |        |   |                                      |        |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                  |        |   | ****                                 |        |   | ****                                |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                  |        |   | **2005**                             |        |   | **2004**                            |  |  | **2005** |  |  | **2004** |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                  |        |   | ****                                 |        |   | ****                                | ** ** |  | **** |  |  | **** |
| Numerator for basic earnings per share – net      income..................................................                                                                                                                                                                                                                                                                                                        |   | $ | 25,494                               |   | $ | 30,764                              |  | $ | 73,121 |  | $ | 89,144 |
| Income impact of assumed conversion of      convertible debt......................................                                                                                                                                                                                                                                                                                                                      |        |   | 914                                  |        |   | 867                                 |  |  | 2,742 |   |  | 2,637 |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                  |        |   |                                      |        |   |                                     |  |  |  |  |  |  |
| Numerator for diluted earnings per share –      adjusted.................................................                                                                                                                                                                                                                                                                                                         |        | $ | 26,408                               |        | $ | 31,631                              |  | $ | 75,863 |  | $ | 91,781 |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                  |        |   |                                      |        |   |                                     |  |  |  |  |  |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                  |        |   |                                      |        |   |                                     |  |  |  |  |  |  |
| Denominator for basic earnings per share –      weighted average shares.........................                                                                                                                                                                                                                                                                                                                  |        |   | 54,093                               |        |   | 54,236                              |  |  | 54,226 |  |  | 54,212 |
| Employee stock options...............................                                                                                                                                                                                                                                                                                                                                                                                            |        |   | 8                                    |        |   | –                             |  |  | 10 |  |  | 12 |
| Restricted stock..........................................                                                                                                                                                                                                                                                                                                                                                                                       |        |   | 78                                   |        |   | 7                                   |  |  | 49 |  |  | 7 |
| Assumed conversion of convertible debt.........                                                                                                                                                                                                                                                                                                                                                                                                  |        |   | 7,538                                |        |   | 7,538                               |  |  | 7,538 |  |  | 7,538 |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                  |        |   |                                      |        |   |                                     |  |  |  |  |  |  |
| Denominator for diluted earnings per share –      adjusted and assumed conversions..........                                                                                                                                                                                                                                                                                                                      |        |   | 61,717                               |        |   | 61,781                              |  |  | 61,823 |  |  | 61,769 |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                  |        |   |                                      |        |   |                                     |  |  |  |  |  |  |

            We excluded 297,313 and 134,750 shares of restricted stockfrom the weighted average shares used in computing basic earnings per share for 2005 and 2004, respectively, as these shares werenot vested as of the end of the period.

            We adopted the Emerging Issues Task Force Issue No. 04-08— “The Effect of Contingently Convertible Debt on Diluted Earnings per Share” on December 15, 2004.  As aresult, we included the potential common stock equivalents related to our senior convertible notes in our computation of dilutedearnings per share and restated the prior period presentations.

            Weighted average common shares outstanding for dilutedearnings per share calculation include the incremental effect of shares that would be issued upon the assumed exercise of stockoptions and restricted stock not yet vested.  We excluded the following common stock equivalents from our diluted earnings pershare calculations, because their inclusion would have been anti-dilutive:

|        | •  | options to purchase 1.6 million shares of our common stock for the three and nine months ended September 30, 2005, and 1.4million and 1.1 million shares for the three and nine months ended September 30, 2004, respectively.  These options' exerciseprices were greater 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 nine months ended September 30, 2005.                                                                                                                                                                                                                                                                     |

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****

**Note 5 *–* Stock Plans and Awards**

           We continue to account for our stock-based compensationarrangements using the intrinsic value method in accordance with Accounting Principles Board Opinion No. 25 —“Accounting for Stock Issued to Employees” (“APB 25”), and related interpretations.  We have twostock-based compensation plans: the ExpressJet Holdings, Inc. 2002 Stock Incentive Plan (the “Incentive Plan”) and theExpressJet Holdings, Inc. 2003 Employee Stock Purchase Plan (the “ESPP”).

           The Incentive Plan permits us to grant stock options and restrictedstock to our employees and non-employee directors.  Under APB 25, if the exercise price of our stock options equals the fairmarket value of the underlying stock on the date of grant, no compensation expense is recognized.  Since our stock optionshave all been granted with exercise prices that equal fair market value, no compensation expense has been recognized under APB25.  We recognize compensation expense for our restricted stock in accordance with APB 25.  The total compensationexpense to be incurred for each restricted stock grant equals the product of the number of shares issued and the closing price ofour common stock on the issuance date; the expense is recognized over the vesting period of each grant in accordance with themethod specified in Financial Accounting Standards Board Interpretation No 28 — “Accounting for Stock AppreciationRights and Other Variable Stock Option or Award Plans” (“FIN 28”).  Under APB 25, we do not recognizecompensation expense related to the ESPP.

            In January and July 2005, we issued 32,083 and 37,264 sharesof our common stock to our employees pursuant to the ESPP at $10.37 and $7.23 per share, respectively.  In January and July2004, 36,684 and 36,286 shares of our common stock were issued to our employees at $12.75 and $10.32 per share,respectively.

            The following table illustrates the effect on net income andearnings per share assuming the compensation costs for our stock options, restricted stock and ESPP were determined using the fairvalue method, prorated over the vesting periods in accordance with FIN 28, at the grant dates as required under Statement ofFinancial Accounting Standard No. 123 – “Accounting for Stock-Based Compensation” for the three and nine monthsended September 30, 2005 and 2004 (in thousands, except for per share data):

|                                                                                                   |        |   | **Three Months Ended September 30,** |        |   | **Nine Months Ended September 30,** |        |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---|--------------------------------------|--------|---|-------------------------------------|--------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |        |   | ****                                 |        |   | ****                                |        |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |        |   | **2005**                             |        |   | **2004**                            |        |  | **2005** |  |  | **2004** |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |        |   | ****                                 |        |   | ****                                |        |  | **** |  |  | **** |  |
| Net income as reported......................................................                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   | $ | 25,494                               |   | $ | 30,764                              |   | $ | 73,121 |  | $ | 89,144 |  |
| Add:  Total stock-based compensation expense included      in reported net income, net of related tax effects..............                                                                                                                                                                                                                                                                                                                                                                                                                                              |        |   | 275                                  |        |   | 118                                 |        |  | 755 |  |  | 189 |  |
| Deduct:  Total stock-based compensation expense      determined under fair value based method      for all awards, net of related tax effect.............................                                                                                                                                                                                                                                                                                                                                                                       |        |   | (606                                 | )      |   | (595                                | )      |  | (2,093 | ) |  | (1,860 | ) |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |        |   |                                      |        |   |                                     |        |  |  |  |  |  |  |
| Pro forma..........................................................................                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |        | $ | 25,163                               |        | $ | 30,287                              |        | $ | 71,783 |  | $ | 87,473 |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |        |   |                                      |        |   |                                     |        |  |  |  |  |  |  |
| Basic earnings per share                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |        |   |                                      |        |   |                                     |        |  |  |  |  |  |  |
|      As reported..................................................................                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |        | $ | 0.47                                 |        | $ | 0.57                                |        | $ | 1.35 |  | $ | 1.64 |  |
|      Pro forma.....................................................................                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |        | $ | 0.47                                 |        | $ | 0.56                                |        | $ | 1.32 |  | $ | 1.61 |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |        |   |                                      |        |   |                                     |        |  |  |  |  |  |  |
| Diluted earnings per share                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |        |   |                                      |        |   |                                     |        |  |  |  |  |  |  |
|      As reported..................................................................                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |        | $ | 0.43                                 |        | $ | 0.51                                |        | $ | 1.23 |  | $ | 1.49 |  |
|      Pro forma.....................................................................                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |        | $ | 0.42                                 |        | $ | 0.50                                |        | $ | 1.21 |  | $ | 1.46 |  |

            The pro forma effect on net income per share is notrepresentative of the pro forma effects in future periods.

