| **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, 2008**     |
|                          | **or**                                                    |
| **[   ]** |                                                           | **Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934** |
|                          | **For the transition period from__________ to__________** |

Commission File Number 1-31300**EXPRESSJET HOLDINGS, INC.***(Exact name of registrant as specified in its charter)*

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

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

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

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

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

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

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

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

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

As of November 10, 2008, 18,945,532 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, 2008 and 2007 |              | 1        |
|              |    | Consolidated Balance Sheets: September  30, 2008 (Unaudited) December 31, 2007                              |              | 3        |
|                   |              |  Condensed Consolidated Statements of Cash Flows (Unaudited): Nine months ended September 30, 2008 and 2007 |              | 5        |
|                   |              |  Notes to Condensed Consolidated Financial Statements (Unaudited)                                           |              | 6        |
| Item 2.           |         |  Management’s Discussion and Analysis of Financial Condition and Results of Operations                |    | 29       |
|   Item 3.    |         | Quantitative and Qualitative Disclosures About Market Risk                                                       |              | 48       |
| **** Item 4.      |              | Controls and Procedures                                                                                          |              | 50       |
| **PART II.** |         | **OTHER INFORMATION**                                                                                            |              |          |
| Item 1.           |              |  Legal Proceedings                                                                                          |              | 51       |
| Item 1A.          |              | Risk Factors                                                                                                     |              | 51       |
| Item 2.           |              | Unregistered Sales of Equity Securities and Use of Proceeds                                                      |              | 51       |
| Item 3.           |              |  Defaults Upon Senior Securities                                                                            |              | 52       |
| Item 4.           |              |  Submission of Matters to a Vote of Security Holders                                                        |              | 52       |
| Item 5.           |              |  Other Information                                                                                          |              | 52       |
| Item 6.           |              |  Exhibits                                                                                                   |              | 53       |
|                   |              |   Signatures                                                                                                |              | 54       |
|              |              |   Index to Exhibits                                                                                         |              | 55       |

----

Table of Contents

**PART I. FINANCIAL INFORMATIONItem 1. Financial Statements**

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

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |  |   | **Three Months Ended September 30,** |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--|---|--------------------------------------|---|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |  |   |                                      |   |
|                                                                                                                      |  |   | **2008**                             |   |  |  | **2007** |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |  |   |                                      |   |  |  |  |  |
| Operating Revenue:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |  |   |                                      |   |  |  |  |  |
|      Passenger........................................................................................                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |  | $ | 252,785                              |   |  | $ | 431,140 |  |
|      Ground handling and other..................................................................                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |  |   | 9,541                                |   |  |  | 10,205 |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |  |   |                                      |   |  |  |  |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |  |   | 262,326                              |   |  |  | 441,345 |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |  |   |                                      |   |  |  |  |  |
| Operating Expenses:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |  |   |                                      |   |  |  |  |  |
|      Wages, salaries and related costs......................................................                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |  |   | 98,252                               |   |  |  | 112,697 |  |
|      Aircraft fuel and related taxes.............................................................                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |  |   | 32,235                               |   |  |  | 98,782 |  |
|      Aircraft rentals...................................................................................                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |  |   | 18,917                               |   |  |  | 86,675 |  |
|      Maintenance, materials and repairs.....................................................                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |  |   | 48,296                               |   |  |  | 52,674 |  |
|      Other rentals and landing fees............................................................                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |  |   | 22,646                               |   |  |  | 33,198 |  |
|      Ground handling................................................................................                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |  |   | 5,862                                |   |  |  | 24,824 |  |
|      Outside services................................................................................                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |  |   | 8,509                                |   |  |  | 11,218 |  |
|      Marketing and distribution..................................................................                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |  |   | 1,767                                |   |  |  | 8,275 |  |
|      Depreciation and amortization.............................................................                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |  |   | 6,718                                |   |  |  | 6,668 |  |
|      Special charges................................................................................                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |  |   | 21,187                               |   |  |  | — |  |
|      Other operating expenses..................................................................                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |  |   | 26,898                               |   |  |  | 42,990 |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |  |   |                                      |   |  |  |  |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |  |   | 291,287                              |   |  |  | 478,001 |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |  |   |                                      |   |  |  |  |  |
| Operating Loss.......................................................................................                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |  |   | (28,961                              | ) |  |  | (36,656 | ) |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |  |   |                                      |   |  |  |  |  |
| Nonoperating Income (Expense):                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |  |   |                                      |   |  |  |  |  |
|      Gain due to fair value adjustment........................................................                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  |   | 27,785                               |   |  |  | — |  |
|      Settlement of fuel contracts................................................................                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |  |   | 23,149                               |   |  |  | — |  |
|      Interest expense................................................................................                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |  |   | (3,848                               | ) |  |  | (2,320 | ) |
|      Interest income.................................................................................                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |  |   | 1,218                                |   |  |  | 3,969 |  |
|      Capitalized interest............................................................................                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |  |   | 248                                  |   |  |  | 373 |  |
|      Equity investments gain (loss), net......................................................                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  |   | 96                                   |   |  |  | (564 | ) |
|      Other, net.........................................................................................                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |  |   | (203                                 | ) |  |  | 4 |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |  |   |                                      |   |  |  |  |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |  |   | 48,455                               |   |  |  | 1,462 |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |  |   |                                      |   |  |  |  |  |
| Income (Loss) before Income Taxes.........................................................                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |  |   | 19,484                               |   |  |  | (35,194 | ) |
| Income Tax Benefit (Expense) ................................................................                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |  |   | (14,466                              | ) |  |  | 12,866 |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |  |   |                                      |   |  |  |  |  |
| Net Income (Loss)..................................................................................                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |  | $ | 5,018                                |   |  | $ | (22,328 | ) |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |  |   |                                      |   |  |  |  |  |
| Basic Income (Loss) per Common Share..................................................                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |  | $ | 0.32                                 |   |  | $ | (4.13 | ) |
| Diluted Income (Loss) per Common Share................................................                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |  | $ | 0.32                                 |   |  | $ | (4.13 | ) |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |  |   |                                      |   |  |  |  |  |
| Shares Used in Computing Basic Income (Loss) per Common Share..........                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  |   | 15,872                               |   |  |  | 5,406 |  |
| Shares Used in Computing Diluted Income (Loss) per Common Share........                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  |   | 15,880                               |   |  |  | 5,406 |  |

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

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Table of Contents

****

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

|                                                                                                                             |  |   | **Nine Months Ended September 30,** |   |
|-----------------------------------------------------------------------------------------------------------------------------|--|---|-------------------------------------|---|
|                                                                                                                             |  |   |                                     |   |
|                                                                                                                             |  |   | **2008**                            |   |  |  | **2007** |  |
|                                                                                                                             |  |   |                                     |   |  |  |  |  |
| Operating Revenue:                                                                                                          |  |   |                                     |   |  |  |  |  |
|      Passenger                                                                      |  | $ | 1,125,681                           |   |  | $ | 1,223,598 |  |
|      Ground handling and other...........................................................          |  |   | 31,989                              |   |  |  | 25,949 |  |
|                                                                                                                             |  |   |                                     |   |  |  |  |  |
|                                                                                                                             |  |   | 1,157,670                           |   |  |  | 1,249,547 |  |
|                                                                                                                        |  |   |                                     |   |  |  |  |  |
| Operating Expenses:                                                                                                         |  |   |                                     |   |  |  |  |  |
|      Wages, salaries and related costs................................................             |  |   | 321,686                             |   |  |  | 324,516 |  |
|      Aircraft fuel and related taxes.......................................................        |  |   | 226,184                             |   |  |  | 226,006 |  |
|      Aircraft rentals............................................................................  |  |   | 192,432                             |   |  |  | 257,408 |  |
|      Maintenance, materials and repairs...............................................             |  |   | 160,349                             |   |  |  | 152,712 |  |
|      Other rentals and landing fees......................................................          |  |   | 81,398                              |   |  |  | 90,863 |  |
|      Ground handling..........................................................................     |  |   | 57,813                              |   |  |  | 72,994 |  |
|      Outside services.........................................................................     |  |   | 41,819                              |   |  |  | 43,494 |  |
|      Marketing and distribution............................................................        |  |   | 25,173                              |   |  |  | 18,176 |  |
|      Depreciation and amortization......................................................           |  |   | 24,145                              |   |  |  | 19,277 |  |
|      Impairment of fixed assets and goodwill.........................................              |  |   | 21,410                              |   |  |  | — |  |
|      Special charges..........................................................................     |  |   | 21,896                              |   |  |  | — |  |
|      Other operating expenses............................................................          |  |   | 91,107                              |   |  |  | 109,146 |  |
|                                                                                                                        |  |   |                                     |   |  |  |  |  |
|                                                                                                                        |  |   | 1,265,412                           |   |  |  | 1,314,592 |  |
|                                                                                                                        |  |   |                                     |   |  |  |  |  |
| Operating Loss................................................................................                              |  |   | (107,742                            | ) |  |  | (65,045 | ) |
|                                                                                                                        |  |   |                                     |   |  |  |  |  |
| Nonoperating Income (Expense):                                                                                              |  |   |                                     |   |  |  |  |  |
|      Gain due to fair value adjustment..................................................           |  |   | 27,785                              |   |  |  | — |  |
|      Settlement of fuel contracts..........................................................        |  |   | 23,149                              |   |  |  | — |  |
|      Impairment charges on investments..............................................               |  |   | (18,892                             | ) |  |  | — |  |
|      Interest expense.........................................................................     |  |   | (8,719                              | ) |  |  | (5,904 | ) |
|      Interest income...........................................................................    |  |   | 4,980                               |   |  |  | 12,515 |  |
|      Capitalized interest......................................................................    |  |   | 911                                 |   |  |  | 926 |  |
|      Equity investments loss, net........................................................          |  |   | (967                                | ) |  |  | (946 | ) |
|      Other, net................................................................................... |  |   | 1,408                               |   |  |  | 14 |  |
|                                                                                                                        |  |   |                                     |   |  |  |  |  |
|                                                                                                                             |  |   | 29,655                              |   |  |  | 6,605 |  |
|                                                                                                                             |  |   |                                     |   |  |  |  |  |
| Loss before Income Taxes................................................................                                    |  |   | (78,087                             | ) |  |  | (58,440 | ) |
| Income Tax Benefit ..........................................................................                               |  |   | 20,068                              |   |  |  | 19,875 |  |
|                                                                                                                        |  |   |                                     |   |  |  |  |  |
| Net Loss.........................................................................................                           |  | $ | (58,019                             | ) |  | $ | (38,565 | ) |
|                                                                                                                        |  |   |                                     |   |  |  |  |  |
| Basic and Diluted Loss per Common Share........................................                                             |  | $ | (6.64                               | ) |  | $ | (7.14 | ) |
|                                                                                                                        |  |   |                                     |   |  |  | **** |  |
| Shares Used in Computing Basic and Diluted Loss per Common Share                                                            |  |   | 8,737                               |   |  |  | 5,401 |  |

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,** |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---|-------------------|--------|---|------------------|---|
|                                                                                            |   |   | **2008**          |        |   | **2007**         |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |        |   |                   |        |   |                  |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |        |   | (Unaudited)       |   |   |                  |   |
| Current Assets:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |        |   |                   |        |   |                  |   |
|      Cash and cash equivalents.......................................                                                                                                                                                                                                                                                                                                                                                                                                                                                               |        | $ | 67,922            |        | $ | 189,259          |   |
|      Restricted cash.......................................................                                                                                                                                                                                                                                                                                                                                                                                                                                                         |        |   | 24,733            |        |   | 24,756           |   |
|      Short-term investments.............................................                                                                                                                                                                                                                                                                                                                                                                                                                                                            |        |   | 52,667            |        |   | —          |   |
|      Accounts receivable, net...........................................                                                                                                                                                                                                                                                                                                                                                                                                                                                            |        |   | 21,784            |        |   | 15,677           |   |
|      Amounts due from Continental Airlines, net................                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |        |   | 3,220             |        |   | —          |   |
|      Spare parts and supplies, net....................................                                                                                                                                                                                                                                                                                                                                                                                                                                                              |        |   | 25,707            |        |   | 26,598           |   |
|      Income tax receivable...............................................                                                                                                                                                                                                                                                                                                                                                                                                                                                           |        |   | 383               |        |   | 37,081           |   |
|      Prepayments and other............................................                                                                                                                                                                                                                                                                                                                                                                                                                                                              |        |   | 10,787            |        |   | 9,013            |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |        |   |                   |        |   |                  |   |
|         Total Current Assets.............................................                                                                                                                                                                                                                                                                                                                                                                                                                                            |        |   | 207,203           |        |   | 302,384          |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |        |   |                   |        |   |                  |   |
| Property and Equipment:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |        |   |                   |        |   |                  |   |
|      Owned property and equipment:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |        |   |                   |        |   |                  |   |
|         Flight equipment...................................................                                                                                                                                                                                                                                                                                                                                                                                                                                          |        |   | 225,655           |        |   | 233,237          |   |
|         Other...................................................................                                                                                                                                                                                                                                                                                                                                                                                                                                     |        |   | 170,117           |        |   | 169,386          |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |        |   |                   |        |   |                  |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |        |   | 395,772           |        |   | 402,623          |   |
|         Less:  Accumulated depreciation............................                                                                                                                                                                                                                                                                                                                                                                                                                                        |        |   | (162,810          | )      |   | (139,044         | ) |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |        |   |                   |        |   |                  |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |        |   | 232,962           |        |   | 263,579          |   |
|      Capital Leases:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |        |   |                   |        |   |                  |   |
|        Ground service equipment.......................................                                                                                                                                                                                                                                                                                                                                                                                                                                                    |        |   | 43                |        |   | 4,338            |   |
|         Less:  Accumulated amortization...........................                                                                                                                                                                                                                                                                                                                                                                                                                                         |        |   | (10               | )      |   | (4,219           | ) |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |        |   |                   |        |   |                  |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |        |   | 33                |        |   | 119              |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |        |   |                   |        |   |                  |   |
|         Total Property and Equipment................................                                                                                                                                                                                                                                                                                                                                                                                                                                                 |        |   | 232,995           |        |   | 263,698          |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |        |   |                   |        |   |                  |   |
| Investments in Other Entities.........................................                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |        |   | 3,515             |        |   | 9,713            |   |
| Reorganization Value In Excess of Amounts Allocable to   Identifiable Assets, net................................................                                                                                                                                                                                                                                                                                                                                                                                                                  |        |   | —           |        |   | 12,789           |   |
| Airport Operating Rights, net of accumulated amortization   of $0 and $1,560.........................................................                                                                                                                                                                                                                                                                                                                                                                                                              |        |   | —           |        |   | 3,440            |   |
| Debt Issuance Cost, net................................................                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |        |   | 1,889             |        |   | 1,970            |   |
| Other Assets, net.........................................................                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |        |   | 3,984             |        |   | 3,614            |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |        |   |                   |        |   |                  |   |
|         Total Assets.........................................................                                                                                                                                                                                                                                                                                                                                                                                                                                        |        | $ | 449,586           |        | $ | 597,608          |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |        |   |                   |        |   |                  |   |

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

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

| **LIABILITIES AND STOCKHOLDERS' EQUITY**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |  |   | **September 30, 2008** |   |        |   | **December 31, 2007** |   |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--|---|------------------------|---|--------|---|-----------------------|---|
| **                                                                                                         ** |  |   | ****                   |   |        |   | ****                  |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |  |   | **(Unaudited)**        |   |        |   |                       |   |
| Current Liabilities:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |  |   |                        |   |   |   |                       |   |
|      Current maturities of long-term debt.......................................                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  | $ | 3,459                  |   |        | $ | 138,159               |   |
|      Current maturities of capital lease obligations.........................                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |  |   | 3                      |   |        |   | 217                   |   |
|      Accounts payable................................................................                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |  |   | 8,048                  |   |        |   | 4,036                 |   |
|      Accrued payroll and related costs..........................................                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  |   | 59,956                 |   |        |   | 47,985                |   |
|      Accrued airport service costs................................................                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |  |   | 14,434                 |   |        |   | 22,875                |   |
|      Accrued maintenance, materials and repair costs...................                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |  |   | 14,755                 |   |        |   | 19,406                |   |
|      Accrued tax costs (other than income tax).............................                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |  |   | 9,234                  |   |        |   | 11,434                |   |
|      Air traffic liability..................................................................                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |  |   | —                |   |        |   | 18,213                |   |
|      Amounts due to Continental Airlines, net................................                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |  |   | —                |   |        |   | 4,726                 |   |
|      Accrued other liabilities........................................................                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |  |   | 18,801                 |   |        |   | 29,633                |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |  |   |                        |   |        |   |                       |   |
|         Total Current Liabilities......................................................                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |  |   | 128,690                |   |        |   | 296,684               |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |  |   |                        |   |        |   |                       |   |
| Long-term Debt.........................................................................                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |  |   | 6,919                  |   |        |   | 9,308                 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |  |   |                        |   |        |   |                       |   |
| 11.25% Convertible Notes, net of discount of $26,241   and $0...................................................................................                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |  |   | 42,212                 |   |        |   | —               |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |  |   |                        |   |        |   |                       |   |
| Capital Lease Obligations..........................................................                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |  |   | 12                     |   |        |   | 14                    |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |  |   |                        |   |        |   |                       |   |
| Deferred Income Taxes..............................................................                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |  |   | 30,472                 |   |        |   | 49,662                |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |  |   |                        |   |        |   |                       |   |
| Other Long-term Liabilities.........................................................                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |  |   | 1,877                  |   |        |   | 9,500                 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |  |   |                        |   |        |   |                       |   |
| Stockholders’ Equity:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |  |   |                        |   |        |   |                       |   |
|      Preferred stock - $.01 par, 10,000,000 shares authorized, no         shares issued or outstanding, respectively..........................                                                                                                                                                                                                                                                                                                                                                                                                                                            |  |   | —                |   |        |   | —               |   |
|      Common stock - $.01 par, 150,000,000 shares authorized, and         22,024,439 and 5,513,869 shares issued, respectively.........                                                                                                                                                                                                                                                                                                                                                                                                                                                    |  |   | 220                    |   |        |   | 551                   |   |
|      Additional paid-in capital.......................................................                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |  |   | 237,389                |   |        |   | 171,260               |   |
|      Accumulated earnings .........................................................                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |  |   | 11,431                 |   |        |   | 71,786                |   |
|      Accumulated other comprehensive income.............................                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |  |   | 2,443                  |   |        |   | 540                   |   |
|      Common stock held in treasury, at cost 1,299,392 and          310,449 shares, respectively.............................................                                                                                                                                                                                                                                                                                                                                                                                                                                         |  |   | (12,079                | ) |        |   | (11,697               | ) |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |  |   |                        |   |        |   |                       |   |
|         Total Stockholders’ Equity.................................................                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |  |   | 239,404                |   |        |   | 232,440               |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |  |   |                        |   |        |   |                       |   |
|         Total Liabilities and Stockholders’ Equity............................                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |  | $ | 449,586                |   |        | $ | 597,608               |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |  |   |                        |   |        |   |                       |   |

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,** |   |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--|---|-------------------------------------|---|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  |   | ****                                |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  |   | **2008**                            |   |  |  | **2007** |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  |   | ****                                |   |  |  | **** |  |
|  Net Cash Flows (used in) provided by Operating Activities..........................                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |  | $ | (44,404                             | ) |  | $ | 2,773 |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  |   |                                     |   |  |  |  |  |
| Cash Flows from Investing Activities:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |  |   |                                     |   |  |  |  |  |
|   Capital expenditures..............................................................................                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |  |   | (9,059                              | ) |  |  | (43,840 | ) |
|   Purchase of short-term investments........................................................                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |  |   | (64,425                             | ) |  |  | — |  |
|   Proceeds from sale of property and equipment.........................................                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |  |   | 11,739                              |   |  |  | — |  |
|   Investments in restricted cash................................................................                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |  |   | (2,516                              | ) |  |  | (11,199 | ) |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  |   |                                     |   |  |  |  |  |
|   Net cash used in investing activities........................................................                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |  |   | (64,261                             | ) |  |  | (55,039 | ) |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  |   |                                     |   |  |  |  |  |
| Cash Flows from Financing Activities:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |  |   |                                     |   |  |  |  |  |
|   Payments on convertible notes ..............................................................                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |  |   | (6,500                              | ) |  |  | — |  |
|   Payments related to modification of convertible notes’ terms ....................                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |  |   | (2,000                              | ) |  |  | — |  |
|   Repurchase of common stock................................................................                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |  |   | (3,128                              | ) |  |  | — |  |
|   Payments on long-term debt and capital lease obligations.........................                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |  |   | (2,605                              | ) |  |  | (1,241 | ) |
|   Proceeds from issuance of common stock related to Employee      Stock Purchase Plan..........................................................................                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |  |   | 1,484                               |   |  |  | 362 |  |
|   Proceeds from short term financing.........................................................                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |  |   | 77                                  |   |  |  | — |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  |   |                                     |   |  |  |  |  |
|     Net cash used in financing activities......................................................                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |  |   | (12,672                             | ) |  |  | (879 | ) |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  |   |                                     |   |  |  |  |  |
|   Net Decrease in Cash and Cash Equivalents............................................                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |  |   | (121,337                            | ) |  |  | (53,145 | ) |
| Cash and Cash Equivalents - Beginning of Year.........................................                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |  |   | 189,259                             |   |  |  | 291,633 |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |  |   |                                     |   |  |  |  |  |
| Cash and Cash Equivalents - End of Period...............................................                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |  | $ | 67,922                              |   |  | $ | 238,488 |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  |   |                                     |   |  |  |  |  |
| Supplemental Cash Flow Information:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |  |   |                                     |   |  |  |  |  |
|   Interest paid, net...................................................................................                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |  | $ | 5,038                               |   |  | $ | 6,580 |  |
|   Income taxes refunded (paid), net...........................................................                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |  | $ | 37,567                              |   |  | $ | (4,796 | ) |

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

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

**Overview**

            ExpressJet Holdings, Inc. (“Holdings”) has strategic investments in the air transportation industry.  Our principal asset is all of the issued and outstanding shares of stock ofXJT Holdings, Inc., the sole stockholder of ExpressJet Airlines, Inc. (referred to in this report as “Airlines” and, together with Holdings, as “ExpressJet”, “we” or “us”).  Our primary business is flying regionaljet aircraft in both contract arrangements and in the corporate aviation sector.

            Our quarter ended September 30, 2008 was one of transition.  During the quarter we dramatically reshaped our business in order to adapt to the unprecedented high fuel costs and otherchallenges facing the industry.  As part of the transition, we terminated our Branded Flying operations.   Furthermore, we mutually agreed with Delta Air Lines (“Delta”) to terminate our capacity purchase agreement (the “Delta CPA”)and pro-rate flying agreements effective September 2, 2008. 

            As a result of the termination of our Branded Flying operations and termination of our relationship with Delta, we recorded several adjustments resulting in an increase of approximately $18 millionto passenger revenue for the 3rd quarter.

            As of September 30, 2008, our fleet was assigned as follows: 

|           | •  | 214 aircraft for Continental Airlines (“Continental”) as Continental Express pursuant to a capacity purchase agreement (the “Continental CPA”); |
|--------------------------------------------------------|--------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                        | •  | 30 aircraft in our Corporate Aviation division, which is dedicated to charter contracts and ad-hoc charter service; and                                                 |
|                                                        | •  | 30 aircraft in transition back to Continental as uncovered aircraft pursuant to terms of the Continental CPA.                                                           |

**            Liquidity. ** In light of the amended Continental CPA, aircraft withdrawals, dramatically lower utilization, our diminished stock price and the potential increases in the price of fuel,we believe cost restructuring and cash preservation are crucial to sustain our liquidity and meet our financial obligations through the third quarter of 2009.  Additional cost savings initiatives are essential at this time to maintain an appropriate operatingmargin and preserve our cash.  These include, individually or in combination, if required:

|           | •  | effectively implementing wage and benefit concessions from all of our employees;                                                       |
|--------------------------------------------------------|--------------|----------------------------------------------------------------------------------------------------------------------------------------|
|           | •  | reduction-in-force to match reduction-in-capacity;                                                                                     |
|           | •  | obtaining third-party vendor concessions;                                                                                              |
|           | •  | reducing capital expenditures to only those required by law or operational necessities;                                                |
|           | •  | managing our working capital effectively (i.e., time to pay for accounts payables, accounts receivable aging, and inventory turnover); |
|           | •  | borrowing against or liquidating our auction rate securities (“ARS”) holdings; and                                         |
|           | •  | selling unencumbered assets, tangible or intangible, or subleasing the aircraft we lease from Continental.                             |

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            Our 2008 cash flows as of the date of this filing have included the following sources of cash outside of normal operating revenues:

|           | •  | $37.8 million tax refund for prior year loss carryback provisions, received in June 2008;                                                                                                                               |
|--------------------------------------------------------|--------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|           | •  | $23.1 million, of which approximately $21 million was received in the 3rd quarter of 2008 non-operating gain from the monetization of fuel fixed forward contracts subsequent to capacity reductions in September 2008; |
|           | •  | $11.7 million in sales of unencumbered assets; and                                                                                                                                                                 |
|           | •  | $4.0 million in purchase deposits previously held by our fuel vendor was refunded in October 2008.                                                                                                                 |

            We believe that our existing liquidity and projected 2008 cash flows, including the incremental sources of liquidity described above and implementation of cost saving initiatives, if needed, willbe sufficient to fund current operations and our financial obligations through the twelve months ending September 30, 2009.  However, as noted above, factors outside our control may dictate that we alter our current plans and expectations and could have amaterial adverse impact on our ability to sustain operations over the long term.

            The interim financial information is unaudited, but reflects all 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 been eliminated 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 financial statements and the notes thereto contained in our 2007 10-K.

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

            The accompanying consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles and include the accounts of Holdings and itssubsidiaries.  All material intercompany transactions have been eliminated in consolidation.  The following are changes to the accounting policies and estimates described in our 2007 10-K.

            **Fair Value Measurements.**  In September 2006, the Financial Accounting Standards Board (“FASB”) issued FASB Statement No. 157, Fair Value Measurements (“Statement157”), which is effective for fiscal years beginning after November 15, 2007.  Statement 157 defines fair value, establishes a framework for measuring it and expands disclosures about assets and liabilities measured at fair value.  We adopted theprovisions of Statement 157 as of January 1, 2008 for our financial assets and liabilities.  However, the FASB deferred the effective date of Statement 157 for one year as it relates to fair value measurement requirements for nonfinancial assets and liabilitiesthat are not recognized or disclosed at fair value on a recurring basis until 2009.

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            The new standard provides a consistent definition of fair value which focuses on exit price and prioritizes, within a measurement of fair value, the use of market-based inputs over entity-specificinputs. The standard also establishes a three-level hierarchy for fair value measurements based on the transparency of inputs to the valuation of an asset or liability as of the measurement date.  The three tiers of fair value input are defined below:

|           | •  | Level 1 – inputs to the valuation methodology which are quoted prices in active markets for identical assets or liabilities;                                                                                                                                                                                  |
|--------------------------------------------------------|--------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                        | •  | Level 2 – inputs to the valuation methodology which are quoted prices in active markets for similar assets or liabilities, quoted prices in markets that are not active; or other inputs that are observable, either directly or indirectly, for substantially thefull term of the assets or liabilities; and |
|                                                        | •  | Level 3 – inputs to the valuation methodology which are unobservable and significant to the fair value measurement.                                                                                                                                                                                           |

            As of September 30, 2008, we held cash equivalents and short-term investments of Auction Rate Securities (“ARS”) that were required to be measured at fair value.  We used themarket approach to value our cash equivalents (see below for a discussion of our ARS).  The market approach uses prices and other relevant information generated by market transactions involving identical assets.

            In February 2008, we invested in $65 million of ARS which are classified as available-for-sale securities and reflected at fair value.  The fair value of our ARS is estimated using adiscounted cash flow valuation model as of September 30, 2008.  As of September 30, 2008, we continue to earn interest at an average rate of 3.74% on all of our ARS.  Any changes in fair value related to these instruments that we deem to be temporary wouldbe recorded to accumulated other comprehensive income.  If we determine that any future decline in value was other than temporary, it would be recognized as a charge to earnings as appropriate.

            Our valuation model considers, among other items, the collateralization underlying the ARS, the creditworthiness of our counterparties, the timing of expected future cash flows, and a discount ratewhich accounts for the liquidity issue associated with the current market conditions.  These securities were also compared, where possible, to other observable market data with similar characteristics, however, due to the contraction in the credit markets andother factors, the market for ARS is currently trading at minimal volumes.  As we could not predict when the market would recover and needed to avail ourselves the flexibility to sell our ARS in the next 12 months, we evaluated and classified, in accordance withaccounting guidance our ARS as short-term investments and recognized in the first quarter of 2008 an other-than-temporary impairment of $13.7 million.  For the nine months ended September 30, 2008, we estimated the fair value of our ARS investment to be $52.7million and recorded the unrealized gain to other comprehensive income, accordingly.

**           ** Our total comprehensive gains for the three and nine months ending September 30, 2008 was $0.8 million and $1.9 million, respectively.

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            Subsequent to the quarter’s end, we monetized $5 million of our ARS for 91.25% of the securities face value.  We continue to monitor the ARS market and will aggressively pursuemonetizing the assets at or near face value through additional market transactions and may also pursue litigation if necessary to recoup full value.

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

|                                                      | **As of September 30, 2008 Fair Value Measurements Using** |
|------------------------------------------------------|------------------------------------------------------------|
|                                                      |                                                            | **Total** |  |  | **Level 1** |  |  | **Level 2** |  |  | **Level 3** |
|                                                      |                                                            | **** |  |  | **** |  |  | **** |  |  | **** |
|                                                      |                                                            |  |  |  |  |  |  |  |   |   |  |
| Cash equivalents..............................       | $                                                          | 59,406 |    | $ | 59,406 |    | $ | — |    | $ | — |
| Short-term investments.....................          |                                                            | 52,667 |  |  | — |  |  | — |  |  | 52,667 |
|                                                      |                                                            | **** |  |  | **** |  |  | **** |  |  | **** |
| Total............................................... | $                                                          | 112,073 |  | $ | 59,406 |  | $ | — |  | $ | 52,667 |
|                                                      |                                                            |  |  |  |  |  |  |  |  |  |  |

            The following table presents our ARS which were measured at fair value on a recurring basis using significant unobservable inputs (Level 3) as defined in Statement 157 at September 30, 2008 (inthousands):

|                                                                                                              |   | **Three Months Ended September 30,** |  |   | **Nine Months Ended September 30,** |
|--------------------------------------------------------------------------------------------------------------|---|--------------------------------------|--|---|-------------------------------------|
|                                                                                                         |   |                                      |  |   |
|                                                                                                              |   | ****                                 |  |   | ****                                |
|                                                                                                              |   | **2008**                             |  |   | **2007**                            |  |  | **2008** |  |  | **2007** |  |
|                                                                                                              |   | ****                                 |  |   | ****                                |  |  | **** |  |  | **** |  |
|                                                                                                              |   |                                      |  |   |                                     |  |  |  |  |  |  |  |
| Beginning Balance Short-Term Investments                                                                     | $ | 51,864                               |  | $ | —                             |  | $ | — |  | $ | — |  |
| Purchases...................................................                                                 |   | —                              |  |   | —                             |  |  | 65,075 |  |  | — |  |
| Sales..........................................................                                              |   | —                              |  |   | —                             |  |  | (650 | ) |  | — |  |
| Other Than Temporary Impairments (included   in non-operating income)............................. |   | —                              |  |   | —                             |  |  | (13,661 | ) |  | — |  |
| Temporary Changes in Market Value (included   in other comprehensive income)...................    |   | 803                                  |  |   | —                             |  |  | 1,903 |  |  | — |  |
|                                                                                                              |   |                                      |  |   |                                     |  |  |  |  |  |  |  |
| Ending Balance Short-Term Investments.........                                                               | $ | 52,667                               |  | $ | —                             |  | $ | 52,667 |  | $ | — |  |
|                                                                                                              |   |                                      |  |   |                                     |  |  |  |  |  |  |  |

**           ** Following the completion of the tender offer in August 2008 for our then 4.25% Convertible Notes due 2023, $68.5 million aggregate principal of our convertible notes remains outstanding. Additionally, as provided in the amended indenture governing the notes, such notes have become our 11.25% Convertible Secured Notes due 2023.  In accordance with EITF 96-19 “Debtor's Accounting for a Modification or Exchange of Debt Instruments,” weaccounted for this exchange as an extinguishment of debt, since the net present value of the cash flows under the exchanged terms was more than 10% of the net present value of the cash flows under the terms of the original instrument.  As required by accountingrules, we recorded the convertible notes to a fair value of $40.7 million, net of a fair value adjustment of $27.8 million that will be amortized over the life of the new instrument up to the first date at which we may be required to repurchase the notes in August2011.  Such adjustment was recorded as a non-recurring gain under non-operating income for the third quarter.  The net balance of the 11.25% Convertible Secured Notes as of September 30, 2008 was $42.2 million.

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            We estimated fair value of our convertible notes based on an average of market trading activity for the convertible notes subsequent to the exchange in August 2008.

            Liabilities that we measure at fair value on a non-recurring basis are shown below (in thousands):

|                                                                              |              |                    |        |   | **Fair Value Measurements Using**                                  |        |   |                                                   |        |
|------------------------------------------------------------------------------|--------------|--------------------|--------|---|--------------------------------------------------------------------|--------|---|---------------------------------------------------|--------|
|                                                                              |              |                    |        |   |                                                                    |        |   |                                                   |        |
| **Description**                                                              |              | **August 2, 2008** |        |   | **Quoted Priced in Active Markets for Identical Assets (Level 1)** |        |   | **Significant Other Observable Inputs (Level 2)** |        |  | **Significant Unobservable Inputs (Level 3)** |  |  | **Total Gains** |  |
|                                                                              |    |                    |   |   |                                                                    |        |   |                                                   |   |  |  |  |  |  |  |
| 11.25% Convertible Secured   Notes due 2023.................. | $            | 68.5               |        | $ | 40.7                                                               |   | $ | —                                           |        | $  | — |   | $ | 27.8 |  |

****

            In May 2008, the Financial Accounting Standards Board (FASB) affirmed the consensus of FASB Staff Position APB 14-1 (FSP APB 14-1), “Accounting for Convertible Debt Instruments That MayBe Settled in Cash upon Conversion (Including Partial Cash Settlement)”, which applies to all convertible debt instruments that have a ‘‘net settlement feature’’, which means that such convertible debt instruments, by their terms, may besettled either wholly or partially in cash upon conversion. FSP APB 14-1 requires issuers of convertible debt instruments that may be settled wholly or partially in cash upon conversion to separately account for the liability and equity components in a mannerreflective of the issuers’ nonconvertible debt borrowing rate. FSP APB 14-1 is effective for financial statements issued for fiscal years beginning after December 15, 2008 and interim periods within those fiscal years.  Early adoption is notpermitted and retroactive application to all periods presented is required.  The adoption of FSP APB 14-1 will affect the historical accounting for our then 4.25% convertible notes and our 11.25% convertible notes.  We have not concluded the impact ofthis standard to our financial statements.

****

**Note 2 – Contract Flying**

            **Continental CPA.**  Prior to July 1, 2008, Airlines was entitled to receive payment for each block hour that Continental scheduled it to fly.  Payment was based on a formula designedto provide Airlines with a target operating margin of 10% before taking into account variations in certain costs and expenses that were generally within our control.  We had exposure for most labor costs and some maintenance and general administrative expensesif actual costs were higher than those budgeted in our block hour rates.  For a detailed description of the terms of the original Continental CPA, please see Item 1. “Business – Continental Capacity Purchase and Other Agreements” in our 200710-K.  For the first six months of 2008, we recognized revenues using 2007 block hour rates, pursuant to our agreement with Continental reached in June 2008.

**           ** At such time, we also reached an agreement with Continental to amend the existing Continental CPA.  The amended Continental CPA, which became effective July 1, 2008, allows us tocontinue flying 205 aircraft currently flown for Continental for seven years while providing Continental the right after one year to reduce the number to 190 aircraft.  The amended agreement significantly reduces Continental’s governance rights under theoriginal agreement, including easing change-in-control limitations on ExpressJet, reducing restrictions on ExpressJet flying into Continental’s hub airports, and removing the most-favored-nation clause, allowing ExpressJet the option to fly for other carriersand to consider other strategic alternatives.  The amended agreement also removes Continental’s ability to terminate the agreement without cause.  On August 29, 2008, we executed a first amendment to the amended Continental CPA for the purpose ofclarifying certain payments and to provide for the sale of slots at White Plains, New York, to Continental.

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            The amended agreement provides payments to us at a pre-determined rate based on block hours flown and reimburses us for various pass-through expenses including passenger liability insurance, hullinsurance, war risk insurance, landing fees and substantially all regional jet engine expenses under current long-term third-party contracts with no margin or mark-up.  Under the amended Continental CPA, Continental is responsible for the cost of providing fuelfor all flights and for paying aircraft rent for all aircraft covered by the amended Continental CPA and, therefore, these items are not included in our statements of operations for the three month period ended September 30, 2008 and thereafter.  The fixed blockhour rates are considerably lower than the rates under the original agreement and will be subject to annual escalations tied to a consumer price index (capped at 3.5%) at each anniversary date.  During the quarter ended September 30, 2008, we returned toContinental 29 aircraft previously released from the original capacity purchase agreement, with Continental bearing the expense related to the aircraft following their return.  We will continue to operate 214 aircraft under the amended Continental CPA unlessContinental decides to withdraw aircraft from the agreement.  The costs associated with preparing the aircraft for return to Continental were recorded as special charges on the consolidated statements of operations.  ExpressJet will continue to focus onaggressively reducing costs in response to the amended agreement with Continental and the economic difficulties facing the entire airline industry.

            In September 2008, we agreed with Continental on our first amendment to the amended Continental CPA in order to compensate us for our fixed costs, considered in the calculation of thepre-determined block hour rates, that cannot be reduced as a result of the unanticipated reduction in aircraft utilization. We also agreed that if Continental, beginning in year two, increases its aircraft utilization, then it may receive discounts on the block hourrates.  For the three months ended September 30, 2008, we recorded a $1 million receivable from Continental as compensation for shortfalls in aircraft utilization.  We received payment from Continental on October 15, 2008.  The associated revenue hasbeen deferred and is recorded in “Accrued Other Liabilities” on the Consolidated Balance Sheet as of September 30, 2008.

            We also entered into a settlement agreement with Continental to release the parties’ claims at the time of the agreement to amend the then existing capacity purchase agreement, relating tocertain identified payments under such capacity purchase agreement, including disputes previously disclosed as possible matters for arbitration.

            **Delta CPA.**  The Delta CPA was scheduled to end on the second anniversary of each aircraft’s in-service date (June 2009); however, Delta and ExpressJet mutually agreed in July 2008to terminate this agreement effective September 2, 2008.  Delta agreed to compensate us in August 2008 for costs incurred as a result of the early termination.  On October 2, 2008, we transitioned the 10 aircraft previously operating within the Delta CPAback to our continuing operations.

            **Corporate Aviation.**** ** During the quarter, we reassigned 18 aircraft that were part of our at-risk operations to expand our Corporate Aviation division to 30 aircraft.  Theseaircraft are now dedicated to existing and new long-term arrangements.  Our Corporate Aviation division continues to focus on corporate shuttles, entertainment / sports, and government businesses.  As of September 30, 2008, our Corporate Aviation divisionhas contracted with eight customers with long-term agreements ranging from 15 to 35 months**.**  Corporate Aviation customers typically prepay flights based on estimated charges to be incurred.  Such prepayments are held in escrow and recorded asrestricted cash until the flights have operated.  At that time we recognize the associated revenue and release the funds from escrow.

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**Note 3- Restructuring and Related Special Charges**

            Effective July 1, 2008, we entered into a new seven-year capacity purchase agreement with Continental by amending and restating the existing Continental CPA.  The amended agreement is based onfixed block hour rates that are considerably lower than the rates under the original agreement, which was designed to achieve an approximate 10% margin.  Additionally, Airlines suspended flying under its branded commercial passenger flight operations andterminated its capacity purchase and pro-rate agreements with Delta Airlines in September 2008.  In connection with these capacity reductions and the transition of up to 39 aircraft back to Continental, we incurred special charges of $21.2 million related toaircraft, employee reductions and certain other charges.  