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            In December 2004, the Financial Accounting Standards Board(“FASB”) issued Statement of Financial Accounting Standard No. 123 (Revised 2004) — “Share-BasedPayments” (“SFAS 123R”) which will impact our method of accounting for our stock compensation.  See adetailed description of SFAS 123R below in Note 13.  

            In addition, on November 4, 2005, our board of directorsapproved accelerating the vesting of 669,750 unvested options with exercise prices of greater than $11.00 per share and extendedthe life of 868,500 options that had a five-year term to seven years.  See detailed discussion of this event below in Note13.

**Note 6 – Note Payable to Continental**

            At September 30, 2005, our note payable to Continental,including current maturities, had an outstanding balance of $44.9 million.  The note accrues interest based on the three-monthLIBOR plus 1.25% per annum.  For the three months ended September 30, 2005 and 2004, our interest rates were 4.75% and 2.85%,respectively. 

            The quarterly payment on the note for principal and interestis $27.9 million, payable through the earlier of March 31, 2007 or until the principal balance and any accrued unpaid interest arepaid in full.  We currently expect to pay off this obligation by March 2006.  In September 2004, we made a voluntaryprincipal prepayment of $27.0 million, which reduced our required quarterly principal and interest payments for March 31,2005.  Accordingly, an interest-only payment of $0.9 million was made on March 31, 2005.  On June 30 and September 30,2005, we made our quarterly principal and interest payments totaling $55.8 million, of which $53.9 million is related toprincipal.  The note is an unsecured general obligation and is subordinated in right of payment to all of our future seniorindebtedness.

****

**Note 7 – Other Long-Term Debt**

            On April 1, 2005, Airlines called the sole authorized andoutstanding share of its non-voting Series A Cumulative Mandatorily Redeemable Preferred Stock, par value $.01 per sharefor redemption.  The redemption price, including accrued but unpaid dividends, was approximately $5.0 million.  The sharewas redeemed on April 16, 2005, and the corresponding dividends ceased.  In addition, we received $5.0 million, includingaccrued but unpaid interest income, from the holder of the stock to retire a $5.0 million promissory note held by us.

****

**Note 8 – 4.25% Senior Convertible Notes due 2023**

            As of September 30, 2005 and December 31, 2004, we estimatedthe fair value of our $137.2 million (carrying value) fixed-rate debt to be $117.2 million and $139.1 million, respectively, basedupon quoted market prices. 

**Note 9 – Income Taxes**

            At December 31, 2004, we had federal net operating losscarryforwards of approximately $17.4 million, which expire in 2019.  In September 2005, Continental entered into a finalsettlement agreement with the IRS that included periods when we were included in the consolidated federal income tax return ofContinental.  Our taxable income was not adjusted, but the amount of net operating losses allocated to us was reduced byapproximately $16.4 million.  In accordance with our tax agreement with Continental, we recorded a receivable of approximately$5.7 million from Continental for the reduction of our federal net operating loss carryforwards.  We received the $5.7 millionfrom Continental in October 2005.  Correspondingly, we adjusted our tax accounts to reflect a federal net operating losscarryforward at December 31, 2004 of approximately $1.0 million.

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            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 the tax benefits are not realized by the end of 2018, we will be obligated to pay Continental 100% of anybenefit realized after that date.  Since these payments are solely dependent on our ability to generate sufficient taxableincome to realize these deferred tax assets, they are recorded as an obligation to Continental within the deferred tax assetaccounts, and the portion we may retain in the future is offset by a valuation allowance.  At the time of the initial publicoffering, the valuation allowance and the obligation to Continental offset the step-up in basis of assets in our long-term deferredtax asset account.  During the nine months ended September 30, 2005 and 2004, we made net payments to Continental under thetax agreement of approximately $16.7 million and $53.5 million, respectively.

            The tax agreement requires Continental to reimburse us forany net increase in our cash tax payments resulting from any decreased availability of net operating loss carryovers related to thebasis increase at the time our payment occurs.  The resulting receivable and/or payable is recorded within the deferred taxasset account since its performance is dependent on our ability to generate taxable income.

            No valuation allowance was established on our net operatingloss carryforwards or on our receivable from Continental for reimbursing carryforward losses utilized resulting from the basisincrease because we believe our stand-alone taxable income will be sufficient to utilize substantially all of these assets withinthe next several years.

            We believe that our initial public offering created a changein ownership limitation on the utilization of our federal tax attribute carryforwards, primarily net operating losses. Section 382 of the Internal Revenue Code limits our utilization of these attributes to offset up to approximately $43.3 million ofpost-change taxable income per year.  This limitation did not have any impact on our financial condition during the ninemonths ended September 30, 2005 or 2004.

            Our tax agreement increases our dependence onContinental’s financial condition.  If it is 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 are required to pay additional taxes, interest andpenalties, then we could be adversely affected if Continental were unable to indemnify us under the agreement.

**Note 10 – Preferred Stock**

            On April 7, 2005, Continental contributed 6.1 million sharesof our common stock to its defined benefit pension plan.  As a result, Continental’s ownership of our common shares fellbelow 10%.  We redeemed the Special Voting Preferred Stock held by Continental, which terminated its right to elect a directorto our board of directors.  Continental retained the contractual right to nominate a director to our board pursuant to ourcapacity purchase agreement, but effective October 2005, relinquished this right.

**Note 11 – Stock Repurchase Program**

****

            In July 2005, our board of directors authorized theexpenditure of up to $30 million to repurchase shares of our common stock.  Purchases have been made from time to time in theopen market; the timing of any share repurchases under the program depends on a variety of factors, including market conditions,and may be suspended or discontinued at any time.  Common stock acquired through the program will be available for generalcorporate purposes.  During the three months ended September 30, 2005, we purchased 590,800 shares of our common stock at anaverage cost per share of $9.55.