**            Special Charges**

            The following table sets forth the special charges recorded for the three and nine months ended September 30, 2008 and 2007 (in thousands):

|                                                               |   | **Three Months Ended September 30,** |   |   | **Nine Months Ended September 30,** |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|---|--------------------------------------|---|---|-------------------------------------|
|                                                                                                                                                                                                                                                                                                                                                                                |   |                                      |   |
|                                                                                                                                                                                                                                                                                                                                                                                |   | ****                                 |   |   | ****                                |
|                                                                                                                                                                                                                                                                                                                                                                                |   | **2008**                             |   |   | **2007**                            |  |  | **2008** |  |  | **2007** |  |
|                                                                                                                                                                                                                                                                                                                                                                                |   | ****                                 |   |   | ****                                | **  ** |  | **** |  |  | **** |  |
| Wages and fringe...................................                                                                                                                                                                                                                                                                                                                            | $ | 19,246                               |   | $ | —                             |  | $ | 19,246 |  | $ | — |  |
| Lease return costs.................................                                                                                                                                                                                                                                                                                                                            |   | 1,644                                |   |   | —                             |  |  | 1,644 |  |  | — |  |
| Deferred Credits.....................................                                                                                                                                                                                                                                                                                                                          |   | (7,854                               | ) |   | —                             |  |  | (7,854 | ) |  | — |  |
| Contract termination costs......................                                                                                                                                                                                                                                                                                                                               |   | 1,223                                |   |   | —                             |  |  | 1,223 |  |  | — |  |
| Unused facility costs..............................                                                                                                                                                                                                                                                                                                                            |   | 6,287                                |   |   | —                             |  |  | 6,287 |  |  | — |  |
| Other....................................................                                                                                                                                                                                                                                                                                                                      |   | 641                                  |   |   | —                             |  |  | 1,350 |  |  | — |  |
|                                                                                                                                                                                                                                                                                                                                                                                |   | ****                                 |   |   | ****                                |  |  | **** |  |  | **** |  |
|                                                                                                                                                                                                                                                                                                                                                                                | $ | 21,187                               |   | $ | —                             |  | $ | 21,896 |  | $ | — |  |
|                                                                                                                                                                                                                                                                                                                                                                                |   |                                      |   |   |                                     |  |  |  |  |  |  |  |

**            Wages and Fringe.**  As a result of our restructuring we implemented a reduction in workforce and recorded $19.2 million in severance and continuing medical coverage and other fringebenefits for employees accepting early retirement.  We do not expect additional charges related to the reduction in workforce to be significant.  

**            Lease Return Costs.** We incurred $1.6 million in costs during the 3rd quarter to retrofit 39 returned aircraft to comply with the return conditions specified in thesubleases.  These costs included labor and materials to repair, paint, and modify the interiors to prelease conditions. 

            **Deferred Credits.**  We wrote off $7.9 million in deferred credits in the 3rd quarter of 2008.  The credits were from the aircraft manufacturer to cover training and spareparts purchases and were being amortized against aircraft rent expense over the lives of the underlying aircraft leases.  Due to the transition in our business model, we no longer are charged aircraft rent and accordingly wrote off the deferred credits.

            **Contract Termination Costs.**  During the 3rd quarter we paid $1.2 million in early termination payments to sever contractual relationships that supported our Branded Flyingoperations.  We are currently in negotiation with other parties to settle early contract terminations so there may be additional contract termination charges in the 4th quarter, however we do not expect the charges to be significant.

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**            Unused Facility Costs and Other. ** We recorded a charge of $6.3 million in the 3rd quarter for the future rent obligations related to facility leases at locations thatsupported our suspended operations.  Payments remaining on these lease obligations will continue through 2010.  In addition, we incurred $.6 million in the 3rd quarter to redeploy certain general service equipment from our unused facilities toour other lines of business.

            The above costs are reflected in the line “Special charges” on our consolidated statements of operations. 

            As of September 30, 2008 we had accruals for special charges as follows (in thousands):

|                                                  |  |   | **Balance December 21, 2007** |        |        |   | **Accrual** |        |   | **Payments** |   |            |   | **Balance September 30, 2008** |  |
|--------------------------------------------------|--|---|-------------------------------|--------|--------|---|-------------|--------|---|--------------|---|------------|---|--------------------------------|--|
|                                                  |  |   |                               |        |        |   |             |        |   |              |   | ** ** |   |                                |  |
| Wages and fringe .........................       |  | $ | —                       |        |        | $ | 19,246      |        | $ | (11,241      | ) |            | $ | 8,005                          |  |
| Leased return costs.......................       |  |   | —                       |        |        |   | 1,644       |        |   | (1,644       | ) |            |   | —                        |  |
| Contract termination costs.............          |  |   | —                       |        |        |   | 1,223       |        |   | (1,223       | ) |            |   | —                        |  |
| Unused facility costs.....................       |  |   | —                       |        |        |   | 6,287       |        |   | (998         | ) |            |   | 5,289                          |  |
| Other........................................... |  |   | —                       |        |        |   | 641         |        |   | (641         | ) |            |   | —                        |  |
|                                                  |  |   | ****                          |        |        |   | ****        |        |   | ****         |   |            |   | ****                           |  |
|                                                  |  | $ | —                       |   |   | $ | 29,041      |   | $ | (15,747      | ) |            | $ | 13,294                         |  |
|                                                  |  |   |                               |        |        |   |             |        |   |              |   |            |   |                                |  |

            Payments related to the wages and fringe accrual will be made through the 1st quarter of 2009.  Payments remaining on our lease obligations for unused facilities will continuethrough 2010.

            In accordance with Statement of Financial Accounting Standards No. 144 Accounting for the Impairment of Long-Lived Assets (SFAS 144) we record impairment charges on long-lived assets used inoperations when events and circumstances indicate that the assets may be impaired, the undiscounted cash flows estimated to be generated by those assets are less than the carrying amount of those assets and the net book value of the assets exceeds their estimatedfair value.  As a result of our impairment test, we concluded the carrying values of certain of our long-lived assets, primarily leasehold improvements in our at-risk flying segment were no longer recoverable.  Consequently, during the second quarter of2008, we recorded an impairment charge of $8.6 million to write these long-lived assets down to their estimated fair values.  Fair values were determined based on estimated future cash flows for Branded Flying which were considered nominal.  No portion ofthe impairment charge will result in future cash expenditures.  All other long-lived assets for our other reportable segments were tested for impairment but were concluded to be recoverable with projected undiscounted cash flows.

            Reorganization value in excess of amounts allocable to identifiable assets (goodwill) of $12.8 million represents an amount associated with Continental’s bankruptcy restructuring and wasrecorded on our books prior to ExpressJet’s IPO from Continental in 2002.  In accordance with SFAS No. 142 *Goodwill and Other Intangible Assets* (SFAS 142), we apply a fair value based impairment test to the net book value of goodwill on an annualbasis and if certain events or circumstances indicate that an impairment loss may have been incurred on an interim basis.  The analysis of potential impairment of goodwill requires a two-step process.  The first step is the estimation of fair value. If step one indicates that impairment potentially exists, the second step is performed to measure the amount of impairment, if any.  Goodwill impairment exists when the estimated fair value of goodwill is less than our carrying value. 

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            Goodwill is allocated to our contract flying reportable segment.  We estimated fair value based on a discounted projection of future cash flows, supported with market based valuation. During the 2nd quarter of 2008, we determined goodwill was impaired and recorded a non-cash charge of $12.8 million.  

            The impairment charges recorded during the second quarter for both long-lived assets and goodwill total $21.4 million.  These charges are reflected in the line “Impairment of fixedassets and goodwill” on our consolidated statement of operations for the nine months ended September 30, 2008.

**Note 4 *–* Segment Reporting**

            Statement of Financial Accounting Standard No. 131, “Disclosures about Segments of an Enterprise and Related Information,” (“Statement 131”) requires disclosures related tocomponents of a company for which separate financial information is available if that segregated information is evaluated regularly by our chief operating decision makers in deciding the allocation of resources and assessing performance.  During the thirdquarter of 2008, we changed our management reporting structure and the manner in which we report financial results internally.  As discussed below under “Potential Changes to Reportable Segments,” we will evaluate our reportable segments effectiveOctober 1, 2008 to better align with our announced reorganization and reallocation of assets, as applicable.  The following business discussion is based on the three reportable segments, Contract Flying, Branded Flying and Aviation Services, as they werestructured as of and for the quarter ended September 30, 2008.

            A significant portion of our operating expenses and infrastructure is integrated across segments (e.g., for maintenance, non-airport facility rentals, outside services, general and administrativeexpenses) in order to support our entire fleet of aircraft; therefore, we do not allocate these costs to the individual segments identified above, but evaluate them for our consolidated operation.  The presentation of our consolidated shared costs is consistentwith the manner in which these expenses are reviewed by our chief operating decision makers.  Consequently, the tables below present (in thousands) our operating revenues, including inter-segment revenues, and segment profit / (losses) generated per reportablesegment for the three and nine months ended September 30, 2008 and 2007.  We also included our reconciliation of the consolidated operating revenue to consolidated net loss before taxes and of our total assets at September 30, 2008 and 2007. 

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|                                                                                                            |                          | **Contract Flying** |        |        | **Branded Flying** |   |        |   | **Aviation Services** |        |        | **Eliminations** |   |        |        | **Consolidated** |   |
|------------------------------------------------------------------------------------------------------------|--------------------------|---------------------|--------|--------|--------------------|---|--------|---|-----------------------|--------|--------|------------------|---|--------|--------|------------------|---|
|                                                                                                            |                          | ****                |        |        | ****               |   |        |   | ****                  |        |        | ****             |   |        |        | ****             |   |
| **Three months ended September 30, 2008:**                                                                 |                          |                     |   |   |                    |   |        |   |                       |   |   |                  |   |        |   |                  |   |
| Revenue from customers.............................                                                        | $                        | 184,428             |   | $      | 69,286             |   |   | $ | 10,618                |        | $      | (2,006           | ) |        | $      | 262,326          |   |
| Direct segment expenses............................                                                        |                          | 133,238             |        |        | 62,767             |   |        |   | 4,806                 |        |        | (2,006           | ) |        |        | 198,805          |   |
|                                                                                                            |                          |                     |        |        |                    |   |        |   |                       |        |        |                  |   |        |        |                  |   |
|     Segment profit (loss)...............................                               | $                        | 51,190              |        | $      | 6,519              |   |        | $ | 5,812                 |        | $      | —          |   |        | $      | 63,521           |   |
| Shared special charges (1)............................                                                     |                          |                     |        |        | (21,187            | ) |        |   |                       |        |        |                  |   |        |        | (21,187          | ) |
| Other shared expenses (2)............................                                                      |                          |                     |        |        |                    |   |        |   |                       |        |        |                  |   |        |        | (71,295          | ) |
| Gain due to fair value adjustment..................                                                        |                          |                     |        |        |                    |   |        |   |                       |        |        |                  |   |        |        | 27,785           |   |
| Settlement of fuel contracts.........................                                                      |                          |                     |        |        | 23,149             |   |        |   |                       |        |        |                  |   |        |        | 23,149           |   |
| Impairment charges on investments..............                                                            |                          |                     |        |        |                    |   |        |   |                       |        |        |                  |   |        |        | —          |   |
| Interest expense.........................................                                                  |                          |                     |        |        |                    |   |        |   |                       |        |        |                  |   |        |        | (3,848           | ) |
| Interest Income...........................................                                                 |                          |                     |        |        |                    |   |        |   |                       |        |        |                  |   |        |        | 1,466            |   |
| Other.........................................................                                             |                          |                     |        |        |                    |   |        |   |                       |        |        |                  |   |   |        | (107             | ) |
|                                                                                                            |                          |                     |        |        |                    |   |        |   |                       |        |        |                  |   |        |        |                  |   |
| Consolidated income before income   taxes....................................................... |                          |                     |        |        |                    |   |        |   |                       |   |        |                  |   |        | $      | 19,484           |   |
|                                                                                                            |      |                     |        |        |                    |   |        |   |                       |        |        |                  |   |        |        |                  |   |
| **Nine months ended September 30, 2008:**                                                                  |                          |                     |   |   |                    |   |        |   |                       |   |   |                  |   |        |   |                  |   |
| Revenue from customers.............................                                                        | $                        | 908,348             |   | $      | 221,258            |   |   | $ | 32,770                |        | $      | (4,706           | ) |        | $      | 1,157,670        |   |
| Direct segment expenses............................                                                        |                          | 679,897             |        |        | 289,480            |   |        |   | 16,827                |        |        | (4,706           | ) |        |        | 981,498          |   |
|                                                                                                            |                          |                     |        |        |                    |   |        |   |                       |        |        |                  |   |        |        |                  |   |
|     Segment profit (loss)...............................                               | $                        | 228,451             |        | $      | (68,222            | ) |        | $ | 15,943                |        | $      | —          |   |        | $      | 176,172          |   |
| Shared special charges (3)............................                                                     |                          | (13,498             | )      |        | (29,809            | ) |        |   |                       |        |        |                  |   |        |        | (43,307          | ) |
| Other shared expenses (4)............................                                                      |                          |                     |        |        |                    |   |        |   |                       |        |        |                  |   |        |        | (240,607         | ) |
| Gain due to fair value adjustment..................                                                        |                          |                     |        |        |                    |   |        |   |                       |        |        |                  |   |        |        | 27,785           |   |
| Settlement of fuel contracts.........................                                                      |                          |                     |        |        | 23,149             |   |        |   |                       |        |        |                  |   |        |        | 23,149           |   |
| Impairment charges on investments..............                                                            |                          |                     |        |        |                    |   |        |   |                       |        |        |                  |   |        |        | (18,892          | ) |
| Interest expense.........................................                                                  |                          |                     |        |        |                    |   |        |   |                       |        |        |                  |   |        |        | (8,719           | ) |
| Interest Income...........................................                                                 |                          |                     |        |        |                    |   |        |   |                       |        |        |                  |   |        |        | 5,891            |   |
| Other.........................................................                                             |                          |                     |        |        |                    |   |        |   |                       |        |        |                  |   |   |        | 441              |   |
|                                                                                                            |                          |                     |        |        |                    |   |        |   |                       |        |        |                  |   |        |        |                  |   |
| Consolidated loss before income taxes.........                                                             |                          |                     |        |        |                    |   |        |   |                       |   |        |                  |   |        | $      | (78,087          | ) |
|                                                                                                            |      |                     |        |        |                    |   |        |   |                       |        |        |                  |   |        |        |                  |   |
| **Assets at September 30, 2008**                                                                           |                          |                     |        |        |                    |   |        |   |                       |        |        |                  |   |        |        |                  |   |
| Segment assets.........................................                                                    | $                        | 136,608             |        | $      | 46,439             |   |        | $ | 14,603                |        | $      | —          |   |        | $      | 197,650          |   |
| Other shared assets (5)................................                                                    |                          |                     |        |        |                    |   |        |   |                       |        |        |                  |   |        |        | 251,936          |   |
|                                                                                                            |                          |                     |        |        |                    |   |        |   |                       |        |        |                  |   |        |        |                  |   |
|     Total consolidated assets .......................                                  |                          |                     |        |        |                    |   |        |   |                       |        |        |                  |   |        | $      | 449,586          |   |
|                                                                                                            |                          |                     |        |        |                    |   |        |   |                       |        |        |                  |   |        |        |                  |   |

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|    | (1)  | Shared special charges for the three months ended September 30, 2008, include $21.2 million related to suspended flying under several lines of our at-risk operations.                                                                                                                                                                                                                                                                                                |
|--------------|-----------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|    | (2)  | Some of the major components of other shared expenses for the three months ended September 30, 2008 are maintenance labor – $20.0 million; general and administrative labor and related expenses – $17.3 million; other general and administrative expenses– $20.00 million; outside services – $8.0 million; and non-airport rentals – $2.5 million.  Transition costs incurred were approximately $3.5 million.             |
|    | (3)  | Shared special charges for the nine months ended September 30, 2008, include $21.2 million related to suspended flying under several lines of our at-risk operations in addition to a $12.8 million impairment of goodwill, an $8.6 million impairment of fixed assetsand $0.7 million charge related to base closure costs.                                                                                                                                          |
|    | (4)  | Some of the major components of other shared expenses for the nine months ended September 30, 2008 are maintenance labor – $60.3 million; general and administrative labor and related expenses – $62.5 million; other general and administrative expenses– $72.6 million; outside services – $29.9 million; and non-airport rentals – $7.7 million.  Transition costs incurred were approximately $7.6 million.    |
|    | (5)  | Other shared assets include assets that are used across segments.                                                                                                                                                                                                                                                                                                                                                                                                     |

|                                                                              |                          | **Contract Flying** |        |        | **Branded Flying** |   |        |   | **Aviation Services** |        |        | **Eliminations** |   |        |        | **Consolidated** |   |
|------------------------------------------------------------------------------|--------------------------|---------------------|--------|--------|--------------------|---|--------|---|-----------------------|--------|--------|------------------|---|--------|--------|------------------|---|
|                                                                              | ** **               |                     |        |        |                    |   |        |   |                       |        |        |                  |   |        |        |                  |   |
| **Three months ended September 30, 2007:**                                   |                          |                     |   |   |                    |   |        |   |                       |   |   |                  |   |        |   |                  |   |
| Revenue from customers.............................                          | $                        | 362,175             |   | $      | 75,564             |   |   | $ | 5,152                 |        | $      | (1,546           | ) |        | $      | 441,345          |   |
| Direct segment expenses............................                          |                          | 275,151             |        |        | 113,102            |   |        |   | 7,100                 |        |        | (1,546           | ) |        |        | 393,807          |   |
|                                                                              |                          |                     |        |        |                    |   |        |   |                       |        |        |                  |   |        |        |                  |   |
|     Segment profit (loss)............................... | $                        | 87,024              |        | $      | (37,538            | ) |        | $ | (1,948                | )      | $      | —          |   |        | $      | 47,538           |   |
| Other shared expenses (1)...........................                         |                          |                     |        |        |                    |   |        |   |                       |        |        |                  |   |        |        | (84,194          | ) |
| Interest expense.........................................                    |                          |                     |        |        |                    |   |        |   |                       |        |        |                  |   |        |        | (2,320           | ) |
| Interest Income..........................................                    |                          |                     |        |        |                    |   |        |   |                       |        |        |                  |   |        |        | 4,343            |   |
| Other.........................................................               |                          |                     |        |        |                    |   |        |   |                       |        |        |                  |   |   |        | (561             | ) |
|                                                                              |                          |                     |        |        |                    |   |        |   |                       |        |        |                  |   |        |        |                  |   |
| Consolidated loss before income taxes.........                               |                          |                     |        |        |                    |   |        |   |                       |   |        |                  |   |        | $      | (35,194          | ) |
|                                                                              |      |                     |        |        |                    |   |        |   |                       |        |        |                  |   |        |        | ****             |   |
| **Nine months ended September 30, 2007:**                                    |                          |                     |        |        |                    |   |        |   |                       |        |        |                  |   |        |        |                  |   |
| Revenue from customers.............................                          | $                        | 1,127,079           |        | $      | 103,762            |   |        | $ | 24,771                |        | $      | (6,065           | ) |        | $      | 1,249,547        |   |
| Direct segment expenses............................                          |                          | 861,359             |        |        | 179,805            |   |        |   | 19,993                |        |        | (6,065           | ) |        |        | 1,055,092        |   |
|                                                                              |                          |                     |        |        |                    |   |        |   |                       |        |        |                  |   |        |        |                  |   |
|     Segment profit (loss)............................... | $                        | 265,720             |        | $      | (76,043            | ) |        | $ | 4,778                 |        | $      | —          |   |        | $      | 194,455          |   |
| Other shared expenses (2)...........................                         |                          |                     |        |        |                    |   |        |   |                       |        |        |                  |   |        |        | (259,500         | ) |
| Interest expense.........................................                    |                          |                     |        |        |                    |   |        |   |                       |        |        |                  |   |        |        | (5,904           | ) |
| Interest Income..........................................                    |                          |                     |        |        |                    |   |        |   |                       |        |        |                  |   |        |        | 13,442           |   |
| Other.........................................................               |                          |                     |        |        |                    |   |        |   |                       |        |        |                  |   |        |        | (933             | ) |
|                                                                              |                          |                     |        |        |                    |   |        |   |                       |        |        |                  |   |        |        |                  |   |
| Consolidated loss before income taxes.........                               |                          |                     |        |        |                    |   |        |   |                       |        |        |                  |   |        | $      | (58,440          | ) |
|                                                                              |                          |                     |        |        |                    |   |        |   |                       |        |        |                  |   |        |        | ****             |   |
| **Assets at September 30, 2007:**                                            |                          |                     |        |        |                    |   |        |   |                       |        |        |                  |   |        |        |                  |   |
| Segment assets.........................................                      | $                        | 182,437             |        | $      | 21,792             |   |        | $ | 15,633                |        | $      | —          |   |        | $      | 219,862          |   |
| Other shared assets (3)................................                      |                          |                     |        |        |                    |   |        |   |                       |        |        |                  |   |        |        | 437,016          |   |
|     Total consolidated assets .......................    |                          |                     |        |        |                    |   |        |   |                       |        |        |                  |   |        |        |                  |   |
|                                                                              |                          |                     |        |        |                    |   |        |   |                       |        |        |                  |   |        | $      | 656,878          |   |
|                                                                              |                          |                     |        |        |                    |   |        |   |                       |        |        |                  |   |        |        |                  |   |

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|    | (1)  | Some of the major components of other shared expenses for the three months ended September 30, 2007 are maintenance labor - $19.8 million; general and administrative labor and related expenses - $24.2 million; other general and administrative expenses –$26.2 million; outside services - $9.3 million; and non-airport rentals - $4.3 million.  Transition costs incurred were approximately $0.4 million. |
|--------------|-----------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|    | (2)  | Some of the major components of other shared expenses for the nine months ended September 30, 2007 are maintenance labor - $56.5 million; general and administrative labor and related expenses - $71.8 million; other general and administrative expenses - $73.9million; outside services - $32.5 million; and non-airport rentals - $11.9 million.  Transition costs incurred were approximately $12.9 million.     |
|    | (3)  | Other shared assets include assets that are interchangeable between segments.                                                                                                                                                                                                                                                                                                                                               |

**            Potential Changes to Reportable Segments.**  On July 8, 2008, we announced that we would suspend flying under several lines of our at-risk flying operations and reduce capacity inSeptember 2008 due to unprecedented high fuel costs and other challenges facing the industry.  Furthermore, we mutually agreed with Delta to terminate our capacity purchase and pro-rate flying agreements effective September 2, 2008.  During the quarter wereassigned a portion of our fleet to the Corporate Aviation division and notified Continental of our intent to return 39 aircraft previously employed in various at-risk operations.  Due to the announced reallocation of assets which will reduce costs and betteralign resources with the needs of each segment, we are evaluating our changes effective October 1, 2008.  The following indicates our reporting structure under consideration in accordance with Statement 131:

*            Continental CPA.** *** This segment includes components solely related to the majority of our fleet operating within our amended Continental CPA.  These components werepreviously pooled within our Contract Flying reportable segment with other similar fee based arrangements.

*            Corporate Aviation. * This segment will primarily include components related to charter contracts and ad-hoc charter service.  Due to the reassignment to this division of 18additional aircraft, we will evaluate the applicability of a separate reportable segment in accordance with Statement 131.

            *Aviation Services.*  This reportable segment will continue to include components related to our ground-handling services pursuant to our contracts with Continental and otherairlines, as well as Services, our wholly owned repair and overhaul subsidiary.  Under Services’ brand, we provide composite, sheet metal, interior (including seat refurbishment) and thrust reverser repairs, as well as aircraft painting, throughout ourfive facilities in the United States and Mexico.

            A significant portion of our operating expenses and infrastructure will continue to be integrated across segments (e.g., for maintenance, non-airport facility rentals, outside services, general andadministrative expenses) in order to support our entire fleet of aircraft; therefore, we will not allocate these costs to the individual segments identified above, but evaluate them for our consolidated operation. 

            We will continue to monitor various components of our business and, if necessary, isolate those components into new reportable segments or transfer those components within our existing reportingstructure.  If feasible, the segmented information for prior periods will be restated to reflect all changes in reportable segments effective October 1, 2008.   

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**Note 5 – Earnings / (Loss) Per Share**

            We account for earnings per share in accordance with Statement of Financial Accounting Standard No. 128 — “Earnings per Share.”  Basic earnings per common share(“EPS”) excludes dilution and is computed by dividing net income available to common stockholders by the weighted average number of common shares outstanding during the periods presented.  Diluted EPS reflects the potential dilution that could occurif securities or other obligations to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the earnings of the company.  As discussed below under “Reverse Stock Split,” ourstock began trading on a split-adjusted basis when the market opened on October 2, 2008.  As required per SEC Staff Accounting Bulletin Topic 4C, “Changes in Capital Structure”, the computation of basic and diluted loss per share has beenretroactively adjusted to reflect the reverse stock split for all periods presented in our consolidated statements of operations.

            The following table sets forth the reconciliation of the numerator and denominator of basic EPS to the numerator and denominator of diluted EPS for the three and nine months ended September 30,2008 and 2007 (in thousands, except per share amounts):

|                                                               |   | **Three Months Ended September 30,** |  |   | **Nine Months Ended September 30,** |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|---|--------------------------------------|--|---|-------------------------------------|
|                                                                                                                                                                                                                                                                                                                                                                                |   |                                      |  |
|                                                                                                                                                                                                                                                                                                                                                                                |   | ****                                 |  |   | ****                                |
|                                                                                                                                                                                                                                                                                                                                                                                |   | **2008**                             |  |   | **2007**                            |  |  | **2008** |  |  | **2007** |  |
|                                                                                                                                                                                                                                                                                                                                                                                |   | ****                                 |  |   | ****                                | ** ** |  | **** |  |  | **** |  |
| **Numerator:**                                                                                                                                                                                                                                                                                                                                                                 |   |                                      |  |   |                                     |  |  |  |  |  |  |  |
| Net earnings (loss).................................                                                                                                                                                                                                                                                                                                                           | $ | 5,018                                |  | $ | (22,328                             | ) | $ | (58,019 | ) | $ | (38,565 | ) |
| Income impact of assumed conversion   of convertible debt................................                                                                                                                                                                                                                                                                            |   | —                              |  |   | —                             |  |  | — |  |  | — |   |
|                                                                                                                                                                                                                                                                                                                                                                                |   |                                      |  |   |                                     |  |  |  |  |  |  |  |
|                                                                                                                                                                                                                                                                                                                                                                                | $ | 5,018                                |  | $ | (22,328                             | ) | $ | (58,019 | ) | $ | (38,565 | ) |
|                                                                                                                                                                                                                                                                                                                                                                                |   |                                      |  |   |                                     |  |  |  |  |  |  |  |
|                                                                                                                                                                                                                                                                                                                                                                                |   |                                      |  |   |                                     |  |  |  |  |  |  |  |
| **Denominator:**                                                                                                                                                                                                                                                                                                                                                               |   |                                      |  |   |                                     |  |  |  |  |  |  |  |
| Weighted average common shares   outstanding.........................................                                                                                                                                                                                                                                                                                |   | 15,872                               |  |   | 5,406                               |  |  | 8,737 |  |  | 5,401 |  |
| Effect of stock options and restricted   stock outstanding................................                                                                                                                                                                                                                                                                           |   | 8                                    |  |   | —                             |  |  | — |  |  | — |  |
| Assumed conversion of convertible debt...                                                                                                                                                                                                                                                                                                                                      |   | —                              |  |   | —                             |  |  | — |  |  | — |  |
|                                                                                                                                                                                                                                                                                                                                                                                |   |                                      |  |   |                                     |  |  |  |  |  |  |  |
|                                                                                                                                                                                                                                                                                                                                                                                |   | 15,880                               |  |   | 5,406                               |  |  | 8,737 |  |  | 5,401 |  |
|                                                                                                                                                                                                                                                                                                                                                                                |   |                                      |  |   |                                     |  |  |  |  |  |  |  |
|                                                                                                                                                                                                                                                                                                                                                                                |   |                                      |  |   |                                     |  |  |  |  |  |  |  |
| Basic Earnings (Loss) per share..............                                                                                                                                                                                                                                                                                                                                  | $ | 0.32                                 |  |   | (4.13                               | ) |  | (6.64 | ) |  | (7.14 | ) |
|                                                                                                                                                                                                                                                                                                                                                                                |   |                                      |  |   |                                     |  |  |  |  |  |  |  |
| Diluted Earnings (Loss) per share............                                                                                                                                                                                                                                                                                                                                  | $ | 0.32                                 |  |   | (4.13                               | ) |  | (6.64 | ) |  | (7.14 | ) |
|                                                                                                                                                                                                                                                                                                                                                                                |   |                                      |  |   |                                     |  |  |  |  |  |  |  |

            We excluded 236,881 and 66,103 shares of restricted stock from the weighted average shares used in computing basic EPS for the three months and nine months ended September 30, 2008 and 2007,respectively, as these shares were not vested as of these dates. 

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            Weighted average common shares outstanding for the diluted EPS calculation include the potential common stock equivalents related to our convertible notes, the incremental effect of shares issuableupon the exercise of stock options and restricted stock not yet vested.  We excluded the following common stock equivalents from our diluted EPS calculations, because their inclusion would have been anti-dilutive:

|           | •  | options to purchase 0.4 million and 0.5 million shares of our common stock for the three and nine months ended September 30, 2008  and 0.5 million and 0.3 million shares of our common stock for the three and nine months ended September 30, 2007.  Theseoptions’ exercise prices were greater than the average market price of the common shares for the respective periods; |
|--------------------------------------------------------|--------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                        | •  | 0.1 million shares of restricted stock for the three months ended September 30, 2008; and                                                                                                                                                                                                                                                                                                        |
|                                                        | •  | 0.4 million shares of common stock equivalents for the assumed conversion of convertible debt for the three and nine months ended September 30, 2008 in addition to 0.8 million shares of common stock equivalents for the three and nine months ended September 30,2007.                                                                                                                        |

            As a result of our tender offer with respect to our then 4.25% Convertible Notes due 2023, we issued 16.4 million shares (reverse split adjusted) of our common stock in payment for the $59.7 millionprincipal amount of the notes validly tendered and to settle accrued and unpaid interest that was due August 1, 2008.

            **Reverse Stock Split.**  On October 1, 2008, at a special meeting of our stockholders, we received stockholder approval for a proposal to effect a one-for-ten reverse split of our commonstock, par value $0.01 per share.  The approved proposal also reduced the number of authorized shares of the Company’s common stock from 400,000,000 to 150,000,000.  The Reverse Split became effective on October 2, 2008. 

            The Reverse Split was part of our continuing efforts to return to trading on all New York Stock Exchange (“NYSE”) Group platforms.  In addition, the Reverse Split will allow us toreturn to compliance with the continued listing standard of the NYSE once the six month cure period expires on January 18, 2009.  As a result of the Reverse Split, each 10 shares of our common stock was combined into and automatically became one share of ourcommon stock which began trading on a split-adjusted basis when the market opened on October 2, 2008, with cash paid in lieu of fractional shares.  The Reverse Split affected all shares of our common stock and stock options outstanding immediately prior to theeffective time of the Reverse Split.  The Certificate of Amendment did not change the par value of our Common Stock, which remains at $0.01 per share. 

            Each stockholder’s percentage ownership in the company and proportional voting power remains unchanged after the Reverse Split except for minor changes and adjustments resulting fromfractional shares. The rights and privileges of stockholders are substantially unaffected by the Reverse Split.

            The Reverse Split which began trading on a split-adjusted basis when the market opened on October 2, 2008 is currently reflected in all share information presented in these financialstatements.

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**Note 6 – Debt**

            As of September 30, 2008, long-term debt, including current maturities, totaled $52.6 million, which consisted of our 11.25% Convertible Secured Notes due 2023 and the secured debt owed to ExportDevelopment Canada (“EDC”). 

            As of September 30, 2008 and December 31, 2007, we estimated the fair value of our $68.5 million and $134.7 million (carrying values) convertible notes to be $40.7 million and $130.7 million,respectively, based upon the average of market trading activity for the convertible notes subsequent to the exchange in August 2008.   

**            Convertible Debt**.  On August 1, 2008, holders of our 4.25% Convertible Notes due 2023 had the right to require us to repurchase their notes at a price equal to 100% of the principalamount of the notes plus any accrued and unpaid interest.  Under the indenture governing the convertible notes, we were able to satisfy the obligation with either cash, shares of our common stock, or a combination of cash and shares.  During the quarterended September 30, 2008, we took the following actions after consulting with our independent financial advisors:

|           | •  | Received stockholders approval for two proposals that provided us greater flexibility in satisfying our repurchase obligations with respect to the convertible notes, which included the ability to issue such number of shares of our common stock as necessary torepurchase all outstanding convertible notes that were tendered on August 1, 2008, and increased our authorized common stock from 200 million shares to 400 million shares;                                                                                                                |
|--------------------------------------------------------|--------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                        | •  | Commenced our repurchase offer for the convertible notes and provided written notice to the trustee of our intention to pay the repurchase price wholly in shares of our common stock;                                                                                                                                                                                                                                                                                                                                                                        |
|           | •  | Unilaterally amended the indenture governing the notes to increase the coupon from 4.25% to 11.25% over the remaining note term, to provide security based on a pro-rata amount of collateral and to provide for an additional repurchase date on August 1, 2011, inorder to provide improved terms and additional flexibility for the noteholders; and                                                                                                                                                                                                       |
|           | •  | Issued 16.4 million shares (reverse split adjusted) of our common stock in payment of the repurchase price for the $59.7 million principal amount of the notes validly tendered and to settle accrued and unpaid interest due August 1, 2008.  Because the commonstock was issued in exchange for the convertible notes exclusively with the existing holders of the notes, and no commission or other compensation was paid in soliciting the exchange, the securities are exempt from registration under Section 3(a)(9) of the SecuritiesAct of 1933. |

            Following the completion of the tender offer in August 2008 for our then 4.25% Convertible Notes due 2023, $68.5 million aggregate principal of our convertible notes remains outstanding. Additionally, as provided in the amended indenture governing the notes, such notes have become our 11.25% Convertible Secured Notes due 2023.  In accordance with EITF 96-19 “Debtor's Accounting for a Modification or Exchange of DebtInstruments,” we accounted for this exchange as an extinguishment of debt, since the net present value of the cash flows under the exchanged terms was more than 10% of the net present value of the cash flows under the terms of the originalinstrument.  As required by accounting rules, we recorded the convertible notes to a fair value of $40.7 million, net of a fair value adjustment of $27.8 million that will be amortized over the life of the new instrument up to the first date at which we may berequired to repurchase the notes in August 2011.  Such adjustment was recorded as a non-recurring gain under non-operating income for the third quarter.  The net balance of the 11.25% Convertible Secured Notes as of September 30, 2008 was $42.2 million.

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            We estimated fair value of our convertible notes based on an average of market trading activity for the convertible notes subsequent to the exchange in August 2008.

            Other than the convertible notes, we do not have any material long-term borrowings or available lines of credit.  Pursuant to the terms of the amended indenture governing the 11.25% notesoutstanding, we granted a security interest, with a pro-rata portion, (based on the portion that the remaining notes represent of the total convertible notes that were issued) of assets with an appraised value of approximately $181 million, including approximately$96 million in spare parts and $85 million of spare engines.  Based on the principal amount of notes remaining outstanding on August 2, 2008, the pledged collateral for the notes totals approximately $51.5 million in spare parts and $45.3 million in spareengines.  We agreed that we will not as of any fiscal year end permit the aggregate outstanding principal amount of the Notes divided by the fair market value of the pledged collateral to be greater than certain percentages.  If such collateral ratios aregreater than the applicable maximum, we will pledge additional spare parts, spare aircraft engines and / or cash and cash equivalents.  An appraisal will be performed annually by a third party.

            The following condensed consolidating balance sheets, results of operations and cash flows present separately the financial position of the parent issuer, Holdings, the subsidiary guarantor,Airlines, and all other non-guarantor subsidiaries of Holdings on a combined basis.

|                                                                                                          |        |   | **Condensed Consolidating Balance Sheet September 30, 2008 (In thousands)** |   |
|----------------------------------------------------------------------------------------------------------|--------|---|-----------------------------------------------------------------------------|---|
|                                                                                                          |        |   | ****                                                                        |   |
|                                                                                                          |        |   | **Holdings**                                                                |   |  |  | **Airlines** |  |  |  | **Other Non- Guarantor Subsidiaries** |  |  |  | **Eliminations** |  |  |  | **Consolidated Totals** |  |
|                                                                                                          |        |   | ****                                                                        |   |  |  | **** |  |  |  | **** |  |  |  | **** |  |  |  | **** |  |
| Current assets.................................                                                          |   | $ | —                                                                     |   | ** ** | $ | 197,412 |  | ** ** | $ | 9,791 |  | ** ** | $ | — |  | ** ** | $ | 207,203 |  |
| Property and equipment, net.............                                                                 |   |   | 110                                                                         |   |  |  | 218,650 |  |  |  | 14,235 |  |  |  | — |  |  |  | 232,995 |  |
| Investments in other entities..............                                                              |   |   | 3,515                                                                       |   |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 3,515 |  |
| Other assets....................................                                                         |   |   | 2,888                                                                       |   |  |  | 4,707 |  |  |  | 2,136 |  |   |  | (3,858 | ) |  |  | 5,873 |  |
|                                                                                                          |        |   |                                                                             |   |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Total assets.....................................                                                        |        | $ | 6,513                                                                       |   |  | $ | 420,769 |  |  | $ | 26,162 |  |  | $ | (3,858 | ) |  | $ | 449,586 |  |
|                                                                                                          |        |   |                                                                             |   |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Current liabilities..............................                                                        |        | $ | 1,031                                                                       |   |  | $ | 125,370 |  |  |  | 2,289 |  |  |  | — |  |  |  | 128,690 |  |
| Intercompany payables (receivables)..                                                                    |        |   | (345,023                                                                    | ) |  |  | 338,048 |  |  |  | 6,975 |  |  |  | — |  |  |  | — |  |
| Long-term debt.................................                                                          |        |   | 42,212                                                                      |   |  |  | 6,919 |  |  |  | — |  |  |  | — |  |  |  | 49,131 |  |
| Other liabilities.................................                                                       |        |   | 6,128                                                                       |   |  |  | 30,079 |  |  |  | 12 |  |  |  | (3,858 | ) |  |  | 32,361 |  |
| Stockholders’ equity.........................                                                      |        |   | 302,165                                                                     |   |  |  | (79,647 | ) |  |  | 16,886 |  |  |  | — |  |  |  | 239,404 |  |
|                                                                                                          |        |   |                                                                             |   |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Total liabilities and stockholders’   equity............................................ |        | $ | 6,513                                                                       |   |  | $ | 420,769 |  |  | $ | 26,162 |  |  | $ | (3,858 | ) |  | $ | 449,586 |  |
|                                                                                                          |        |   |                                                                             |   |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

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|                                                                                                          |        |   | **Condensed Consolidating Balance Sheet December 31, 2007 (In thousands)** |   |
|----------------------------------------------------------------------------------------------------------|--------|---|----------------------------------------------------------------------------|---|
|                                                                                                          |        |   | ****                                                                       |   |
|                                                                                                          |        |   | **Holdings**                                                               |   |  |  | **Airlines** |  |  |  | **Other Non- Guarantor Subsidiaries** |  |  |  | **Eliminations** |  |  |  | **Consolidated Totals** |  |
|                                                                                                          |        |   | ****                                                                       |   | ** ** |  | **** |  | ** ** |  | **** |  | ** ** |  | **** |  | ** ** |  | **** |  |
| Current assets.................................                                                          |   | $ | —                                                                    |   |  | $ | 296,348 |  |  | $ | 6,036 |  |  | $ | — |  |  | $ | 302,384 |  |
| Property and equipment, net.............                                                                 |   |   | 112                                                                        |   |  |  | 248,720 |  |  |  | 14,866 |  |  |  | — |  |  |  | 263,698 |  |
| Investments in other entities..............                                                              |   |   | 3,254                                                                      |   |  |  | — |  |  |  | 6,459 |  |  |  | — |  |  |  | 9,713 |  |
| Other assets....................................                                                         |   |   | 15,760                                                                     |   |  |  | 5,907 |  |  |  | 146 |  |   |  | — |  |  |  | 21,813 |  |
|                                                                                                          |        |   |                                                                            |   |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Total assets.....................................                                                        |        | $ | 19,126                                                                     |   |  | $ | 550,975 |  |  | $ | 27,507 |  |  | $ | — |  |  | $ | 597,608 |  |
|                                                                                                          |        |   |                                                                            |   |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Current liabilities..............................                                                        |        |   | 137,122                                                                    |   |  |  | 158,557 |  |  |  | 1,005 |  |  |  | — |  |  |  | 296,684 |  |
| Intercompany payables (receivables)..                                                                    |        |   | (332,112                                                                   | ) |  |  | 326,233 |  |  |  | 5,879 |  |  |  | — |  |  |  | — |  |
| Long-term debt.................................                                                          |        |   | —                                                                    |   |  |  | 9,308 |  |  |  | 14 |  |  |  | — |  |  |  | 9,322 |  |
| Other liabilities.................................                                                       |        |   | (5,838                                                                     | ) |  |  | 66,992 |  |  |  | (1,992 | ) |  |  | — |  |  |  | 59,162 |  |
| Stockholders’ equity.........................                                                      |        |   | 219,954                                                                    |   |  |  | (10,115 | ) |  |  | 22,601 |  |  |  | — |  |  |  | 232,440 |  |
|                                                                                                          |        |   |                                                                            |   |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Total liabilities and stockholders’   equity............................................ |        | $ | 19,126                                                                     |   |  | $ | 550,975 |  |  | $ | 27,507 |  |  | $ | — |  |  | $ | 597,608 |  |
|                                                                                                          |        |   |                                                                            |   |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