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**Note 12 – Commitments and Contingencies**

***Purchase Commitments and Contingencies***

******

            As shown in the following table, our fleet consisted of 261regional jets at September 30, 2005.  Aircraft purchase commitments (firm orders) and aircraft options as of September 30,2005 are also shown below.

| **Type**                                                                                                                                                                                                                                         |              | **Total Leased Aircraft** |              | **Firm Orders** |              | **Options** |              | **Seats in Standard Configuration** |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------------|---------------------------|--------------|-----------------|--------------|-------------|--------------|-------------------------------------|
|                                                                                                                                                                                                                                                  |              |                           |    |                 |    |             |    |                                     |
|                                          |    |                           |              |                 |              |             |              |                                     |
|   ERJ-145XR..................                                                                                                                                                                                                          |              | 91                        |              | 13              |              | 100         |              | 50                                  |
|   ERJ-145......................                                                                                                                                                                                                        |              | 140                       |              | —         |              | —     |              | 50                                  |
|   ERJ-135......................                                                                                                                                                                                                        |              | 30                        |              | —         |              | —     |              | 37                                  |
|                                                                                                                                                                                                                                                  |              |                           |              |                 |              |             |              |                                     |
|     Total.........................                                                                                                                                                                                           |              | 261                       |              | 13              |              | 100         |              |                                     |
|                                                                                                                                                                                                                                                  |              |                           |              |                 |              |             |              |                                     |

            During the nine months ended September 30, 2005, we tookdelivery of 16 ERJ-145XR aircraft and expect to take delivery of the remaining 13 ERJ-145 XR aircraft subject to firm ordersthrough the second quarter of 2006.   As of September 30, 2005, the estimated aggregate cost of our firm commitments forEmpresa Brasileira de Aeronautica S.A. (“Embraer”) aircraft was approximately $0.3 billion.  We will not have anyobligation to take any of the aircraft under firm commitments if they are not financed by a third party and leased to eitherContinental or us.  We also have options to purchase an additional 100 Embraer regional jets.  In October 2005,Continental declined its right to add any of these option aircraft to the capacity purchase agreement.  We continue to havethe option to take delivery of all or a portion of the aircraft outside of the capacity purchase agreement, but have not made adecision as to whether we will do so. 

            Under our power-by-the-hour agreement with Rolls RoyceCorporation (“Rolls Royce”), we are obligated to acquire up to three spare engines for approximately $9.0 million tosupport our existing aircraft and the remaining 13 aircraft on firm order.  We are evaluating ways to satisfy this obligationthrough alternative financing arrangements with third-parties or amendments to the agreement.  We currently have no financingin place for these spare engines.

***Collective Bargaining Agreements***

            Airlines’ pilots, mechanics, dispatchers and flightattendants, comprising approximately 70% of our employees, are covered by collective bargaining agreements.  The contractswith the pilots, dispatchers and mechanics will become amendable in December 2008, July 2009 and August 2009, respectively. Airlines’ contract with its flight attendants, who are represented by the International Association of Machinists andAerospace Workers (“IAM”) and constitute approximately 16% of our employees, became amendable in December 2004. The IAM applied for federal mediation in September 2005.  Our negotiations with the IAM were temporarily placed in recess bythe mediator, with no specified deadlines or dates for continued negotiations.  We believe that a mutually acceptableagreement can be reached with Airlines’ flight attendants, although the ultimate outcome of these negotiations is unknown atthis time. 

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***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 conditions.

            In October 2005, we gave a guaranty, limited to $1.5 million,for a subsidiary of Wing Holdings relating to a promissory note and mortgage agreement for the purchase of an aircraft.  Underthe agreement, we guarantee payment of the principal and interest due under the note and compliance with the terms and conditionsof the note and the mortgage agreement.  For every $1.0 million of principal prepaid under the note, our obligation under theguaranty is reduced by $0.5 million.  This transaction did not change the accounting treatment of our investment in WingHoldings.

**Note 13 – Recently Issued Accounting Standards**

            In December 2004, the FASB issued SFAS 123R, which requirescompanies to measure the cost of employee services received in exchange for an award of equity instruments (typically stockoptions) based on the grant-date fair value of the award.  The fair value is to be estimated using an option-pricingmodel.  The resulting cost will be recognized over the period during which an employee is required to provide service inexchange for the award, usually the vesting period.  Under the original SFAS 123, this accounting treatment was optional withpro forma disclosures required.

            We are required to adopt SFAS 123R no later than January 1,2006.  It will be effective for all awards granted after that date and for the unvested portion of awards granted prior to theadoption date.  The expense that will be recognized with respect to such unvested awards will be based on the grant-date fairvalue and vesting schedule of those awards used in calculating the pro forma disclosures required under SFAS 123 and presented inNote 5.  We anticipate that the impact of adopting SFAS 123R on our statement of operations will be similar to the pro formaimpact of SFAS 123 presented in Note 5.  Adoption of SFAS 123R will not affect our overall financial position orliquidity.

            On November 4, 2005, our board of directors approvedaccelerating the vesting of 669,750 unvested options currently held by employees, including executive officers, with exerciseprices greater than $11.00 per share and extended the term of 868,500 options that had a five-year term to seven years.  Theseoptions were and remain out of the money, and the acceleration and extension were effective immediately.  No options held bynon-employee directors were subject to acceleration or extension.  The acceleration of vesting will reduce compensationexpense upon the adoption of SFAS 123R.  We estimate that the maximum reduction, based on our implementation date of January1, 2006, will be approximately $3.1 million.  We will report this future compensation expense in our 2005 pro forma footnotedisclosures, as permitted under the transition guidance provided by the FASB.   

 

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**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 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 our capacity purchase agreement withContinental; our dependence on Continental’s financial and operational stability; our aircraft and facility leases withContinental; our ability to implement our growth strategy; our ability to enhance the value of our investments; certain taxmatters; deliveries of additional aircraft; flight disruptions as a result of operational matters; regulatory developments andcosts, including the costs and other effects of enhanced security measures and other possible regulatory requirements; andcompetition and industry conditions.  For further discussion of these risks, please see the “Risk Factors” sectionin our 2004 10-K.  The statements in this report are made as of November 8, 2005, and the events described in theforward-looking statements might not occur or might occur to a materially different extent than described in this report.  Weundertake no duty to update or revise any of our forward-looking statements, whether as a result of new information, future eventsor 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.

****

**OVERVIEW**

***Recent Events***

            **Financial Review.**  During the three months endedSeptember 30, 2005, Airlines operated at a 99.1% controllable completion factor, which excludes cancellations due to weather andair traffic control, and an overall completion factor of 96.0%.  These results were negatively impacted by 1,296 flightscanceled for weather related to Hurricane Rita and 963 controllable cancellations due to resource availability, also duringHurricane Rita.  We paid a performance penalty to Continental of approximately $0.8 million, net of incentives earned duringJuly and August 2005, because our controllable completion factor fell below the minimum controllable completion factor benchmark of99.5%, as defined in the capacity purchase agreement.  As a result, our operating margin fell below 10% to 9.6%. 

            In addition, during the third quarter, we recorded areduction in income tax expense of approximately $1.2 million for interest related to payments made to Continental under our taxagreement for 2003 and 2004 and lowered our 2005 estimated annual effective tax rate accordingly.  This deduction is imputedunder applicable tax law to take into account the time value between the inception of the tax agreement and the actual date ofpayment to Continental under the agreement (see Note 9 above).  For financial reporting purposes, all payments under the taxagreement are reflected as part our of income tax expense.  The impact on our effective tax rate in future periods will dependon the timing and the amount of payments made to Continental under the tax agreement.

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**            Fleet. ** We took delivery of five new ERJ-145XRaircraft during the three months ended September 30, 2005.  These 50-seat regional jets are capable of flights ofapproximately 1,500 miles.  With these deliveries, our current fleet consists of 91 ERJ-145XR, 140 ERJ-145 and 30 ERJ-135aircraft.  Our regional jets’ operational capabilities allow us to add service to new markets, expand service inexisting markets and ultimately have allowed Continental to broaden service from its major hub cities, as well as selectcommunities, thus contributing to Continental’s growth options.  Our block hours increased 15.2% during the three monthsended September 30, 2005, as compared to the same period in 2004.  We expect to receive five new ERJ-145XR aircraft in thefourth quarter of 2005 and eight new ERJ-145XR aircraft in 2006.