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|                                                    |        |   | **Condensed Consolidating Results of Operations Three Months Ended September 30, 2008 (In thousands)** |   |
|----------------------------------------------------|--------|---|--------------------------------------------------------------------------------------------------------|---|
|                                                    |        |   | ****                                                                                                   |   |
|                                                    |        |   | **Holdings**                                                                                           |   |  |  | **Airlines** |  |  |  | **Other Non- Guarantor Subsidiaries** |  |  |  | **Eliminations** |  |  |  | **Consolidated Totals** |  |
|                                                    |        |   | ****                                                                                                   |   | ** ** |  | **** |  | ** ** |  | **** |  | ** ** |  | **** |  | ** ** |  | **** |  |
| Operating revenue............................      |   | $ | —                                                                                                |   |  | $ | 259,257 |  |  | $ | 5,075 |  |  | $ | (2,006 | ) |  | $ | 262,326 |  |
| Operating expenses.........................        |   |   | 599                                                                                                    |   |  |  | 288,244 |  |  |  | 4,450 |  |  |  | (2,006 | ) |  |  | 291,287 |  |
|                                                    |   |   |                                                                                                        |   |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Operating income (loss)....................        |   |   | (599                                                                                                   | ) |  |  | (28,987 | ) |  |  | 625 |  |  |  | — |  |  |  | (28,961 | ) |
|                                                    |        |   |                                                                                                        |   |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Gain due to fair value adjustment.......           |        |   | 27,785                                                                                                 |   |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 27,785 |  |
| Settlement of fuel contracts...............        |        |   | —                                                                                                |   |  |  | 23,149 |  |  |  | — |  |  |  | — |  |  |  | 23,149 |  |
| Impairment charges on investments...               |        |   | —                                                                                                |   |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |
| Interest expense..............................     |        |   | (3,715                                                                                                 | ) |  |  | (4,587 | ) |  |  | (2 | ) |  |  | 4,456 |  |  |  | (3,848 | ) |
| Interest income................................    |        |   | 4,456                                                                                                  |   |  |  | 1,218 |  |  |  | — |  |  |  | (4,456 | ) |  |  | 1,218 |  |
| Capitalized interest...........................    |        |   | —                                                                                                |   |  |  | 248 |  |  |  | — |  |  |  | — |  |  |  | 248 |  |
| Equity investment income (loss)........            |        |   | 96                                                                                                     |   |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 96 |  |
| Other, net........................................ |        |   | —                                                                                                |   |  |  | (35 | ) |  |  | (168 | ) |  |  | — |  |  |  | (203 | ) |
|                                                    |        |   |                                                                                                        |   |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Income (loss) before income taxes.....             |        |   | 28,023                                                                                                 |   |  |  | (8,994 | ) |  |  | 455 |  |  |  | — |  |  |  | 19,484 |  |
| Income tax benefit (expense).............          |        |   | (11,577                                                                                                | ) |  |  | (2,606 | ) |  |  | (283 | ) |  |  | — |  |  |  | (14,466 | ) |
|                                                    |        |   |                                                                                                        |   |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Net income (loss).............................     |        | $ | 16,446                                                                                                 |   |  | $ | (11,600 | ) |  | $ | 172 |  |  | $ | — |  |  | $ | 5,018 |  |
|                                                    |        |   |                                                                                                        |   |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

|                                                    |        |   | **Condensed Consolidating Results of Operations Nine Months Ended September 30, 2008 (In thousands)** |   |
|----------------------------------------------------|--------|---|-------------------------------------------------------------------------------------------------------|---|
|                                                    |        |   | ****                                                                                                  |   |
|                                                    |        |   | **Holdings**                                                                                          |   |  |  | **Airlines** |  |  |  | **Other Non- Guarantor Subsidiaries** |  |  |  | **Eliminations** |  |  |  | **Consolidated Totals** |  |
|                                                    |        |   | ****                                                                                                  |   | ** ** |  | **** |  | ** ** |  | **** |  | ** ** |  | **** |  | ** ** |  | **** |  |
| Operating revenue............................      |   | $ | —                                                                                               |   |  | $ | 1,149,029 |  |  | $ | 13,347 |  |  | $ | (4,706 | ) |  | $ | 1,157,670 |  |
| Operating expenses.........................        |   |   | 673                                                                                                   |   |  |  | 1,254,875 |  |  |  | 14,570 |  |  |  | (4,706 | ) |  |  | 1,265,412 |  |
|                                                    |   |   |                                                                                                       |   |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Operating income (loss)....................        |   |   | (673                                                                                                  | ) |  |  | (105,846 | ) |  |  | (1,223 | ) |  |  | — |  |  |  | (107,742 | ) |
|                                                    |        |   |                                                                                                       |   |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Gain due to fair value adjustment.......           |        |   | 27,785                                                                                                |   |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 27,785 |  |
| Settlement of fuel contracts...............        |        |   | —                                                                                               |   |  |  | 23,149 |  |  |  | — |  |  |  | — |  |  |  | 23,149 |  |
| Impairment charges on investments...               |        |   | —                                                                                               |   |  |  | (13,661 | ) |  |  | (5,231 | ) |  |  | — |  |  |  | (18,892 | ) |
| Interest expense..............................     |        |   | (8,232                                                                                                | ) |  |  | (13,847 | ) |  |  | (14 | ) |  |  | 13,374 |  |  |  | (8,719 | ) |
| Interest income................................    |        |   | 13,374                                                                                                |   |  |  | 4,980 |  |  |  | — |  |  |  | (13,374 | ) |  |  | 4,980 |  |
| Capitalized interest...........................    |        |   | —                                                                                               |   |  |  | 911 |  |  |  | — |  |  |  | — |  |  |  | 911 |  |
| Equity investment income (loss)........            |        |   | 261                                                                                                   |   |  |  | — |  |  |  | (1,228 | ) |  |  | — |  |  |  | (967 | ) |
| Other, net........................................ |        |   | 525                                                                                                   |   |  |  | 1,172 |  |  |  | (289 | ) |  |  | — |  |  |  | 1,408 |  |
|                                                    |        |   |                                                                                                       |   |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Income (loss) before income taxes.....             |        |   | 33,040                                                                                                |   |  |  | (103,142 | ) |  |  | (7,985 | ) |  |  | — |  |  |  | (78,087 | ) |
| Income tax benefit (expense).............          |        |   | (13,332                                                                                               | ) |  |  | 31,127 |  |  |  | 2,273 |  |  |  | — |  |  |  | 20,068 |  |
|                                                    |        |   |                                                                                                       |   |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Net income (loss).............................     |        | $ | 19,708                                                                                                |   |  | $ | (72,015 | ) |  | $ | (5,712 | ) |  | $ | — |  |  | $ | (58,019 | ) |
|                                                    |        |   |                                                                                                       |   |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

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Table of Contents

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

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

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|                                                                                                                                                                                                                                                                                                                                                                          |   | **Condensed Consolidating Cash Flows Nine Months Ended September 30, 2008 (In thousands)** |        |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|---|--------------------------------------------------------------------------------------------|--------|
|                                                                                                                                                                                                                                                                                                                                                                          |   | ****                                                                                       |        |
|                                                                                                                                                                                                                                                                                                                                                                          |   | **Holdings**                                                                               |        |  |  | **Airlines** |  |  |  | **Other Non- Guarantor Subsidiaries** |  |  |  | **Eliminations** |  |  |  | **Consolidated Totals** |  |
|                                                              |   | ****                                                                                       |        |  |  | **** |  |  |  | **** |  |  |  | **** |  |  |  | **** |  |
| Operating activities...........................                                                                                                                                                                                                                                                                                                                          | $ | —                                                                                    |   |   | $ | (44,617 | ) |   | $ | (1,043 | ) |   | $ | 1,256 |  |   | $ | (44,404 | ) |
| Investing activities............................                                                                                                                                                                                                                                                                                                                         |   | —                                                                                    |        |  |  | (64,261 | ) |  |  | — |  |  |  | — |  |  |  | (64,261 | ) |
| Financing activities...........................                                                                                                                                                                                                                                                                                                                          |   | —                                                                                    |        |  |  | (12,670 | ) |  |  | 1,254 |  |  |  | (1,256 | ) |  |  | (12,672 | ) |
|                                                                                                                                                                                                                                                                                                                                                                          |   |                                                                                            |        |  |  |  |  |  |  |  |  |   |  |  |  |  |  |  |  |
| Net increase (decrease) in cash........                                                                                                                                                                                                                                                                                                                                  |   | —                                                                                    |        |  |  | (121,548 | ) |  |  | 211 |  |  |  | — |  |  |  | (121,337 | ) |
| Cash at the beginning of the period....                                                                                                                                                                                                                                                                                                                                  |   | —                                                                                    |        |  |  | 188,834 |  |  |  | 425 |  |  |  | — |  |  |  | 189,259 |  |
|                                                                                                                                                                                                                                                                                                                                                                          |   |                                                                                            |        |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Cash at the end of the period.............                                                                                                                                                                                                                                                                                                                               | $ | —                                                                                    |        |  | $ | 67,286 |  |  | $ | 636 |  |  | $ | — |  |  | $ | 67,922 |  |
|                                                                                                                                                                                                                                                                                                                                                                          |   |                                                                                            |        |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

|                                                                                                                                                                                                                                                                                                                                                               |   | **Condensed Consolidated Cash Flows Nine Months Ended September 30, 2007 (In thousands)** |  |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------------------------------------------------------------------|--|
|                                                                                                                                                                                                                                                                                                                                                                    |        |                                                                                           |  |
|                                                             |   | **Holdings**                                                                              |  |  |  | **Airlines** |  |  |  | **Other Non- Guarantor Subsidiaries** |  |  |  | **Eliminations** |  |  |  | **Consolidated Totals** |  |
|                                                                                                                                                                                                                                                                                                                                                                    |        |                                                                                           |  |   |  |  |  |   |  |  |  |  |  |  |  |   |  |  |  |
| Operating activities............................                                                                                                                                                                                                                                                                                                                   | $      | —                                                                                   |  |  | $ | 3,518 |  |  | $ | (745 | ) |  | $ | — |  |  | $ | 2,773 |  |
| Investing activities.............................                                                                                                                                                                                                                                                                                                                  |        | —                                                                                   |  |  |  | (56,027 | ) |  |  | (23 | ) |  |  | 1,011 |  |  |  | (55,039 | ) |
| Financing activities............................                                                                                                                                                                                                                                                                                                                   |        | 838                                                                                       |  |  |  | (1,683 | ) |  |  | 977 |  |  |  | (1,011 | ) |  |  | (879 | ) |
|                                                                                                                                                                                                                                                                                                                                                                    |        |                                                                                           |  |  |  |  |  |  |  |  |  |   |  |  |  |  |  |  |  |
| Net increase (decrease) in cash.........                                                                                                                                                                                                                                                                                                                           |        | 838                                                                                       |  |  |  | (54,192 | ) |  |  | 209 |  |  |  | — |  |  |  | (53,145 | ) |
| Cash at the beginning of the period.....                                                                                                                                                                                                                                                                                                                           |        | —                                                                                   |  |  |  | 291,148 |  |  |  | 485 |  |  |  | — |  |  |  | 291,633 |  |
|                                                                                                                                                                                                                                                                                                                                                                    |        |                                                                                           |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Cash at the end of the period.............                                                                                                                                                                                                                                                                                                                         | $      | 838                                                                                       |  |  | $ | 236,956 |  |  | $ | 694 |  |  | $ | — |  |  | $ | 238,488 |  |
|                                                                                                                                                                                                                                                                                                                                                                    |        |                                                                                           |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

**Note 7 – Income Taxes**

            In conjunction with our initial public offering in April 2002, the tax basis of our tangible and intangible assets was adjusted to fair value.  This adjustment to tax basis should result inadditional tax deductions being available to us through 2017.  In accordance with our tax agreement with Continental, to the extent we generate taxable income sufficient to realize the additional tax deductions, we are required to pay Continental a percentage ofthe amount of tax savings actually realized, excluding the effect of any loss carrybacks: 100% of the first third of the anticipated tax benefit, 90% of the second third and 80% of the last third.  However, if the tax benefits are not realized by the end of2018, we will be obligated to pay Continental 100% of any benefit realized after that date.  Since these payments depend solely on our ability to generate sufficient taxable income to realize these deferred tax assets, they are recorded as an obligation toContinental within the deferred tax asset accounts, and the portion we may retain in the future is offset by a valuation allowance.  At the time of the initial public offering, the valuation allowance and the obligation to Continental offset the step-up in basisof assets in our long-term deferred tax asset account.  There were no payments made to Continental under the tax agreement during 2007 or during the first nine months of 2008.

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            During 2008, we received $37.8 million in tax refunds, which primarily represented income tax refund from prior years resulting from the carry back and application of 2007 operating losses againstpast year’s income.  This was recorded as a tax receivable as of December 31, 2007.  As a result of these refunds, we can no longer carryback additional losses related to federal income taxes.

            During the 3rd quarter we recorded $6.9 million in income tax expense to record a valuation allowance for certain deferred tax assets related to capital gains and state tax net operatinglosses as it was concluded more likely than not that adequate income would not be generated to utilize these deferred tax assets based on their characterization. 

**Note 8 – Commitments and Contingencies**

            **Capacity Purchase Agreement.**  See Note 2 – “Capacity Purchase Agreements” for further information regarding our capacity purchase agreement with Continental.

            **Purchase Commitments.**  As of September 30, 2008, we had options for 50 ERJ-145XR aircraft that may be exercised for an ERJ-145 or similar aircraft.  We retain the right to exercisethese option aircraft and fly them for other airlines or under our own code, subject to some restrictions; however, we will have to finance our acquisition of these aircraft independently.  Currently, we do not have any firm commitments for aircraftpurchases. 

            The following table represents changes to our minimum contractual obligations for our convertible debt and our aircraft operating leases since December 31, 2007.  For a summary of theremaining contractual obligations, please refer to the 2007 10-K Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Commitments – Contractual Obligations and CommercialCommitments.”

| **                                                                  ** |  |   | **Total** |        |   | **2008** |        |   | **2009** |        |   | **2010** |        |   | **2011** |        |   | **2012** |        |   | **Over 5 Years** |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--|---|-----------|--------|---|----------|--------|---|----------|--------|---|----------|--------|---|----------|--------|---|----------|--------|---|------------------|
|                                                                                                                                                                                                                                                                                                                                                                                                                  |  |   | ****      |        |   | ****     |        |   | ****     |        |   | ****     |        |   | ****     |        |   | ****     |        |   | ****             |
| 11.25% Convertible Secured Notes due   2023, including interest (1).........................                                                                                                                                                                                                                                                                                                           |  | $ | 96.0      |   | $ | 4.4      |   | $ | 7.7      |   | $ | 7.7      |   | $ | 76.2     |   | $ | —  |   | $ | —          |
| Aircraft operating leases (2).........................                                                                                                                                                                                                                                                                                                                                                           |  |   | 340.1     |        |   | 197.8    |        |   | 21.9     |        |   | 21.9     |        |   | 21.9     |        |   | 21.9     |        |   | 54.7             |
| Other operating leases(3).............................                                                                                                                                                                                                                                                                                                                                                           |  |   | 121.0     |        |   | 38.7     |        |   | 12.9     |        |   | 9.4      |        |   | 8.6      |        |   | 8.5      |        |   | 42.9             |
| Obligations under capacity purchase and   other agreements with Continental(4)..........                                                                                                                                                                                                                                                                                                               |  |   | 7.9       |        |   | 7.9      |        |   | —  |        |   | —  |        |   | —  |        |   | —  |        |   | —          |
| Other contractual obligations(5)....................                                                                                                                                                                                                                                                                                                                                                             |  |   | 1,002.9   |        |   | 169.6    |        |   | 118.2    |        |   | 121.7    |        |   | 125.1    |        |   | 129.2    |        |   | 339.1            |
|                                                                                                                                                                                                                                                                                                                                                                                                                  |  |   | ****      |        |   | ****     |        |   | ****     |        |   | ****     |        |   | ****     |        |   | ****     |        |   | ****             |
| Total expected cash obligations..................                                                                                                                                                                                                                                                                                                                                                                |  | $ | 1,567.9   |        | $ | 418.4    |        | $ | 160.7    |        | $ | 160.7    |        | $ | 231.8    |        | $ | 159.6    |        | $ | 436.7            |
|                                                                                                                                                                                                                                                                                                                                                                                                                  |  |   |           |        |   |          |        |   |          |        |   |          |        |   |          |        |   |          |        |   |                  |

| (1)  | Following the completion of the tender offer related to our convertible debt in August 2008, $68.5 million aggregate principal of our then 4.25% Convertible Notes due 2023 remains outstanding.  Additionally, as provided in the amended indenture governing thenotes, such notes have become our 11.25% Convertible Secured Notes due 2023 with an additional repurchase date on August 1, 2011.  |
|-----------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (2)  | Consistent with the amended Continental CPA, the remaining 30 aircraft lease payments for Corporate Aviation are at reduced rental rates.  Lease payments for the 214 aircraft operating under Continental will be incurred directly by Continental.                                                                                                                                                      |

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| (3)  | Other operating lease obligations represent the estimated lease payments for our ground service equipment, spare engines and substantially all of our ground facilities, including facilities at public airports, from Continental or the municipalities or agenciesowning and controlling such airports that are under operation leases.  Other operating lease obligations also include the lease payments related to a flight training device.  As of result of suspended flying within our Branded Flying operations, ourcommitments for facility rents at various airports has significantly diminished.  In addition, as of July 1, 2008, we are no longer obligated for facility fees under the amended Continental CPA.                                                                      |
|-----------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (4)  | Obligations under capacity purchase and other agreements with Continental represent fixed charges for ground handling costs at Continental stations and charges for administrative services provided by Continental, such as technology, fuel management and insuranceservices for the first six months of 2008. Under the amended Continental CPA, which became effective July 1, 2008, Continental will pay for ground handling, fuel related and various technology services provided to us directly.                                                                                                                                                                                                                                                                                                            |
| (5)  | Other contractual obligations primarily include our power-by-the-hour agreement with Rolls Royce.  We expect to fund these commitments with cash generated from operations.  The estimated amount of future commitments for Rolls Royce is based onassumptions related to anticipated future levels of operations and forecasted payment rates.  The level of operations inherent in the estimated amounts for Rolls Royce is based on Continental’s most recent operating plan for Airlines, which can be alteredat Continental’s sole discretion and includes our 30 aircraft that are operating in our other business segments.  Contractual rate increases at actual time of occurrence may be different than the forecasted rate inherent in the amounts for RollsRoyce.  |

            **General Guarantees and Indemnifications.**  Pursuant to the amended Continental CPA, we indemnify Continental for certain of our actions and it indemnifies us for some of itsactions. 

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

***           * Credit Card Holdback. ** The level of credit card holdbacks under the agreement with our Visa and MasterCard processor is subject to adjustments based on specific financialtriggers that require, among other things, that we maintain certain financial ratios and levels of operating income and unrestricted cash.  This holdback, which is included in restricted cash in our consolidated balance sheet, totaled approximately $3.3 millionand $4.9 million as of September 30, 2008 and December 31, 2007, respectively.  The funds held back bear interest and will be made available to us as our liability to past customers diminishes. 

**           ** Under our American Express credit card processing agreement, certain proceeds from advance ticket sales are held back to serve as collateral to cover any possible chargebacks or otherdisputed charges that may occur.  These holdbacks, which are included in restricted cash in our consolidated balance sheets, totaled approximately $.4 million and $3.6 million as of September 30, 2008 and December 31, 2007, respectively.  The funds heldback by American Express bear interest and are subsequently made available to us as our liability to past customers diminishes.

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            As of September 30, 2008, we included $0.6 million in restricted cash on our consolidated balance sheet for credit card holdbacks under our processing agreement with Discover.  The funds heldback bear interest and will be made available to us as our liability to past customers diminishes.

            We believe that substantially all of the restricted cash associated with the credit card holdbacks will be reclassed to unrestricted cash during the 4th quarter of 2008.

            **Fuel.**  Under the amended Continental CPA, Continental will be responsible for the cost of providing fuel for all flights and, therefore, effective July 1, 2008, fuel expense is nolonger included in our statements of operations for aircraft flying within this arrangement.  Upon the decision to suspend operations for Airlines’ Branded Flying on July 8, 2008, we sold our fixed forward purchase contracts for periods subsequent toSeptember 2, 2008, which resulted in a non-operating gain of approximately $23 million.  To date, we have received approximately $21 million in cash from World Fuel Services with the remaining $2 million held in deposit for future fuel purchases within ourCorporate Aviation division.  The funds held in deposit by World Fuel Services earn interest.

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

**Note 9 - Subsequent Events**

****

**            Reverse Stock Split.**  On October 1, 2008, at a special meeting of our stockholders, we received stockholder approval for a proposal to effect a one-for-ten reverse split of our commonstock, par value $0.01 per share.  The approved proposal also reduced the number of authorized shares of the Company’s common stock from 400,000,000 to 150,000,000.  The Reverse Split became effective on October 2, 2008. 

            The Reverse Split was part of our continuing efforts to return to trading on all NYSE Group platforms.  In addition, the Reverse Split will allow us to return to compliance with the continuedlisting standard of the NYSE once the six month cure period expires on January 18, 2009.  As a result of the Reverse Split, each 10 shares of our common stock was combined into and automatically became one share of our common stock which began trading on asplit-adjusted basis when the market opened on October 2, 2008, with cash paid in lieu of fractional shares.  The Reverse Split affected all shares of our common stock and stock options outstanding immediately prior to the effective time of the ReverseSplit.  The Certificate of Amendment did not change the par value of our Common Stock, which remains at $0.01 per share

            Each stockholder’s percentage ownership in the company and proportional voting power remains unchanged after the Reverse Split except for minor changes and adjustments resulting fromfractional shares.  The rights and privileges of stockholders are substantially unaffected by the Reverse Split.

            This issuance of our common stock with respect to our 4.25% Convertible Notes due 2023 and the Reverse Split which began trading on a split-adjusted basis when the market opened on October 2, 2008are currently reflected in our basic and diluted loss per share calculation recorded in the consolidated statements of operations. 

**

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            **Labor Agreements. ** During the third quarter, we realized $10 million in concessions through reductions provided by management and clerical employees.  An additional $5 million willbe contributed by the airport services division through wage and benefit reductions as well as productivity improvements.   Furthermore, subsequent to quarter end, we reached tentative agreements with our four unions representing the pilots and instructors,mechanics, flight attendants and dispatchers for $20 million in labor savings.  In November 2008, we received final approval from each of the union’s national offices to execute the new agreements recently ratified by the union memberships.  Each ofthese agreements will be retroactive to November 1, 2008 and will become amendable in December 2010 for pilots and instructors, August 2009 for mechanics, August 2010 for flight attendants and July 2009 for dispatchers.

**            Auction Rate Securities.**  Subsequent to the quarter’s end, we monetized $5 million of our ARS for 91.25% of the securities face value.  We continue to monitor the ARS marketand will aggressively pursue monetizing the assets at or near face value through additional market transactions and may also pursue litigation if necessary to recoup full value.

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

            The following discussion contains a number of forward-looking statements that are based on our current expectations and involve a number of risks and uncertainties, many of which are outside ourcontrol.  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.  Important factors that couldcause actual results to differ materially from the expectations expressed or implied in the forward-looking statements include known and unknown risks.  Some of the known risks that could significantly impact our revenues, operating results, and capacityinclude, but are not limited to: 

|        | •  | our dependence on the financial and operational stability of Continental;                                                                                                                                                                                                                                 |
|--------------------------------------|--------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                      | •  | our operations under the amended Continental CPA could be unprofitable;                                                                                                                                                                                                                                   |
|                                      | •  | our charter operations outside of the amended Continental CPA could reduce our ability to operate profitably;                                                                                                                                                                                             |
|                                      | •  | the expiration of the amended Continental CPA after a term of seven years with no renewal or extension options;                                                                                                                                                                                           |
|                                      | •  | Continental’s ability to remove additional aircraft from the amended Continental CPA as leases on covered aircraft expire;                                                                                                                                                                     |
|                                      | •  | the possibility that we could lose access to our aircraft, facilities and regulatory authorizations, as well as any airport-related and other services that Continental currently provides to us if the amended Continental CPA were terminated for “cause”as defined in the agreement;  |
|                                      | •  | the possibility that a small number of stockholders may be able to exert significant control over the election of our Board of Directors and the management of our business;                                                                                                                         |
|                                      | •  | the new amendments to the terms of our convertible notes and the required accounting treatment for extinguishment of debt could increase our obligations and could put some of our assets at risk;                                                                                              |
|                                      | •  | our common stock could be delisted from the NYSE, if we fail to maintain the minimum required market capitalization and minimum average closing stock price; triggering a default under our notes and the obligation to repay the notes in cash;                                                          |
|                                      | •  | increased maintenance and other costs as our fleet ages;                                                                                                                                                                                                                                                  |
|                                      | •  | our cost structure may not be competitive with some low-cost or other regional carriers;                                                                                                                                                                                                                  |
|                                      | •  | extensive government regulation of our business and additional costs to comply with such regulations;                                                                                                                                                                                                     |
|                                      | •  | other adverse factors, including weather conditions and the availability and cost of fuel;                                                                                                                                                                                                                |
|                                      | •  | our reliance on technology could be harmful in the event of system failure; and                                                                                                                                                                                                                           |
|                                      | •  | any adverse effects on our operations and financial condition from an aviation accident.                                                                                                                                                                                                                  |

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For further discussion of these risks, please see the “Risk Factors” sections in our 2007 10-K and in this report.  The statements in this report are made as of November 7, 2008 and the events described in forward-looking statements might notoccur or might occur to a materially different extent than described in this report.  We undertake no duty to update or revise any of our forward-looking statements, whether as a result of new information, future events or otherwise.

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

**Operational Review**

            Our quarter ended September 30, 2008 was one of transition.  During the quarter we dramatically reshaped our business in order to adapt to the unprecedented high fuel costs and otherchallenges facing the industry.  As part of the transition, we suspended flying under several lines of our at-risk flying operations, including the termination of our Branded Flying operations, and reduced capacity in September 2008.  Furthermore, wemutually agreed with Delta Air Lines (“Delta”) to terminate our capacity purchase agreement (the “Delta CPA”) and pro-rate flying agreements effective September 2, 2008.  During the quarter we reassigned a portion of our fleet to theCorporate Aviation division and transitioned 29 aircraft back to Continental that were previously employed in various at-risk operations.  We will continue to operate 214 aircraft under the amended Continental CPA unless Continental withdraws aircraft from theagreement.

            The following table summarizes our active fleet allocation as of September 30, 2008 and June 30, 2008:

|                                                                      |  | **Fleet Allocation** |
|----------------------------------------------------------------------|--|----------------------|
|                                                                      |  | **September 2008**   |  | **June 2008** |
|                                                                      |  | ****                 |  | **** |
|                                                                      |  |                      |  |  |
| **Contract**                                                         |  |                      |   |  |
|    Continental CPA................................    |  | 214                  |  | 205 |
|    Delta CPA (1)..................................... |  | —              |  | 10 |
|    Corporate Aviation..............................   |  | 30                   |  | 12 |
|                                                                      |  |                      |  |  |
|                                                                      |  | 244                  |  | 227 |
| **Branded**                                                          |  |                      |  |  |
|    ExpressJet........................................ |  | —              |  | 34 |
|    Delta Prorate..................................... |  | —              |  | 13 |
|                                                                      |  |                      |  |  |
|                                                                      |  | —              |  | 47 |
|                    |  |                      |  |  |
| Total....................................................            |  | 244                  |  | 274 |

|    | (1)  | At quarter end, we held 10 aircraft previously operating within the Delta CPA.  These aircraft were not active in our fleet at September 30, 2008 and were transitioned back to Continental on October 2, 2008. |
|--------------|-----------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

            We plan to end 2008 with 244 operating aircraft, 214 flying under the amended Continental CPA and 30 in our Corporate Aviation Division.  As aresult of the fleet reduction and decreased flying on behalf of Continental we expect to operate approximately 30% less block hours during the 4th quarter of 2008 versus the 2nd quarter of 2008.  We excluded block hours comparisons tothe 3rd quarter 2008 as our operations were under extensive transition during that period.

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            The following table summarizes our performance as determined through completion factors for the three and nine months ending September 30, 2008.

|                                                                                   |  | **Three Months Ended September 30,** |   |                  | **Nine Months Ended September 30,** |
|-----------------------------------------------------------------------------------|--|--------------------------------------|---|------------------|-------------------------------------|
|                                                                                   |  |                                      |   |
|                                                                                   |  | ****                                 |   | **  ** | ****                                |
|                                                                                   |  | **2008**                             |   |                  | **2007**                            |  |  | **2008** |  |  | **2007** |  |
|                                                                                   |  | ****                                 |   |                  | ****                                |  |  | **** |  |  | **** |  |
|                                                                                   |  |                                      |   |                  |                                     |  |  |  |  |  |  |  |
| System completion factor..........                                                |  | 96.9                                 | % |                  | 98.0                                | % |  | 97.3 | % |  | 97.5 | % |
|                                                                                   |  |                                      |   |                  |                                     |  |  |  |  |  |  |  |
| Continental CPA                                                                   |  |                                      |   |                  |                                     |  |  |  |  |  |  |  |
|   - completion factor....................                                    |  | 96.4                                 | % |                  | 97.5                                | % |  | 96.7 | % |  | 97.1 | % |
|   - controllable completion factor(1)....................................... |  | 99.8                                 | % |                  | 99.9                                | % |  | 99.8 | % |  | 99.8 | % |
|                                                                                   |  |                                      |   |                  |                                     |  |  |  |  |  |  |  |

|    | (1)  | Controllable completion factor excludes cancellations due to weather, air traffic control and ground handling at locations not managed by ExpressJet.  |
|--------------|-----------|-------------------------------------------------------------------------------------------------------------------------------------------------------------|

**2008 Outlook**

            **Industry. ** The airline industry is very competitive and is facing unprecedented challenges including a weak U.S. economy, credit market instability and volatile fuel prices. Someairlines have been able to use the bankruptcy process to restructure and lower their operating costs.  Additional pressures on airlines from potential consolidation among legacy carriers, the Internet as a distribution system and the intense competition fromlower-cost carriers have resulted in announcements of significant capacity reductions, increases in fuel surcharges, fares and other fees.  In addition, regional carriers’ networks have become susceptible to mainline partner risks as legacy carriers arebecoming more aggressive in down-sizing and terminating contracts.

            **Continental CPA. ** Prior to July 1, 2008, Airlines was entitled to receive payment for each block hour that Continental scheduled it to fly.  Payment was based on a formula designedto provide Airlines with a target operating margin of 10% before taking into account variations in certain costs and expenses that were generally within our control.  We had exposure for most labor costs and some maintenance and general administrative expensesif actual costs were higher than those budgeted in our block hour rates.  For a detailed description of the terms of the original Continental CPA, please see Item 1. “Business – Continental Capacity Purchase and Other Agreements” in our 200710-K.  For the first six months of 2008, we recognized revenues using 2007 block hour rates, pursuant to an agreement with Continental reached in June 2008.

**           ** At such time, we also reached an agreement with Continental to amend the existing Continental CPA.  The amended Continental CPA, which became effective July 1, 2008, allows us tocontinue flying a 205 aircraft currently flown for Continental for seven years while providing Continental the right after one year to reduce the number to 190 aircraft.  The amended agreement significantly reduces Continental’s governance rights under theoriginal agreement, including easing change-in-control limitations on ExpressJet, reducing restrictions on ExpressJet flying into Continental’s hub airports, and removing the most-favored-nation clause, allowing ExpressJet the option to fly for other carriersand to consider other strategic alternatives.  The amended agreement also removes Continental’s ability to terminate the agreement without cause.

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            The amended agreement provides payments to us at a pre-determined rate based on block hours flown and reimburses us for various pass-through expenses including passenger liability insurance, hullinsurance, war risk insurance, landing fees and substantially all regional jet engine expenses under current long-term third-party contracts with no margin or mark-up.  Under the amended Continental CPA, Continental will be responsible for the cost of providingfuel for all flights and for paying aircraft rent for all aircraft covered by the amended Continental CPA and, therefore, these items are not included in our statements of operations for the three month period ended September 30, 2008 and thereafter.  The fixedblock hour rates are considerably lower than the rates under the original agreement and will be subject to annual escalations tied to a consumer price index (capped at 3.5%) at each anniversary date.  During the quarter ended September 30, 2008, we returned toContinental 29 aircraft previously released from the original capacity purchase agreement, with Continental bearing the expense related to the aircraft following their return.  We will continue to operate 214 aircraft under the amended Continental CPA unlessContinental decides to withdraw aircraft under the agreement.  The costs associated with preparing the aircraft for return to Continental were recorded as special charges on the consolidated statements of operations.  ExpressJet will continue to focus onaggressively reducing costs in response to the amended agreement with Continental and the economic difficulties facing the entire airline industry.

            In September 2008, we agreed with Continental on our first amendment to the amended Continental CPA in order to compensate us for our fixed costs, considered in the calculation of thepre-determined block hour rates, that cannot be reduced as a result of the unanticipated reduction in aircraft utilization.  We also agreed that if Continental, beginning in year two, increases its aircraft utilization, then it may receive discounts on the blockhour rates.  For the three months ended September 30, 2008, we recorded a $1 million receivable from Continental as compensation for shortfalls in aircraft utilization.  We received payment from Continental on October 15, 2008.  The associated revenuehas been deferred and is recorded in “Accrued Other Liabilities” on the Consolidated Balance Sheet as of September 30, 2008.

            We also entered into a settlement agreement with Continental to release the parties’ claims at the time of the agreement to amend the then existing capacity purchase agreement, relating tocertain identified payments under such capacity purchase agreement, including disputes previously disclosed as possible matters for arbitration.

            **Corporate Aviation.**** ** During the quarter, we reassigned 18 aircraft that were part of our at-risk operations to expand our Corporate Aviation division to 30 aircraft.  Theseaircraft are now dedicated to existing and new long-term arrangements.  Our Corporate Aviation division continues to focus on corporate shuttles, entertainment / sports, and government businesses.  Revenue from brokers increased by more than 265% during thefirst six months of 2008 when compared to the first six months of 2007 which reinforces our need to focus on growing our broker network to increase market share and acquire new contacts.  In response to interest expressed by several market segments, these 30aircraft will be reconfigured to provide an expanded pitch product with a 41 seat layout.  Reconfiguring our aircraft from a 50 seat layout to a 41 seat layout increases the pitch to 38 inches for every seat on board, effectively the same length as first classseats on a 737 aircraft.  We anticipate capital expenditures related to the seat modifications for the remainder of 2008 to be $0.4 million.  We are also exploring other modifications to enhance the 41 seat aircraft including catering options utilizingovens on board and additional power outlets.  As of September 30, 2008, our Corporate Aviation division has contracted with eight customers for agreements ranging from 15 to 35 months**.**

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**            Capacity Reductions and Cost Savings Initiatives.**  Effective September 2, 2008, we suspended flying under several lines of our at-risk flying operations and reduced capacity due tounprecedented high fuel costs and other challenges facing the industry.  Furthermore, we mutually agreed with Delta to terminate our capacity purchase and pro-rate flying agreements effective September 2, 2008.  As a result of the fleet reduction anddecreased flying on behalf of Continental we expect to operate approximately 30% less block hours during the 4th quarter of 2008 versus the 2nd quarter of 2008.  We do not expect to incur additional expenses in the 4th quarter2008 for severance, meeting aircraft return conditions or early termination of marketing and facility contracts related to our suspended at-risk operations.  Cash outlays for the employee and aircraft charges will be incurred over the next several quarters whilecash outlays related to facility exit costs will occur through 2010.

            **Labor Agreements. ** During the third quarter, we realized $10 million in concessions through reductions provided by management and clerical employees.  An additional $5 million willbe contributed by the airport services division through wage and benefit reductions as well as productivity improvements.  Furthermore, subsequent to quarter end, we reached tentative agreements with our four unions representing the pilots and instructors,mechanics, flight attendants and dispatchers for $20 million in labor savings.  In November 2008, we received final approval from each of the union’s national offices to execute the new agreements recently ratified by the union memberships.  Each ofthese agreements will be retroactive to November 1, 2008 and will become amendable in December 2010 for pilots and instructors, August 2009 for mechanics, August 2010 for flight attendants and July 2009 for dispatchers.

            In addition, we have made significant progress among all work groups in reducing headcount to achieve necessary cost reductions and we continue to make progress towards our targetedreduction-in-force.  We anticipate that we will further refine staffing levels as our company adjusts to a new operating structure.

            **Convertible Debt**.  On August 1, 2008, holders of our 4.25% Convertible Notes due 2023 had the right to require us to repurchase their notes at a price equal to 100% of the principalamount of the notes plus any accrued and unpaid interest.  Under the governing the convertible notes, we were able to satisfy the obligation with either cash, shares of our common stock, or a combination of cash and shares.  During the quarter endedSeptember 30, 2008, we took the following actions after consulting with our independent financial advisors:

|           | •  | Received stockholders approval for two proposals that provided us greater flexibility in satisfying our repurchase obligations with respect to the convertible notes, which included the ability to issue such number of shares of our common stock as necessary torepurchase all outstanding convertible notes that were tendered on August 1, 2008, and increases our authorized common stock from 200 million shares to 400 million shares;                                                                                                                |
|--------------------------------------------------------|--------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                        | •  | Commenced our repurchase offer for the convertible notes and provided written notice to the trustee of our intention to pay the repurchase price wholly in shares of our common stock;                                                                                                                                                                                                                                                                                                                                                                        |
|           | •  | Unilaterally amended the indenture governing the notes to increase the coupon from 4.25% to 11.25% over the remaining note term, to provide security based on a pro-rata amount of collateral and to provide for an additional repurchase date on August 1, 2011, inorder to provide improved terms and additional flexibility for the noteholders; and                                                                                                                                                                                                       |
|           | •  | Issued 16.4 million shares (reverse split adjusted) of our common stock in payment of the repurchase price for the $59.7 million principal amount of the notes validly tendered and to settle accrued and unpaid interest due August 1, 2008.  Because the commonstock was issued in exchange for the convertible notes exclusively with the existing holders of the notes, and no commission or other compensation was paid in soliciting the exchange, the securities are exempt from registration under Section 3(a)(9) of the SecuritiesAct of 1933. |

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            Following the completion of the tender offer in August 2008 for our then 4.25% Convertible Notes due 2023, $68.5 million aggregate principal of our convertible notes remains outstanding. Additionally, as provided in the amended indenture governing the notes, such notes have become our 11.25% Convertible Secured Notes due 2023.  In accordance with EITF 96-19 “Debtor's Accounting for a Modification or Exchange of DebtInstruments,” we accounted for this exchange as an extinguishment of debt, since the net present value of the cash flows under the exchanged terms was more than 10% of the net present value of the cash flows under the terms of the originalinstrument.  As required by accounting rules, we recorded the convertible notes to a fair value of $40.7 million, net of a fair value adjustment of $27.8 million that will be amortized over the life of the new instrument up to the first date at which we may berequired to repurchase the notes in August 2011.  Such adjustment was recorded as a non-recurring gain under non-operating income for the third quarter. The net balance of the 11.25% Convertible Secured Notes as of September 30, 2008 was $42.2 million.