**           ****Business Ventures.**  Our consistentearnings and improving balance sheet have helped position us for new opportunities.  We continue to seek strategicopportunities that leverage our internal strengths, such as our technical, training and fleet and asset management capabilities, todevelop and implement future business strategies.  The following is a description of the investments we made in 2005 (see Note3 above for the accounting treatment of each of the investments):

|              | •  | In July 2005, we purchased a non-controlling interest in American Composites and land and related improvements (from a partyrelated to American Composites) for approximately $5.8 million in cash.  $4.8 million of the purchase price was recorded asland and related improvements and the balance was recorded as our non-controlling interest.  American Composites providesmaintenance, repair and overhaul services of aircraft composite and sheet metal parts and structures to Airlines and otherparties.  At the same time, we leased the land and related improvements to American Composites for use in its operation. The lease is accounted for as an operating lease. |
|--------------------------------------------|--------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|         | •  | In June 2005, we purchased a non-controlling interest in Wing Holdings for $16.0 million.  Wing Holdings and itssubsidiaries are a full-service aviation company specializing in high-quality aircraft charter and management, airframemaintenance, avionics installations and aircraft painting.  In September 2005, we loaned Wing Holdings $6.5 million under anote due in October 2005.  Wing Holdings used the proceeds of the note as a progress payment to purchase a new aircraft. The note accrued interest based on the three-month LIBOR plus 1.25% per annum.  The principal and related interest were paidto us in full in October 2005.                           |
|                                            | •  | In March 2005, we purchased a non-controlling interest in JetX for $0.9 million.  JetX is a European start-up company thatseeks to provide regional jet service to European air carriers.  The start-up company is currently attempting to market thisconcept, but is not yet a certificated airline and does not yet have a commitment from an air carrier.                                                                                                                                                                                                                                                                                                                              |

            During the third quarter of 2005, we also announced that ourExpressJet Services, LLC subsidiary and ExpressJet Airlines’ Training Services division received third-party repair andtraining certificates, respectively, from the Federal Aviation Administration.  We anticipate that these certifications willallow us to generate additional revenues as we provide outsourced services to other airlines or aviation-related entities.

            In October 2005, we began construction of an aircraftpainting facility in Mexico, on which we expect to spend approximately $3.7 million during the fourth quarter of 2005.  Thetotal cost of the facility is expected to be $8.2 million, and we expect it to be completed by the second quarter of 2006.  Webelieve the services to be provided by this facility will enhance the product offerings of our current subsidiaries andinvestments.

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            **Stock Repurchase Program.**  In July 2005, ourboard of directors authorized the expenditure of up to $30 million to repurchase shares of our common stock.  Purchases havebeen made from time to time in the open market; the timing of any share repurchases under the program depends on a variety offactors, including market conditions, and may be suspended or discontinued at any time.  Common stock acquired through theprogram will be available for general corporate purposes.  During the three months ended September 30, 2005, we purchased590,800 shares of our common stock at an average cost per share of $9.55.

**            Our Liquidity. ** As of September 30, 2005, we had$201.3 million in cash and cash equivalents, excluding $6.4 million in restricted cash, which is used as collateral for ourworkers’ compensation coverage.  Our cash flows from operations were sufficient to cover our capital resource andliquidity requirements.  We made principal and interest payments totaling $27.9 million on our note payable to Continentalduring the three months ended September 30, 2005. 

            **Relationship with Continental.**  Continentalcurrently owns 8.6% of our common stock and has the contractual right to nominate a director to our board pursuant to the capacitypurchase agreement.  However, effective October 2005, Continental relinquished this right.  Continental has indicatedthat it intends to dispose of some or all of its remaining interest in our common stock, subject to market conditions.  Basedon current information and our capacity purchase agreement with Continental, we do not believe that Continental’s dispositionof its remaining ownership interest in us will have an adverse impact on our results of operations or financial position.

            **Labor. ** Approximately 70% of our employees,representing four distinct groups, are covered by Airlines’ collective bargaining agreements.  The only labornegotiation Airlines has not completed is with its flight attendants, which represent approximately 16% of our employees. Theflight attendant contract became amendable in December 2004.  The IAM applied for federal mediation in September 2005. Our negotiations with the IAM have been temporarily placed in recess by the mediator, with no specified deadlines or dates forcontinued negotiations.  We believe that a mutually acceptable agreement can be reached with Airlines’ flightattendants, although the ultimate outcome of these negotiations is unknown at this time.  As contracts become amendable, it isour policy to accrue for any expected increase in costs related to the new contracts.  However, the actual outcome coulddiffer from our estimates.

***Outlook***

****

**           ****Operational Guidance for 2005.**  Thefollowing table summarizes our current guidance for block hours, available seat miles and departures: 

|                                                                                                                                                                                                                                                                                                  |        | **Fourth Quarter 2005** |        | **Fiscal Year 2005** |        |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------|--------|----------------------|--------|
|                                                  |   |                         |   |                      |   |
| Block Hours(1) (3)........................                                                                                                                                                                                                                                                       |        | 13% — 15%         |        | 13% — 15%      |        |
| Available Seat Miles(2) (3)............                                                                                                                                                                                                                                                          |        | 14% — 16%         |        | 14% — 16%      |        |

| (1) |    | Block hours are the hours from gate departure to gate arrival.                                                            |
|-----|--------------|---------------------------------------------------------------------------------------------------------------------------|
| (2) |         | Available seat miles are the number of passenger seats multiplied by the number of scheduled miles those seats are flown. |
| (3) |         | Growth based on expected year-over-year increases.                                                                        |

            We expect our departures for the fourth quarter of 2005 to beapproximately 116,700.  However, since Continental controls and is responsible for our scheduling, our actual performancedetailed above can be materially different from our estimates. 

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**            Rate Resetting Process under the Capacity PurchaseAgreement**.  We have begun negotiations with Continental to adjust the scheduled block hour rates for 2006 as requiredunder the capacity purchase agreement.  Under the current agreement, we receive payment for each scheduled block hour inaccordance with a formula designed to provide us with a target operating margin of 10.0%.  As required by the agreement, wehave provided Continental with our proposed 2006 budgeted costs in order to negotiate 2006 block hour rates. Although the agreementprovides that, if we cannot reach an agreement with Continental on the 2006 rates by November 1 the disagreement will be submittedto a third party for arbitration, we have agreed to extend this date to November 15.

            In addition to negotiating with respect to 2006 rates,Continental recently delivered a proposal to us to revise the structure of the capacity purchase agreement beginning January 2006that would significantly reduce the amount it pays us for providing regional air service.  Such a revision is not contemplatedin the current agreement, and we are not contractually obligated to agree to any of the proposed changes.  If we do not agreeto any revisions to the agreement prior to January 2006, the new rates that are negotiated or arbitrated as described above will beeffective through December 31, 2006.

            The capacity purchase agreement has a scheduled terminationdate of December 31, 2010, subject to renewal by Continental through December 31, 2030.  Because Continental could currentlygive us 12-18 months’ notice that it is terminating the agreement (as early as January 1, 2007), and because we believe thatit might be in stockholders’ best interests that the agreement not be terminated early, we have informed Continental that wehave reviewed their proposal and analyzed its economic impact on our operating results and financial condition.  We haveoffered to negotiate with Continental to explore the possibility of reaching an agreement on mutually acceptable amendments to thecapacity purchase agreement.  However, we cannot predict the outcome of any negotiations with Continental and there can be noassurance that we will reach an agreement.  If we do reach an agreement, we cannot predict the impact that mutually-acceptableamendments might have on our operating results and financial condition.  Because of these uncertainties, we will not provideany disclosures regarding the progress of any such negotiations.

            If these negotiations are not successful, Continental couldgive us an early termination notice.  We have previously disclosed the terms and conditions of, as well as the possible riskfactors associated with, an early termination.  See our 2004 10-K at “Item 1. Business—Capacity Purchase Agreementand Other Agreements with Continental Airlines” and “—Risk Factors—Factors that May Affect our FutureOperating Results and Financial Condition,” including several risk factors discussing the possible early termination of thecapacity purchase agreement.

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            In addition, Continental has the ability to reduce its levelof commitment and utilization of our aircraft under the agreement.  Continental can provide, at any time, 12-months’notice of its intention to reduce the number of aircraft covered by the agreement.  Under this provision, Continental isentitled to decline up to 25%, over any rolling three-year period, of our delivered aircraft under an agreed methodology.  Asof November 8, 2005, we have not received any reduction or termination notices.  If Continental reduces its commitment orutilization of our aircraft under the capacity purchase agreement, our results of operations and financial condition could beadversely affected.  There can be no assurance that such circumstances will not occur in the future.

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**            Our Dependence on Continental.**  Despite ourefforts to contain costs and improve reliability, we are directly affected by the financial and operational stability ofContinental because we depend on Continental’s ability to make payments to us under our capacity purchase and otheragreements, which continue to be the predominant source of our revenue.  Continental has had substantial losses sinceSeptember 11, 2001 and has indicated that losses of this magnitude are not sustainable.  In addition, Continental hasannounced that its current cost structure is not competitive within the weak domestic yield environment, caused in large part bythe fierce competition from low-cost carriers and record high fuel prices.  Furthermore, Continental may face strongercompetition from major carriers that have filed for bankruptcy protection, which may allow them to achieve substantial costreductions, reduce or discharge debt, lease and pension obligations.  The current U.S. domestic network carrier financialenvironment continues to be poor and could deteriorate further as a result of these factors.

            Continental has indicated that under current conditions,absent adverse factors outside of its control, such as additional terrorist attacks, hostilities involving the United States, afurther delay in the restart of the Gulf Coast refineries as a result of Hurricane Rita and Hurricane Katrina or furthersignificant increases in crude oil prices, its existing liquidity and projected 2006 cash flows will be sufficient to fund currentoperations and other financial obligations through 2006.  However, it has significant financial obligations due in 2007 andthereafter, and it is possible that Continental will have inadequate liquidity to meet those obligations if the current adversedomestic fare environment for network carriers does not improve materially, fuel prices remain high and it is unable to increaseits revenue or decrease costs considerably or raise additional liquidity through financing activities and/or by sellingnon-strategic assets.

            Additionally, Continental leases from third parties asubstantial portion of the aircraft and airport facilities that it subleases to us.  If Continental breaches or otherwisefails to perform under these leases, we could lose our rights under the subleases, and our continued access to our aircraft andairport facilities would then depend on our ability to negotiate direct agreements with the third-party lessors.  For acurrent discussion of Continental's results of operations, please see its quarterly report on Form 10-Q for the quarter endedSeptember 30, 2005 filed with the SEC.

**            Recently Issued Accounting Standards.**   Pleasesee detailed description of this new accounting standard at “Item 1. Financial Statements – Notes to ConsolidatedFinancial Statements – Note 13.”

**RESULTS OF OPERATIONS**

            The following discussion provides an analysis of our resultsof operations and reasons for material changes therein for the three and nine months ended September 30, 2005, compared to thecorresponding period ended September 30, 2004.

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***Comparison of Three Months Ended September 30, 2005 to Three Months Ended September 30, 2004***

******

***General***

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            Our operating margin for the three months ended September 30,2005 was 9.6% as compared to 13.4% for the same period in 2004.  The table below reconciles and compares the impact thatvarious components of the capacity purchase agreement had on operating margin for the three months ended September 30, 2005 and2004:

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          | **Three(6) Months Ended September 30,** |        |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-----------------------------------------|--------|
|                                                                                                      | ****                                    |        |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          | **2005**                                |        |  | **2004** |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          | ****                                    |        |  | **** |  |
| Operating margin per the capacity purchase agreement(1).................                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 | 10.0                                    | %      |  | 11.5 | % |
| Adjustments:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |                                         |   |  |  |   |
|      Add: excludedlabor(2)...............................................................                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       | —                                 | %      |  | 1.2 | % |
|      Add: other costs excluded from the capacity purchase         agreement(3).........................................................................                                                                                                                                                                                                                                                                                                                                                                                                 | (0.2                                    | %)     |  | 0.0 | % |
|      Add: incentives (penalties)(4) and other revenues excluded         from the capacity purchase agreement...................................                                                                                                                                                                                                                                                                                                                                                                                                         | (0.2                                    | %)     |  | 0.7 | % |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |                                         |        |  |  |  |
| Actual operating margin as reported(5).............................................                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      | 9.6                                     | %      |  | 13.4 | % |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |                                         |        |  |  |  |

| (1) |    | Under the capacity purchase agreement, the operating margin for 2004 was to be between 8.5% and 11.5% each quarter, but excludedthe effect of any unanticipated changes in most labor costs, performance incentive payments and miscellaneous revenues and costsrelated to services provided to other customers.  This margin cap was set at 10.0% effective January 1, 2005, includingunanticipated changes in labor costs, to the extent the results do not drive the margin below the margin floor (8.5%). Airlines can continue to receive incentive payments, which may bring our operating margin above 10%. |
|-----|--------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (2) |              | Excluded labor impact on operating margin is only related to the operating margin pursuant to the capacity purchase agreementfor the 2004 calculation.                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| (3) |              | These expenses represent costs that are not deemed as part of underlying costs related to the capacity purchase agreement suchas stock compensation expenses and costs related to investments in other entities.                                                                                                                                                                                                                                                                                                                                                                                                             |
| (4) |              | Airlines paid a performance penalty because its controllable completion factor (which excludes weather and air traffic controlcancellations) was 99.1% for the three months ended September 30, 2005, as compared to the minimum controllable completion factorbenchmark of 99.5% for the period.  These results were negatively impacted by controllable cancellations as a result ofresource availability during Hurricane Rita.                                                                                                                                                                                      |
| (5) |              | We expect our operating margin for 2005 to be approximately 10.0%.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| (6) |              | Since the settlement for the operating margin is calculated on a quarterly basis, year-to-date calculation is notmeaningful.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |

            In addition, as part of the 2005 annual rate resettingprocess and as a result of Continental’s cost-saving initiatives, the costs for Continental to provide us with certainservices currently classified as outside services (such as technology infrastructure and other services) and ground handling werereduced by approximately $13.3 million and $35.1 million, respectively, for the three and nine months ended September 30, 2005 ascompared to the same periods in 2004.  As these are fully reconciled costs, our operating income for the same periods in 2005was reduced by approximately $1.5 million and $3.9 million, respectively, as a result of these cost reductions.