            **Other****Liquidity Matters. ** In light of the amended Continental CPA, aircraft withdrawals, dramatically lower utilization, our diminished stock price and the potential increases inthe price of fuel, we believe cost restructuring and cash preservation are crucial to sustain our liquidity and meet our financial obligations through the third quarter of 2009.  In addition to the previously mentioned labor reductions, other cost savingsinitiatives are essential at this time to maintain an appropriate operating margin and preserve our cash.  These include, individually or in combination, if required:

|           | •  | effectively implementing wage and benefit concessions from all of our employees;                                                      |
|--------------------------------------------------------|--------------|---------------------------------------------------------------------------------------------------------------------------------------|
|           | •  | reduction-in-force to match reduction-in-capacity;                                                                                    |
|           | •  | obtaining third-party vendor concessions;                                                                                             |
|           | •  | reducing capital expenditures to only those required by law or operational necessities;                                               |
|           | •  | managing our working capital effectively (i.e., time to pay for accounts payables, accounts receivable aging, and inventory turnover; |
|           | •  | borrowing against or liquidating our auction rate securities (“ARS”) holdings; and                                        |
|           | •  | selling unencumbered assets, tangible or intangible, or subleasing the aircraft we lease from Continental.                            |

            Our 2008 cash flows as of the date of this filing have included the following sources of cash outside of normal operating revenues:

|           | •  | $37.8 million tax refund for prior year loss carryback provisions, received in June 2008;                                                                                                                               |
|--------------------------------------------------------|--------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|           | •  | $23.1 million, of which approximately $21 million was received in the 3rd quarter of 2008 non-operating gain from the monetization of fuel fixed forward contracts subsequent to capacity reductions in September 2008; |
|           | •  | $11.7 million in sales of unencumbered assets; and                                                                                                                                                                 |
|           | •  | $4.0 million in purchase deposits previously held by our fuel vendor was refunded in October 2008.                                                                                                                 |

            We believe that our existing liquidity and projected 2008 cash flows, including the incremental sources of liquidity described above and implementation of cost saving initiatives, if needed, willbe sufficient to fund current operations and our financial obligations through the twelve months ending September 30, 2009.  However, as noted above, factors outside our control may dictate that we alter our current plans and expectations and could have amaterial adverse impact on our ability to sustain operations over the long term.

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**            Auction Rate Securities.**  Subsequent to the quarter’s end, we monetized $5 million of our ARS for 91.25% of the securities face value.  We continue to monitor the ARS marketand will aggressively pursue monetizing the assets at or near face value through additional market transactions and may also pursue litigation if necessary to recoup full value.

            **Corporate Aviation**

****

**           ** Our continued goal for 2008 is to expand our Corporate Aviation (charter) division customer base and focus on growing our already developed relationships with key clients.  Asreductions in commercial schedules continue, we will continue to evaluate various corporate shuttle opportunities, including seasonal flying for other air carriers during high-demand periods to complement our current contracts.  Our current contracts are themost consistent during the period from October through April, but in future years we expect to generate steady operating income during all months.  Additionally, we continue to seek longer-term contracts instead of those lasting from one to six months that wecurrently have in place to enhance consistency in aircraft and crew planning and to maximize our operational efficiency. ** **  

****

            As of September 30, 2008, we operated 30 aircraft within the charter division at reduced rental rates. These aircraft will be dedicated to charter contracts, corporate shuttles and ad-hoc charterservices. 

            **Aviation Services**

            Aviation Services includes our ground-handling services pursuant to our contracts with Continental and other airlines at several airport locations across the United States as of September 30, 2008,as well as the work provided under Services, brand.  During 2008, we will continue to leverage our operational expertise developed from this business segment to cost-effectively operate the aircraft for our current customers and attract potential customers.

**Critical Accounting Policies and Estimates**

            The following are changes to our accounting policies and estimates described in our 2007 10-K.

            **Fair Value Measurements. ** At September 30, 2008, we have ARS, with a fair value of $52.7 million.  These were classified as short-term investments within the current assets of ourbalance sheet.  We did not have any ARS as of December 31, 2007.  See Item 1. “Financial Statement and Supplementary Data – Notes to Consolidated Financial Statements – Note 1 – Summary of Significant Account Policies” for adiscussion of our ARS.

            As we could not predict when the market would recover and needed to avail ourselves of the flexibility to sell our ARS in the next 12 months, we evaluated and classified, in accordance withaccounting guidance, our ARS as short-term investments and recognized in the first quarter of 2008 an other-than-temporary impairment of $13.7 million.  For the quarter ended June 30, 2008, we re-evaluated our ARS and recorded a $1.1 million unrealized gain toother comprehensive income.  For the quarter ended September 30, 2008, we again re-evaluated our ARS and recorded an additional $0.8 million unrealized gain to other comprehensive income.  Due to the current market conditions, we cannot currently anticipatewhether our fair value will be materially different from the amount we will realize when we settle our ARS.  Please see Item 1. Financial Statements and Supplementary Data – Note 1 – Summary of Significant Accounting Policies for further informationon our auction rate securities including our valuation methodology.  Subsequent to the quarter’s end, we monetized $5 million of our ARS for 91.25% of the securities face value.  We continue to monitor the ARS market and will aggressively pursuemonetizing the assets at or near face value through additional market transactions and may also pursue litigation if necessary to recoup full value.

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            In May 2008, the Financial Accounting Standards Board (FASB) affirmed the consensus of FASB Staff Position APB 14-1 (FSP APB 14-1), “Accounting for Convertible Debt Instruments That MayBe Settled in Cash upon Conversion (Including Partial Cash Settlement)”, which applies to all convertible debt instruments that have a ‘‘net settlement feature’’, which means that such convertible debt instruments, by their terms, may besettled either wholly or partially in cash upon conversion. FSP APB 14-1 requires issuers of convertible debt instruments that may be settled wholly or partially in cash upon conversion to separately account for the liability and equity components in a mannerreflective of the issuers’ nonconvertible debt borrowing rate. FSP APB 14-1 is effective for financial statements issued for fiscal years beginning after December 15, 2008 and interim periods within those fiscal years.  Early adoption is notpermitted and retroactive application to all periods presented is required.  The adoption of FSP APB 14-1 will affect the historical accounting for our then 4.25% convertible notes and our 11.25% convertible notes.  We have not concluded the impact ofthis standard to our financial statements.

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****

**Results of Operations**

            The following discussion provides an analysis of our results of operations and reasons for material changes in those results for the three and nine months ended September 30, 2008, compared to thecorresponding periods ended September 30, 2007.

**Comparison of Three Months Ended September 30, 2008 to Three Months Ended September 30, 2007**

**            Operating Revenue and Segment Profit / (Loss)**

**

            The table below (in thousands, except percentage data) sets forth the changes in revenue, direct segment costs and segment profit (loss) from the three months ended September 30, 2008 to the sameperiod in 2007.  A significant portion of our operating expenses and infrastructure is integrated across segments (e.g., for maintenance, non-airport facility rentals, outside services, general and administrative expenses) in order to support our entire fleet ofaircraft; therefore, we do not allocate these costs to the individual segments identified above, but evaluate them for our consolidated operation.  The presentation of our consolidated shared costs is consistent with the manner in which these expenses arereviewed by our chief operating decision makers.  These costs are included as a part of the analysis of our operating expenses below. 

|                                                                                                                                                                                                                                                                                                                                | **Three Months Ended September 30,** |          |   |        |                     |    |        |   |          |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------------------------------------|----------|---|--------|---------------------|----|--------|---|----------|
|                                                                                                                                                                                                                                                                                                                                |                                      |          |   |        |                     |    |        |   |          |
|                                                                                                                                                                                                                                                                                                                                |                                      | **2008** |   |        | **Total Revenue %** |    |        |   | **2007** |  | **Total Revenue %** |  |  | **Increase / (Decrease)** |  |  | **Change %** |  |
|                                                       |                                      |          |   |        |                     |    |        |   |          |  |  |  |  |  |  |  | **** |  |
| Revenue from customers:...............                                                                                                                                                                                                                                                                                         |                                      |          |   |   |                     |    |   |   |          |  |  |  |  |  |  |   |  |  |
|   Contract Flying............................                                                                                                                                                                                                                                                                        | $                                    | 184,428  |   |        | 70.3                | %  |        | $ | 362,175  |  | 82.1 | % |   | (177,747 | ) |  | (49.1 | %) |
|   Branded Flying............................                                                                                                                                                                                                                                                                         |                                      | 69,286   |   |        | 26.4                | %  |        |   | 75,564   |  | 17.1 | % |  | (6,278 | ) |  | (8.3 | %) |
|   Aviation Services.........................                                                                                                                                                                                                                                                                         |                                      | 10,618   |   |        | 4.0                 | %  |        |   | 5,152    |  | 1.2 | % |  | 5,466 |  |  | 106.1 | % |
|   Eliminations................................                                                                                                                                                                                                                                                                       |                                      | (2,006   | ) |        | (0.8                | %) |        |   | (1,546   | ) | (0.4 | %) |  | (460 | ) |  | 29.8 | % |
| Total Revenue from customers........                                                                                                                                                                                                                                                                                           |                                      | 262,326  |   |        | 100.0               | %  |        |   | 441,345  |  | 100.0 | % |  | (179,019 | ) |  | (40.6 | %) |
|                                                                                                                                                                                                                                                                                                                                |                                      |          |   |        |                     |    |        |   |          |  |  |  |  |  |  |  |  |  |
|   Contract Flying............................                                                                                                                                                                                                                                                                        |                                      | 133,238  |   |        | 50.8                | %  |        |   | 275,151  |  | 62.3 | % |  | (141,913 | ) |  | (51.6 | %) |
|   Branded Flying............................                                                                                                                                                                                                                                                                         |                                      | 62,767   |   |        | 23.9                | %  |        |   | 113,102  |  | 25.6 | % |  | (50,335 | ) |  | (44.5 | %) |
|   Aviation Services.........................                                                                                                                                                                                                                                                                         |                                      | 4,806    |   |        | 1.8                 | %  |        |   | 7,100    |  | 1.6 | % |  | (2,294 | ) |  | (32.3 | %) |
|   Eliminations................................                                                                                                                                                                                                                                                                       |                                      | (2,006   | ) |        | (0.8                | %) |        |   | (1,546   | ) | (0.4 | %) |  | (460 | ) |  | 29.8 | % |
| Total Direct segment costs.............                                                                                                                                                                                                                                                                                        |                                      | 198,805  |   |        | 75.8                | %  |        |   | 393,807  |  | 89.2 | % |  | (195,002 | ) |  | (49.5 | %) |
|                                                                                                                                                                                                                                                                                                  |                                      |          |   |        |                     |    |        |   |          |  |  |  |  |  |  |  |  |  |
| Segment profit...............................                                                                                                                                                                                                                                                                                  |                                      | 63,521   |   |        | 24.2                | %  |        |   | 47,538   |  | 10.8 | % |  | 15,983 |  |  | 33.6 | % |
| Shared special charges..................                                                                                                                                                                                                                                                                                       |                                      | (21,187  | ) |        |                     |    |        |   | —  |  |  |  |  |  |  |  |  |  |
| Other shared expenses, including   transition costs............................                                                                                                                                                                                                                                      |                                      | (71,295  | ) |        |                     |    |        |   | (84,194  | ) |  |  |  |  |  |  |  |  |
| Gain due to fair value adjustment.....                                                                                                                                                                                                                                                                                         |                                      | 27,785   |   |        |                     |    |        |   | —  |  |  |  |  |  |  |  |  |  |
| Settlement of fuel contracts............                                                                                                                                                                                                                                                                                       |                                      | 23,149   |   |        |                     |    |        |   | —  |  |  |  |  |  |  |  |  |  |
| Interest expense............................                                                                                                                                                                                                                                                                                   |                                      | (3,848   | ) |        |                     |    |        |   | (2,320   | ) |  |  |  |  |  |  |  |  |
| Interest income..............................                                                                                                                                                                                                                                                                                  |                                      | 1,466    |   |        |                     |    |        |   | 4,343    |  |  |  |  |  |  |  |  |  |
| Other income (loss).......................                                                                                                                                                                                                                                                                                     |                                      | (107     | ) |        |                     |    |        |   | (561     | ) |  |  |  |  |  |  |  |  |
| Consolidated income (loss)   before income taxes.....................                                                                                                                                                                                                                                                |                                      | 19,484   |   |        |                     |    |        |   | (35,194  | ) |  |  |  |  |  |  |  |  |

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Table of Contents

            The table below (in thousands, except percentage data) sets forth the segment profit (loss) for the three months ended September 30, 2008 and the three months ended September 30, 2007 for eachsegment. 

|                                                              |   | **Contract Flying** |  |                     | **Branded Flying** |        |   | **Aviation Services** |        |
|--------------------------------------------------------------|---|---------------------|--|---------------------|--------------------|--------|---|-----------------------|--------|
|                                                              |   |                     |  |                     |
|                                                              |   | **2008**            |  | **Total Revenue %** |                    |        |   | **2008**              |        | **Total Revenue %** |  |  |  | **2008** |  | **Total Revenue %** |  |   |
|                                                              |   |                     |  |                     |                    |        |   |                       |        |  |  |   |  |  |  |  |  |   |
| Revenue from customers:...........                           | $ | 184,428             |  | 100.0               | %                  |   | $ | 69,286                |   | 100.0 | % |  | $ | 10,618 |  | 100.0 | % |   |
| Direct segment costs:..................                      |   | 133,238             |  | 72.2                | %                  |        |   | 62,767                |        | 90.6 | % |  |  | 4,806 |  | 45.3 | % |   |
|                                                              |   |                     |  |                     |                    |        |   |                       |        |  |  |  |  |  |  |  |  |   |
| Segment profit before special   (charges) gains... |   | 51,190              |  | 27.8                | %                  |        |   | 6,519                 |        | 9.4 | % |  |  | 5,812 |  | 54.7 | % |   |

|                                     |        | **Contract Flying** |          |  | **Branded Flying** |                     |   | **Aviation Services** |   |
|-------------------------------------|--------|---------------------|----------|--|--------------------|---------------------|---|-----------------------|---|
|                                     |        |                     |          |  |
|                                     |        |                     | **2007** |  |                    | **Total Revenue %** |   |                       |   | **2007** |  |  | **Total Revenue %** |  |  |  | **2007** |  |  | **Total Revenue %** |  |
|                                     |        |                     |          |  |                    |                     |   |                       |   |  |  |  |  |  |  |  |  |  |  |  |  |
| Revenue from customers:.....        |   | $                   | 362,175  |  |                    | 100.0               | % |                  | $ | 75,564 |  |   | 100.0 | % |  | $ | 5,152 |  |  | 100.0 | % |
| Direct segment costs:.............  |        |                     | 275,151  |  |                    | 76.0                | % |                       |   | 113,102 |  |  | 149.7 | % |  |  | 7,100 |  |  | 137.8 | % |
| Segment profit (loss).............. |        |                     | 87,024   |  |                    | 24.0                | % |                       |   | (37,538 | ) |  | (49.7 | %) |  |  | (1,948 | ) |  | (37.8 | %) |

**            Contract Flying. ****  The decrease in operating revenue and expenses within our Contract Flying segment is primarily due to new terms under the amended Continental CPA which becameeffective July 1, 2008.   Prior to July 1, 2008, Airlines was entitled to receive payment for each block hour that Continental scheduled it to fly and was based on a formula designed to provide Airlines with a target operating margin of 10%.  The amendedagreement provides payments to us at a pre-determined rate based on block hours flown that are considerably lower than the rates under the original agreement.  Likewise, under the amended Continental CPA, Continental is responsible for the cost of providing fuelfor all flights and for paying aircraft rent for all aircraft covered by the amended Continental CPA and, therefore, these items are not included in our statements of operations for the three month period ended September 30, 2008 and thereafter.  In addition,Delta and ExpressJet mutually agreed in July 2008 to terminate their CPA effective September 2, 2008. 

**            Branded Flying.**  The decrease in operating revenue and expenses within our Branded Flying segment is primarily dueto suspended flying under our ExpressJet brand and Delta pro-ratearrangement effective September 2, 2008. Although our load factor within this segment increased to 80.7% in the 3rd quarter of 2008 from 60.5% in the 3rd quarter of 2007, we suspended Branded Flying due to unprecedented high fuel costs and otherchallenges facing the industry.

**            Aviation Services.*** * Aviation Services was included in Contract Flying in the three months ended September 30, 2007 as it was not deemed material for segment reportingpurposes.  For the three months ended September 30, 2008, Aviation Services had a segment profit margin of 54.7%, up from (37.8%) for the three months ended September 30, 2007, due primarily to additional ground handling contracts secured at more favorable ratesthan in 2007.** **

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Table of Contents

**            Operating Expenses**

**

            The table below (in thousands, except percentage data) sets forth the changes in operating expenses from the three months ended September 30, 2008 to the three months ended September 30, 2007.

|                                                          |        |        | **For the three months ended September 30,** |   |  |                     |   |  |
|----------------------------------------------------------|--------|--------|----------------------------------------------|---|--|---------------------|---|--|
|                                                          |        |        | **2008**                                     |   |  | **2007**            |   |  |  |  |  |
|                                                          |        |        | ****                                         |   |  | ****                |   |  |  |  |  |
|                                                          |        |        | **Total Revenue %**                          |   |  | **Total Revenue %** |   |  |  | **Increase/ (Decrease)** |  |
|                                                          |        |        | ****                                         |   |  | ****                |   |  |  | **** |  |
| Wages, salaries, and related costs ..........            |   |   | 37.5                                         | % |  | 25.5                | % |  |  | 12.0 |  |
| Aircraft fuel and related taxes...................       |        |        | 12.3                                         | % |  | 22.4                | % |  |  | (10.1 | ) |
| Aircraft rentals........................................ |        |        | 7.2                                          | % |  | 19.6                | % |  |  | (12.4 | ) |
| Maintenance, materials and repairs...........            |        |        | 18.4                                         | % |  | 11.9                | % |  |  | 6.5 |  |
| Other rentals and landing fees..................         |        |        | 8.6                                          | % |  | 7.5                 | % |  |  | 1.1 |  |
| Ground handling......................................    |        |        | 2.2                                          | % |  | 5.6                 | % |  |  | (3.4 | ) |
| Outside services.....................................    |        |        | 3.2                                          | % |  | 2.5                 | % |  |  | 0.7 |  |
| Marketing and distribution........................       |        |        | 0.7                                          | % |  | 1.9                 | % |  |  | (1.2 | ) |
| Depreciation and amortization..................          |        |        | 2.6                                          | % |  | 1.5                 | % |  |  | 1.1 |  |
| Special charges......................................    |        |        | 8.1                                          | % |  | 0.0                 | % |  |  | 8.1 |  |
| Other operating expenses........................         |        |        | 10.3                                         | % |  | 9.7                 | % |  |  | 0.6 |  |

**            *Aircraft fuel and related taxes*** decreased 67.4% primarily due to new terms under the amended Continental CPA which became effective July 1, 2008.  Prior to July 1, 2008, our fuelprice, including related fuel taxes, was capped at 71.20 cents per gallon under the original Continental CPA.  Under the amended Continental CPA, Continental is responsible for the cost of providing fuel for all aircraft covered by the amended Continental CPAand, therefore, the related expense is no longer included in our statements of operations.  The average price of our fuel, including related fuel taxes, for our operations outside of the amended Continental CPA was $3.14 per gallon. 

***            Aircraft rentals*** decreased 78.2% primarily due to new terms under the amended Continental CPA which became effective July 1, 2008.  Under the amended Continental CPA, Continentalis responsible for paying aircraft rent for all aircraft under that arrangement and, therefore, the related expense is no longer included in our statements of operations.  In addition, lease payments for the 30 aircraft operating outside of the amendedContinental CPA are contracted at significantly lower rates than the current lease obligations.

**

***            Maintenance, materials and repairs***increased as a percentage of total revenue due to the significant reduction in revenues recognized under the terms of the amended Continental CPAthat went into effect July 1, 2008.

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Table of Contents

***            Ground Handling*** decreased 76.4% primarily due to new terms under the amended Continental CPA which became effective July 1, 2008.  Under the amended Continental CPA, Continentalis responsible for the station expenditures directly.  These costs no longer pass through our financials with subsequent reimbursement from Continental.  In addition, under the amended Continental CPA, Continental is responsible for the cost of providingfueling services for all aircraft covered by the amended Continental CPA and, therefore, the related ground handling and aircraft servicing expense is no longer included in our statements of operations.

***            Marketing and Distribution*** decreased 78.6% primarily due to the suspension of flying under our ExpressJet brand and Delta pro-rate arrangement effective September 2, 2008.  Allmarketing and distribution cost for aircraft operating within the Continental CPA is incurred by Continental.

***            Special charges***** ** increased $21.2 million primarily due to the suspension of flying under our branded commercial passenger flight operations and our capacity purchase andpro-rate agreements with Delta Airlines in September 2008.  In connection with these capacity reductions and the transition of up to 39 aircraft back to Continental, we incurred special charges of $21.2 million related to aircraft, employee reductions andcertain other charges. 