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***Operating Expenses***

            Although our operations, as measured by block hours, grewover 15.2%, wages, salaries and related costs only increased by 5.6%.  This is as a result of our continuous focus on managingour labor costs to remain competitive with our peers.  For the three months ended September 30, 2005, wages increased by $3.2million, or 4.9%, as compared to the same period in 2004.  In addition, we incurred approximately $1.1 million higher employeebenefit costs, such as medical coverage, workers’ compensation costs, profit sharing and 401(k) expenses during the thirdquarter of 2005. 

            The increase in aircraft fuel expense and related taxesduring the three months ended September 30, 2005, when compared to the same period in 2004, was due to a 13.8% increase in fuelconsumption.  Consumption rose primarily due to a 15.2% increase in block hours.  Under the capacity purchase agreementand the related fuel purchase agreement with Continental, we incur a fuel price and fuel tax equal to the lower of the actual costof fuel and fuel tax or the agreed-upon caps.  Our caps on fuel and fuel tax are 66.0 cents and 5.2 cents per gallon,respectively, for both 2005 and 2004.  Until the termination of the capacity purchase agreement and the fuel purchaseagreement, our future fuel expense related to all aircraft covered under the capacity purchase agreement will be the lower of theactual cost of fuel and fuel tax or 71.2 cents per gallon.

            Approximately $4.9 million of the increase in maintenance,materials and repairs for the three months ended September 30, 2005, when compared to the same period in 2004, was due to a 14.4%increase in flight hours and a 3.0% increase in rate-per-flight-hour related to our power-by-the-hour contracts.  For thethree months ended September 30, 2005, approximately 72.7% of our maintenance, materials and repairs cost consisted ofpower-by-the-hour expense.  We expect our future maintenance, materials and repairs expense, adjusted for volume and furtherfleet aging, to mirror our current cost structure.

            Approximately $1.7 million of the increase in depreciationwas due to a charge that was taken in September 2005 to reduce the value of our fuel nozzles, which is part of our spare parts andsupplies to net realizable value.  This decrease in net realizable value is due to the installation of more technologicallyadvanced fuel nozzles on our aircraft causing the market value of our older fuel nozzles to decline significantly.  Asdepreciation is a fully reconciled cost under the capacity purchase agreement, the impact on pre-tax income was immaterial.

***Comparison of Nine Months Ended September 30, 2005 to Nine Months Ended September 30, 2004***

******

***Operating Expenses***

            Although our operations, as measured by block hours, grewover 13.7% for the nine months ended September 30, 2005 as compared to 2004, wages, salaries and related costs only increased by7.8%.  This is as a result of our continuous focus on managing our labor costs to remain competitive with our peers.  Forthe nine months ended September 30, 2005, wages increased by $11.0 million, or 5.8%, as compared to the same period in 2004. In addition, we incurred approximately $6.6 million higher employee benefit costs, such as medical coverage, workers’compensation costs, profit sharing and 401(k) expenses for the nine months ended September 30, 2005.

            The increase in aircraft fuel expense and related taxesduring the nine months ended September 30, 2005 as compared to the same period in 2004 was due to a 13.2% increase in fuelconsumption as a result of 13.7% higher block hours flown.

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            Approximately $16.7 million of the increase in maintenance,materials and repairs during the nine months ended September 30, 2005, as compared to the same period in 2004, was due to a 14.0%increase in flight hours and a 6.6% increase in rate-per-flight-hour related to our power-by-the-hour contracts.  Thisincrease is mainly attributable to an amendment to our power-by-the-hour agreement with Rolls-Royce that became effective in May2004.  The remaining change in maintenance, materials and repairs was due to an increase in general maintenance expense tosupport the continuing growth and aging of our fleet.

            The increase in other rentals and landing fees during thenine months ended September 30, 2005, when compared to the same period in 2004, was primarily due to a $6.6 million increase inlanding fees caused by an 11.5% increase in landing weights and 4.0% increase in rates per landing weight mostly due to higherrates at Continental’s hubs.  In addition, our facility rent increased by approximately $3.1 million primarily as aresult of a 15.0% rate increase at various stations.  Non-aircraft rental also increased by $1.0 million as a result ofincreased rental of flight simulator time for training.

            Approximately $1.7 million of the increase in depreciationwas due to a charge that was taken in September 2005 to reduce the value of our fuel nozzles, which is part of our spare parts andsupplies to net realizable value.  As depreciation is a fully reconciled cost under the capacity purchase agreement, theimpact on pre-tax income was immaterial.

            The decrease in other operating expenses for the nine monthsended September 30, 2005 as compared to the same period in 2004 is due to the following:

|              | •  | $11.1 million decrease in security and miscellaneous facility fees as a result of the 2005 rate-resetting under the capacitypurchase agreement; |
|--------------------------------------------|--------------|-------------------------------------------------------------------------------------------------------------------------------------------------|
|         | •  | $4.0 million charge for settlement of a claim by Continental for indemnification under the capacity purchase agreement was madein 2004;         |
|                                            | •  | $1.9 million payment to Continental to purchase an engine we damaged beyond repair in 2004;                                                     |
|                                            | •  | partially offset by $3.9 million increase in international navigational charges; and                                                            |
|                                            | •  | $2.6 million increase in crew related charges, such as per diem and hotel cost, as a result of increased flight operations.                     |

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***Certain Statistical Information***

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

|                                                                   |        | **Three Months Ended September 30,** |   |        |             |   | **Nine Months Ended September 30,** |      |          |             |   |
|-------------------------------------------------------------------|--------|--------------------------------------|---|--------|-------------|---|-------------------------------------|------|----------|-------------|---|
|                                                                   |        | ****                                 |   |        |             |   | ****                                |      |          |             |   |
|                                                                   |        | **2005**                             |   |        | **2004**    |   | **Increase/ (Decrease)**            |      | **2005** |             |   | **2004** |  |  | **Increase/ (Decrease)** |
|                                                                   |        |                                      |   |        |             |   |                                     |      |          |             |   |  |  |  |  |  |  |
| Revenue passenger miles (millions)(1).....                        |        | 2,384                                |   |        | 1,999       |   | 19.3                                | %    |          | 6,582       |   |  | 5,447 |   |  | 20.8 | % |
| Available seat miles (millions)(2).................               |   | 3,112                                |   |   | 2,695       |   | 15.5                                | %    |          | 8,878       |   |    | 7,697 |  |  | 15.3 | % |
| Passenger load factor(3)................................          |        | 76.6                                 | % |        | 74.2        | % | 2.4                                 | pts  |     | 74.1        |   |  | 70.8 | % |   | 3.3 | pts |
| Block hours(4)..................................................  |        | 214,984                              |   |        | 186,539     |   | 15.2                                | %    |          | 613,684     |   |  | 539,695 |  |  | 13.7 | % |
| Departures....................................................... |        | 116,329                              |   |        | 103,994     |   | 11.9                                | %    |          | 334,452     |   |  | 300,883 |  |  | 11.2 | % |
| Operating cost per ASM (cents)(5)................                 |        | 11.42                                |   |        | 12.40       |   | (7.9                                | %)   |          | 11.71       |   |  | 12.60 |  |  | (7.1 | %) |
| Operating cost per block hour (dollars)(6)..                      |        | 1,653                                |   |        | 1,791       |   | (7.7                                | %)   |          | 1,694       |   |  | 1,798 |  |  | (5.8 | %) |
| Average fuel cost per ASM (cents)(7)...........                   |        | 1.77                                 |   |        | 1.79        |   | (1.1                                | %)   |          | 1.77        |   |  | 1.80 |  |  | (1.7 | %) |
| Average price per gallon of fuel (cents)(7)..                     |        | 71.20                                |   |        | 71.20       |   | -                                   |      |          | 71.20       |   |  | 71.20 |  |  | - |  |
| Fuel gallons consumed (millions)..............                    |        | 77.3                                 |   |        | 67.9        |   | 13.8                                | %    |          | 220.1       |   |  | 194.4 |  |  | 13.2 | % |
| Average length of aircraft flight (miles).......                  |        | 548                                  |   |        | 533         |   | 2.8                                 | %    |          | 544         |   |  | 525 |  |  | 3.6 | % |
| Actual aircraft in fleet at end of period.........                |        | 261                                  |   |        | 240         |   | 8.8                                 | %    |          | 261         |   |  | 240 |  |  | 8.8 | % |
| Average daily utilization of each aircraft(8)..                   |        | 9 hr 2 min                           |   |        | 8 hr 33 min |   | 5.7                                 | %    |          | 8 hr 53 min |   |  | 8 hr 31 min |  |  | 4.5 | % |
| Controllable completion factor(9).................                |        | 99.1                                 | % |        | 99.9        | % | (0.8                                | pts) |          | 99.6        | % |  | 99.9 | % |  | (0.3 | pts) |
| Completion factor...........................................      |        | 96.0                                 | % |        | 98.2        | % | (2.2                                | pts) |          | 97.6        | % |  | 98.4 | % |  | (0.8 | pts) |

| (1) |    | Revenue passenger miles is the number of scheduled miles flown by revenue passengers.                                                                                                                                                                                                                           |
|-----|--------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (2) |              | Available seat miles represent the number of seats available for passengers multiplied by the number of scheduled miles thoseseats are flown.                                                                                                                                                                   |
| (3) |              | Passenger load factor is revenue passenger miles divided by available seat miles.                                                                                                                                                                                                                               |
| (4) |              | Block hours are the hours from gate departure to gate arrival.                                                                                                                                                                                                                                                  |
| (5) |              | Operating cost per available seat mile is operating costs related to our flight operations divided by available seat miles.                                                                                                                                                                                     |
| (6) |              | Operating cost per block hour is operating costs related to our flight operations divided by block hours.                                                                                                                                                                                                       |
| (7) |              | Fuel cost used in the calculations includes cost of fuel and related fuel tax.  Airlines incur fuelexpense and fuel tax equal to the lower of the actual cost or an agreed-upon cap of 66.0 cents per gallon and 5.2 cents per gallon,respectively, based on our fuel purchase agreement with Continental. |
| (8) |              | Average daily utilization of each aircraft is the average number of block hours per day that an aircraft in revenue service isoperated (from gate departure to gate arrival).                                                                                                                                   |
| (9) |              | Controllable completion factor is the actual number of completed flights, plus flights cancelled due to weather and air trafficcontrol, divided by the number of scheduled flights.                                                                                                                             |

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

            We remain committed to providing competitively pricedservices by controlling our costs; however, we believe that our costs may increase in the future due to:

|         | •       | changes in wages, salaries and related fringe benefit 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 new aircraft are delivered, to the extent these aircraft are not covered by the capacitypurchase agreement or if Continental were to declare bankruptcy or otherwise default under the current financing arrangements;and                                      |
|                                            | •  | changes in the cost of services provided by Continental at fixed rates under our capacity purchase and other agreements, whichmay be renegotiated.  Under these agreements, if we cannot reach an agreement with Continental, the dispute will be submittedto a third party for arbitration. |

            In the short-term, higher costs would generate higherrevenues; however, in the long-run, failure to control our costs would prevent us from remaining competitive and limit ouropportunities to attract additional partners or to take advantage of strategic opportunities as they present themselves.

**LIQUIDITY AND CAPITAL COMMITMENTS**

***Operating Activities***

            Our primary source of liquidity is the cash flow provided byAirlines’ operations.  For the nine months ended September 30, 2005 and 2004, our operations provided cash flow of $96.5million and $115.5 million, respectively.  Although our operations, as measured by ASMs, grew over 15.3%, our costs have notincreased ratably due to our efforts to exploit the efficiency of our all-jet fleet with almost 100% commonality from the enginesto the flight deck and our focus on cost-saving initiatives.  We continuously endeavor to provide cost-effective services toContinental.  However, we cannot ensure that our future costs will not increase significantly due to factors beyond ourcontrol.  Please see “—Future Costs” above.

***Investing Activities***

            During the nine months ended September 30, 2005, our capitalexpenditures were $14.4 million.  For the remainder of the year, we expect capital expenditures for fleet (primarily relatingto spare parts and engines) and non-fleet (primarily relating to facility improvements, maintenance and ground equipment) to beapproximately $7.2 million, of which $3.7 million is related to the construction of our paint facility in Mexico.  Theremainder is to support our planned fleet deliveries and the increase in our flight schedules under our capacity purchase agreementwith Continental.

            In June 2005, we purchased a non-controlling interest in WingHoldings for $16.0 million.  Wing Holdings is a full-service aviation company specializing in high-quality aircraft charterand management, airframe maintenance, avionics installations and aircraft painting.

            In July 2005, we purchased a non-controlling interest inAmerican Composites and land and related improvements (from a party related to American Composites) for approximately $5.8 millionin cash.  $4.8 million of the purchase price was recorded as land and related improvements and the balance was recorded as ournon-controlling interest.  At the same time, we leased the land and related improvements to American Composites for use in itsoperation through an operating lease.

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            During the three months ended September 30, 2005, wepurchased 590,800 shares of our common stock at an average cost per share of $9.55.

            In September 2005, we loaned Wing Holdings $6.5 million undera note due in October 2005.  Wing Holdings used the proceeds of the note as a progress payment to purchase a newaircraft.  The note accrued interest based on the three-month LIBOR plus 1.25% per annum.  The principal and relatedinterest under the note were paid to us in full in October 2005.

***Financing Activities***

******

            During the nine months ended September 30, 2005, we met allour debt requirements.  In September 2004, we made a voluntary principal prepayment of $27.0 million on our note payable toContinental, which reduced our required quarterly principal and interest payments for March 31, 2005.  Accordingly, on March31, 2005, we made a $0.9 million interest-only payment on this note.  On September 30, 2005, we made our quarterly principaland interest payment of $27.9 million, of which $27.1 million is related to principal.  We currently expect to pay off thisobligation by March 2006. 

**           ** There is no covenant under any of our long-term debtagreements that restricts our ability to undertake additional debt or equity financing.

            In January and July 2005, we issued 32,083 and 37,264 sharesof our common stock pursuant to the ESPP.  The total proceeds received were $0.3 million for each issuance.

            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***

            As of September 30, 2005, the estimated aggregate cost of ourfirm commitments for Embraer regional jets was approximately $0.3 billion, which relates to delivery of an additional 13 aircraftthrough 2006.  We will not have any obligation to take any of the aircraft under firm commitments if they are not financed bya third party and leased to either Continental or us.  In addition, as of September 30, 2005, under our power-by-the-houragreement with Rolls Royce, we are obligated to acquire up to three spare engines for approximately $9.0 million to support ourexisting aircraft and the remaining 13 aircraft on firm order.  We are evaluating ways to satisfy this obligation throughalternative financing arrangements with third-parties or amendments to the agreement.  We currently have no financing in placefor these spare engines.

            We also 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 capacity purchaseagreement.  We continue to have the option to take delivery of all or a portion of the aircraft outside of the capacitypurchase agreement, but have not made a decision as to whether we will do so. 

***Aircraft Leases***

            As of September 30, 2005, we have significant lease andsublease obligations for aircraft that are classified as operating leases, which are not reflected as assets and liabilities on ourbalance sheet.  These leases expire between 2013 and 2022.  In addition, our expected total minimum annual rental expensefor the full year 2005 for current and future firm order aircraft under operating leases are approximately $310.0 million, net ofdeferred credits amortized.  A substantial portion of our aircraft is leased directly by Continental from third parties andsubleased by Continental to us.  If Continental were to default under these leases, our ability to retain access to theaircraft could be adversely affected.

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***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 conditions.

            In October 2005, we gave a guaranty, limited to $1.5 million,for a subsidiary of Wing Holdings relating to a promissory note and mortgage agreement for the purchase of an aircraft.  Underthe agreement, we guarantee payment of the principal and interest due under the note and compliance with the terms and conditionsof the note and the mortgage agreement.  For every $1.0 million of principal prepaid under the note, our obligation under theguaranty is reduced by $0.5 million.  This transaction did not change the accounting treatment of our investment in WingHoldings.

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

            We have been and are subject to market risks, includingcommodity price risk (such as, to a limited extent, aircraft fuel prices) and interest rate risk.  See the Notes toConsolidated Financial Statements included in our 2004 10-K for a description of our accounting policies and other informationrelated to these financial instruments.

***Aircraft Fuel***

            Effective January 1, 2001, we entered into our capacitypurchase agreement with Continental, which is scheduled to expire December 31, 2010 (subject to extensions by Continental through2030, or its right to terminate the agreement as early as January 1, 2007 based on 12–18 months’ notice, which may begiven currently), and a related fuel purchase agreement with Continental, which terminates when the capacity purchase agreementterminates.  Under these agreements, Continental provides all of our aircraft fuel needs for the aircraft covered by thecapacity purchase agreement, and we incur fuel expense and fuel tax equal to the lower of the actual cost of the fuel and therelated taxes or agreed-upon caps of 66.0 cents and 5.2 cents per gallon, respectively.  In addition, under the capacitypurchase agreement, we recover our fuel expense from Continental with a 10% margin.  For the nine months ended September 30,2005 and 2004, our cost of fuel was 71.2 cents per gallon, including fuel tax.  If the fuel agreement with Continental werenot in place, our fuel cost, including related taxes, would have been $1.68 and $1.14 per gallon, respectively, for the nine monthsended September 30, 2005 and 2004.

***Interest Rates***

            As of September 30, 2005, we had firm commitments to acquire13 Embraer regional jets, which we expect to lease from Continental.  Changes in interest rates could impact our actual costsfor the related leasing transactions in the future.  However, the capacity purchase agreement provides that our block hourrates will be adjusted higher or lower to reflect any changes in our aircraft rental rates.  We also have potential interestrate exposure with respect to our loan agreement with Export Development Canada, which bears interest at the six-month LIBOR plus1.75% per annum, and our note payable to Continental, which bears interest at the three-month LIBOR plus 1.25% per annum.  Theinterest rates applicable to these variable rate notes may rise, increasing our interest expense.  The impact of market riskis estimated using a hypothetical increase in interest rates by 100 basis points for our variable rate long-term debt.  Basedon this hypothetical assumption, we would have incurred an additional $0.8 million and $1.6 million in interest expense for thenine months ended September 30, 2005 and 2004, respectively.  However, we believe that interest rate increases on our variablerate, long-term debt would be offset by increases in interest income.

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We do not hold long-term interest-sensitive assets and therefore the value of our assets is not subject to interest ratefluctuations.  We do not purchase or hold any derivative financial instruments to protect against the effects of changes ininterest rates.

            As of September 30, 2005,we estimated the fair value of our $137.2 million (carrying value) fixed-rate debt to be $117.2 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. 

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**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.*  During the third quarter 2005, we implemented a new software application, AuRA, to manage our inventory,maintenance and engineering process.  Effective August 1, 2005, AuRA became our system of record for financial reportingpurposes, which has resulted in a significant change to our internal control over financial reporting.  The new businessprocess and the corresponding internal control relating to inventory management continue to be defined by management as we workthrough the implementation period.  While we have not identified any material weakness in our internal control over financialreporting, we have identified a significant deficiency relating to the reconciliation of AuRA to our general ledger as of September30, 2005.  We intend to address this deficiency in the fourth quarter of 2005; however, we cannot currently provide anyassurance that we will successfully remedy it.

            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.**

               None.

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

**              ** None.

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

               None.

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

****

               None.

**Item 5.    Other Information.**

            On November 4, 2005, our board of directors approvedaccelerating the vesting of 669,750 unvested options currently held by employees, including executive officers, with exerciseprices greater than $11.00 per share and extended the term of 868,500 options that had a five-year term to seven years.  Theseoptions were and remain out of the money, and the acceleration and extension were effective immediately.  No options held bynon-employee directors were subject to acceleration or extension.  The acceleration of vesting will reduce compensationexpense upon the adoption of SFAS 123R.  The decision to extend the terms of the five-year options was made to standardize theterms of our outstanding employee stock options.  We estimate that the maximum reduction in compensation expense, based on ourimplementation date of January 1, 2006, will be approximately $3.1 million.  We will report this future compensation expensein our 2005 pro forma footnote disclosures, as permitted under the transition guidance provided by the FASB.

            The decision to accelerate vesting affected 141,250, 73,750,68,750 and 61,250 shares held by Messrs. Ream, Cromer, Losness and Peterson, respectively.  The decision to extend the optionswith five-year terms to seven years affected 250,000, 90,000 and 90,000 shares held by Messrs. Ream, Cromer and Losness,respectively. 

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**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 3.2 to the Company’s Annual Report on Form 10-K for theyear ended December 31, 2002, File No. 1-31300).              |
| 31.1   |                    | Rule 13a-14(a)/15d-14(a) Certification by Chief Executive Officer.(1)                                                                                                                        |
| 31.2   |                    | Rule 13a-14(a)/15d-14(a) Certification by Chief Financial Officer.(1)                                                                                                                        |
| 32.1   |                    | Section 1350 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: November 8, 2005 |                         | **/s/Frederick S.Cromer                   **                                                                                             |
|                        |                                                                                                         | Frederick S. Cromer Vice President and Chief Financial Officer (Principal Financial Officer)                                                                                                                                            |
|              |                                                                                                                                            |                                                                                                                                                                                                                                         |
| Date: November 8, 2005 |                         | **/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 3.2 to the Company’s Annual Report on Form 10-K for theyear ended December 31, 2002, File No. 1-31300).              |
| 31.1   |                    | Rule 13a-14(a)/15d-14(a) Certification by Chief Executive Officer.(1)                                                                                                                        |
| 31.2   |                    | Rule 13a-14(a)/15d-14(a) Certification by Chief Financial Officer.(1)                                                                                                                        |
| 32.1   |                    | Section 1350 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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