**            Non-Operating Expenses**

******

            The table below (in thousands, except percentage data) sets forth the changes in non-operating expenses from the three months ended September 30, 2008 to the three months ended September 30,2007.

|                                                                                                                                                                                                                                                                                                                                                                                                                                      | **For the three months ended September 30,** |                     |    |        |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|----------------------------------------------|---------------------|----|--------|
|                                                                        |                                              | **2008**            |    |        | **2007** |  |  |  |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                      |                                              |                     |    |        |  |  |  |  |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                      |                                              | **Total Revenue %** |    |        | **Total Revenue %** |   |  | **Increase / (Decrease)** |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                      |                                              |                     |    |        |  |  |  |  |  |
| Gain due to fair value adjustment................                                                                                                                                                                                                                                                                                                                                                                                    |                                         | 10.6                | %  |   | 0.0 | % |   | 10.6 |  |
| Settlement of fuel contracts.......................                                                                                                                                                                                                                                                                                                                                                                                  |                                              | 8.8                 | %  |        | 0.0 | % |  | 8.8 |  |
| Interest expense.......................................                                                                                                                                                                                                                                                                                                                                                                              |                                              | (1.5                | %) |        | (0.5 | %) |  | (1.0 | ) |
| Interest income.........................................                                                                                                                                                                                                                                                                                                                                                                             |                                              | 0.5                 | %  |        | 0.9 | % |  | (0.4 | ) |
| Capitalized interest...................................                                                                                                                                                                                                                                                                                                                                                                              |                                              | 0.1                 | %  |        | 0.1 | % |  | 0.0 |  |
| Equity investment loss..............................                                                                                                                                                                                                                                                                                                                                                                                 |                                              | 0.0                 | %  |        | (0.1 | %) |  | 0.1 |  |
| Other, net.................................................                                                                                                                                                                                                                                                                                                                                                                          |                                              | (0.1                | %) |        | 0.0 | % |  | (0.1 | ) |

            The following explanations are related to changes between the three months ended September 30, 2008 to the same period in 2007.

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Table of Contents

            ***Gain due to fair value adjustment*** was $27.8 million as we recorded, in accordance with EITF 96-19 “Debtor's Accounting for a Modification or Exchange of DebtInstruments,” our $68.5 million convertible notes to a fair value of $40.7 million, net of a fair value adjustment that was recorded as a non-recurring gain under non-operating income for the third quarter. 

**            *Settlement of Fuel Contracts*** was $23.1 million as we recorded the sale of our fixed forward purchase contracts for periods subsequent to September 2, 2008. 

**           *****Income Taxes *** increased during the 3rd quarter due to our recording of a $6.9 million valuation allowance for certain deferred tax assets related to capitalgains and state tax net operating losses as it was concluded more likely than not that adequate income would not be generated to utilize these deferred tax assets based on their characterization.

**Comparison of Nine Months Ended September 30, 2008 to Nine Months Ended September 30, 2007**

**            Operating Revenue and Segment Profit / (Loss)**

**

            The table below (in thousands, except percentage data) sets forth the changes in revenue, direct segment costs and segment profit (loss) from the nine months ended September 30, 2008 to the sameperiod in 2007.  A significant portion of our operating expenses and infrastructure is integrated across segments (e.g., for maintenance, non-airport facility rentals, outside services, general and administrative expenses) in order to support our entire fleet;therefore, we do not allocate these costs to the individual segments identified above, but evaluate them for our consolidated operation.  The presentation of our consolidated shared costs is consistent with the manner in which these expenses are reviewed by ourchief operating decision makers.  These costs are included as a part of the analysis of our operating expenses below. 

|                                                                                                                                                                                                                                                                                                                                                                                      |   | **Nine Months Ended September 30,** |   |        |                     |    |        |   |           |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|---|-------------------------------------|---|--------|---------------------|----|--------|---|-----------|---|
|                                                                                                                                                                                                                                                                                                                                                                                      |   |                                     |   |        |                     |    |        |   |           |   |
|                                                                                                                                                                                                                                                                                                                                                                                      |   | **2008**                            |   |        | **Total Revenue %** |    |        |   | **2007**  |   | **Total Revenue %** |  |  | **Increase / (Decrease)** |  |  | **Change %** |  |
|                                                                |   |                                     |   |        |                     |    |        |   |           |   |  |  |   |  |  |  | **** |  |
| Revenue from customers:...................                                                                                                                                                                                                                                                                                                                                           |   |                                     |   |        |                     |    |        |   |           |   |  |  |  |  |  |  |  |  |
|   Contract Flying...................................                                                                                                                                                                                                                                                                                                                       | $ | 908,348                             |   |   | 78.5                | %  |   | $ | 1,127,079 |   | 90.2 | % | $ | (218,731 | ) |   | (19.4 | %) |
|   Branded Flying...................................                                                                                                                                                                                                                                                                                                                        |   | 221,258                             |   |        | 19.1                | %  |        |   | 103,762   |   | 8.3 | % |  | 117,496 |  |  | 113.2 | % |
|   Aviation Services..............................                                                                                                                                                                                                                                                                                                                          |   | 32,770                              |   |        | 2.8                 | %  |        |   | 24,771    |   | 2.0 | % |  | 7,999 |  |  | 32.3 | % |
|   Eliminations........................................                                                                                                                                                                                                                                                                                                                     |   | (4,706                              | ) |        | (0.4                | %) |        |   | (6,065    | ) | (0.5 | %) |  | 1,359 |  |  | (22.4 | %) |
| Total Revenue from customers...........                                                                                                                                                                                                                                                                                                                                              |   | 1,157,670                           |   |        | 100.0               | %  |        |   | 1,249,547 |   | 100.0 | % |  | (91,877 | ) |  | (7.4 | %) |
|                                                                                                                                                                                                                                                                                                                                                                                      |   |                                     |   |        |                     |    |        |   |           |   |  |  |  |  |  |  |  |  |
|   Contract Flying...................................                                                                                                                                                                                                                                                                                                                       |   | 679,897                             |   |        | 58.7                | %  |        |   | 861,359   |   | 68.9 | % |  | (181,462 | ) |  | (21.1 | %) |
|   Branded Flying...................................                                                                                                                                                                                                                                                                                                                        |   | 289,480                             |   |        | 25.0                | %  |        |   | 179,805   |   | 14.4 | % |  | 109,675 |  |  | 61.0 | % |
|   Aviation Services..............................                                                                                                                                                                                                                                                                                                                          |   | 16,827                              |   |        | 1.5                 | %  |        |   | 19,993    |   | 1.6 | % |  | (3,166 | ) |  | (15.8 | %) |
|   Eliminations........................................                                                                                                                                                                                                                                                                                                                     |   | (4,706                              | ) |        | (0.4                | %) |        |   | (6,065    | ) | (0.5 | %) |  | 1,359 |  |  | (22.4 | %) |
| Total Direct segment costs..................                                                                                                                                                                                                                                                                                                                                         |   | 981,498                             |   |        | 84.8                | %  |        |   | 1,055,092 |   | 84.4 | % |  | (73,594 | ) |  | (7.0 | %) |
|                                                                                                                                                                                                                                                                                                                                                                                      |   |                                     |   |        |                     |    |        |   |           |   |  |  |  |  |  |  |  |  |
| Segment profit.....................................                                                                                                                                                                                                                                                                                                                                  |   | 176,172                             |   |        | 15.2                | %  |        |   | 194,455   |   | 15.6 | % |  | (18,283 | ) |  | (9.4 | %) |
| Shared special charges......................                                                                                                                                                                                                                                                                                                                                         |   | (43,307                             | ) |        |                     |    |        |   | —   |   |  |  |  |  |  |  |  |  |
| Other shared expenses, including   transition costs..................................                                                                                                                                                                                                                                                                                      |   | (240,607                            | ) |        |                     |    |        |   | (259,500  | ) |  |  |  |  |  |  |  |  |
| Gain due to fair value adjustment........                                                                                                                                                                                                                                                                                                                                            |   | 27,785                              |   |        |                     |    |        |   | —   |   |  |  |  |  |  |  |  |  |
| Settlement of fuel contracts................                                                                                                                                                                                                                                                                                                                                         |   | 23,149                              |   |        |                     |    |        |   | —   |   |  |  |  |  |  |  |  |  |
| Impairment charges on   investments.......................................                                                                                                                                                                                                                                                                                                 |   | (18,892                             | ) |        |                     |    |        |   | —   |   |  |  |  |  |  |  |  |  |
| Interest expense..................................                                                                                                                                                                                                                                                                                                                                   |   | (8,719                              | ) |        |                     |    |        |   | (5,904    | ) |  |  |  |  |  |  |  |  |
| Interest income....................................                                                                                                                                                                                                                                                                                                                                  |   | 5,891                               |   |        |                     |    |        |   | 13,442    |   |  |  |  |  |  |  |  |  |
| Other....................................................                                                                                                                                                                                                                                                                                                                            |   | 441                                 |   |        |                     |    |        |   | (933      | ) |  |  |  |  |  |  |  |  |
| Consolidated loss before   income taxes.....................................                                                                                                                                                                                                                                                                                               |   | (78,087                             | ) |        |                     |    |        |   | (58,440   | ) |  |  |  |  |  |  |  |  |

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Table of Contents

            The table below (in thousands, except percentage data) sets forth the segment profit (loss) for the nine months ended September 30, 2008 and September 30, 2007 for each segment. 

|                                                                     |        | **Contract Flying** |          |  | **Branded Flying** |                     |   | **Aviation Services** |   |
|---------------------------------------------------------------------|--------|---------------------|----------|--|--------------------|---------------------|---|-----------------------|---|
|                                                                     |        |                     |          |  |
|                                                                     |        |                     | **2008** |  |                    | **Total Revenue %** |   |                       |   | **2008** |  |  | **Total Revenue %** |  |  |  | **2008** |  |  | **Total Revenue %** |  |
|                                                                     |        |                     |          |  |                    |                     |   |                       |   |  |  |  |  |  |  |  |  |  |  |  |  |
| Revenue from customers:...........                                  |   | $                   | 908,348  |  |                    | 100.0               | % |                  | $ | 221,258 |  |   | 100.0 | % |  | $ | 32,770 |  |  | 100.0 | % |
| Direct segment costs:..................                             |        |                     | 679,897  |  |                    | 74.8                | % |                       |   | 289,480 |  |  | 130.8 | % |  |  | 16,827 |  |  | 51.3 | % |
| Segment profit (loss) before special   (charges) gains... |        |                     | 228,451  |  |                    | 25.2                | % |                       |   | (68,222 | ) |  | (30.8 | %) |  |  | 15,943 |  |  | 48.7 | % |

|                                     |        | **Contract Flying** |           |  | **Branded Flying** |                     |   | **Aviation Services** |   |
|-------------------------------------|--------|---------------------|-----------|--|--------------------|---------------------|---|-----------------------|---|
|                                     |        |                     |           |  |
|                                     |        |                     | **2007**  |  |                    | **Total Revenue %** |   |                       |   | **2007** |  |  | **Total Revenue %** |  |  |  | **2007** |  |  | **Total Revenue %** |  |
|                                     |        |                     |           |  |                    |                     |   |                       |   |  |  |  |  |  |  |  |  |  |  |  |  |
| Revenue from customers:.....        |   | $                   | 1,127,079 |  |                    | 100.0               | % |                  | $ | 103,762 |  |   | 100.0 | % |  | $ | 24,771 |  |  | 100.0 | % |
| Direct segment costs:.............  |        |                     | 861,359   |  |                    | 76.4                | % |                       |   | 179,805 |  |  | 173.3 | % |  |  | 19,993 |  |  | 80.7 | % |
| Segment profit (loss).............. |        |                     | 265,720   |  |                    | 23.6                | % |                       |   | (76,043 | ) |  | (73.3 | %) |  |  | 4,778 |  |  | 19.3 | % |

**            Contract Flying. ****  The decrease in operating revenue and expenses within our Contract Flying segment is primarily due to new terms under the amended Continental CPA which becameeffective July 1, 2008.  Prior to July 1, 2008, Airlines was entitled to receive payment for each block hour that Continental scheduled it to fly and was based on a formula designed to provide Airlines with a target operating margin of 10%.  The amendedagreement provides payments to us at a pre-determined rate based on block hours flown that are considerably lower than the rates under the original agreement.  Likewise, under the amended Continental CPA, Continental is responsible for the cost of providing fuelfor all flights and for paying aircraft rent for all aircraft covered by the amended Continental CPA and, therefore, these items are not included in our statements of operations for the three month period ended September 30, 2008 and thereafter.  In addition,Delta and ExpressJet mutually agreed in July 2008 to terminate their CPA effective September 2, 2008. 

**            Branded Flying. ** The increase in operating revenue and expenses within our Branded Flying segment for the nine months ended September 30, 2008 when compared to the same period in 2007segment is primarily due to the number of months operations were active.  We began operations within our Branded Flying segment primarily on April 2, 2007; however, we suspended flying within this same segment effective September 2, 2008.  Although our loadfactor within this segment increased to 69.1% in 2008 from 52.8% in 2007, we reduced capacity due to unprecedented high fuel costs and other challenges facing the industry.

**

**            Aviation Services.***** *** For the nine months ended September 30, 2008, Aviation Services had a segment profit margin of 48.7%, up from 19.3% for the nine months endedSeptember 30, 2007, due primarily to additional ground handling contracts secured at more favorable rates than in 2007.** **

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            **Operating Expenses**

**

            The table below (in thousands, except percentage data) sets forth the changes in operating expenses from the nine months ended September 30, 2008 to the nine months ended September 30, 2007.

|                                                       |        |        | **For the nine months ended September 30,** |   |  |                     |   |  |
|-------------------------------------------------------|--------|--------|---------------------------------------------|---|--|---------------------|---|--|
|                                                       |        |        | **2008**                                    |   |  | **2007**            |   |  |  |  |  |
|                                                       |        |        | ****                                        |   |  | ****                |   |  |  |  |  |
|                                                       |        |        | **Total Revenue %**                         |   |  | **Total Revenue %** |   |  |  | **Increase/ (Decrease)** |  |
|                                                       |        |        | ****                                        |   |  | ****                |   |  |  | **** |  |
| Wages, salaries, and related costs........            |   |   | 27.8                                        | % |  | 26.0                | % |  |  | 1.8 |  |
| Aircraft fuel and related taxes................       |        |        | 19.5                                        | % |  | 18.1                | % |  |  | 1.4 |  |
| Aircraft rentals..................................... |        |        | 16.6                                        | % |  | 20.6                | % |  |  | (4.0 | ) |
| Maintenance, materials and repairs.......             |        |        | 13.9                                        | % |  | 12.2                | % |  |  | 1.7 |  |
| Other rentals and landing fees...............         |        |        | 7.0                                         | % |  | 7.3                 | % |  |  | (0.3 | ) |
| Ground handling...................................    |        |        | 5.0                                         | % |  | 5.8                 | % |  |  | (0.8 | ) |
| Outside services..................................    |        |        | 3.6                                         | % |  | 3.5                 | % |  |  | 0.1 |  |
| Marketing and distribution.....................       |        |        | 2.2                                         | % |  | 1.5                 | % |  |  | 0.7 |  |
| Depreciation and amortization...............          |        |        | 2.1                                         | % |  | 1.5                 | % |  |  | 0.6 |  |
| Impairment of fixed assets and goodwill.              |        |        | 1.8                                         | % |  | 0.0                 | % |  |  | 1.8 |  |
| Special charges...................................    |        |        | 1.9                                         | % |  | 0.0                 | % |  |  | 1.9 |  |
| Other operating expenses.....................         |        |        | 7.9                                         | % |  | 8.7                 | % |  |  | (0.8 | ) |

**           ** The following explanations are related to changes between the nine months ended September 30, 2008 to the same period in 2007.

***            Aircraft rentals*** decreased 25.2% primarily due to new terms under the amended Continental CPA which became effective July 1, 2008.  Under the amended Continental CPA, Continentalis responsible for paying aircraft rent for all aircraft under that arrangement and, therefore, the related expense is no longer included in our statements of operations.  In addition, lease payments for the 30 aircraft operating outside of the amendedContinental CPA are contracted at significantly lower rates than the current lease obligations.

***            Ground Handling*** decreased 20.8% primarily due to new terms under the amended Continental CPA which became effective July 1, 2008.  Under the amended Continental CPA, Continentalis responsible for ground handling for all Continental managed stations.   In addition, under the amended Continental CPA, Continental is responsible for the cost of providing fueling services for all aircraft covered by the amended Continental CPA and,therefore, the related ground handling and aircraft servicing expense is no longer included in our statements of operations.

***            Marketing and Distribution*** increased 38.5% primarily due to increased Advertising & Promotion expense during the first two quarters of 2008 related to our operations outside ofthe Continental CPA.  Additionally, the increase was driven by the number of months operations outside of the continental CPA were active.  We began operations within our Branded Flying segment primarily on April 2, 2007; however, we suspended flying withinthis same segment effective September 2, 2008.  All marketing and distribution cost for aircraft operating within the Continental CPA is incurred by Continental.

***            Impairment charges on fixed assets and goodwill*** increased $21.4 million primarily due to a $12.8 million non-cash impairment of goodwill related to the original Continental CPA, an$8.6 million non-cash impairment to write-off certain capital assets, primarily non-moveable equipment, building and aircraft improvements (associated with our Branded Flying Segment.  Similar impairment charges did not occur during the nine months endedSeptember 30, 2007.

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***            Special charges*** increased $21.9 million primarily due to the suspension of flying under our branded commercial passenger flight operations and our capacity purchase and pro-rateagreements with Delta Airlines in September 2008.  In connection with these capacity reductions and the transition of up to 39 aircraft back to Continental, we incurred special charges of $21.2 million related to aircraft, employee reductions and certain othercharges in addition to a $0.7 million non-cash charge related to previously disputed base closure costs associated with the original Continental CPA

****

**            Non-Operating Expenses**

******

            The table below (in thousands, except percentage data) sets forth the changes in non-operating expenses from the nine months ended September 30, 2008 to the nine months ended September 30,2007.

|                                                        |        | **For the nine months ended September 30,** |    |  |                     |        |
|--------------------------------------------------------|--------|---------------------------------------------|----|--|---------------------|--------|
|                                                        |        | **2008**                                    |    |  | **2007**            |        |  |  |  |
|                                                        |        |                                             |    |  |                     |        |  |  |  |
|                                                        |        | **Total Revenue %**                         |    |  | **Total Revenue %** |   |  | **Increase / (Decrease)** |  |
|                                                        |        |                                             |    |  |                     |        |  |  |  |
| Gain due to fair value adjustment............          |        | 2.4                                         | %  |  | 0.0                 | %      |  | 2.4 |  |
| Settlement of fuel contracts...................        |        | 2.0                                         | %  |  | 0.0                 | %      |  | 2.0 |  |
| Impairment charges on investments........              |        | (1.6                                        | %) |  | 0.0                 | %      |  | (1.6 | ) |
| Interest expense...................................    |   | (0.8                                        | %) |  | (0.5                | %)     |  | (0.3 | ) |
| Interest income.....................................   |        | 0.4                                         | %  |  | 1.0                 | %      |  | (0.6 | ) |
| Capitalized interest...............................    |        | 0.1                                         | %  |  | 0.1                 | %      |  | 0.0 |  |
| Equity investment loss..........................       |        | (0.1                                        | %) |  | (0.1                | %)     |  | 0.0 |  |
| Other, net............................................ |        | 0.1                                         | %  |  | 0.0                 | %      |  | 0.1 |  |

            The following explanations are related to changes between the nine months ended September 30, 2008 to the same period in 2007.

**            *Gain due to fair value adjustment*** was $27.8 million as we recorded, in accordance with EITF 96-19 “Debtor's Accounting for a Modification or Exchange of DebtInstruments,” our $68.5 million convertible notes to a fair value of $40.7 million, net of a fair value adjustment that was recorded as a non-recurring gain under non-operating income for the third quarter. 

**            *Settlement of fuel contracts*** was $23.1 million as we recorded the sale of our fixed forward purchase contracts for periods subsequent to September 2, 2008. 

***            Impairment charge on investments *** increased $18.9 million due to an other-than-temporary decline in the value of our ARS of $13.7 recorded in the first quarter of 2008 inaddition to a $5.2 million charge to impair our remaining investment in Wing.  See Note 1 – “Summary of Significant Accounting Policies” for further information on our ARS.

**           *****Income Taxes*****increased during the 3rd quarter due to our recording of a $6.9 million valuation allowance for certain deferred tax assets related to capitalgains and state tax net operating losses as it was concluded more likely than not that adequate income would not be generated to utilize these deferred tax assets based on their characterization.

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**Certain Operational Information**

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

| **EXPRESSJET HOLDINGS, INC. AND SUBSIDIARIES PRELIMINARY STATISTICS**                                              |
|--------------------------------------------------------------------------------------------------------------------|
|                                                                                                          |  |  |  |  |  |  |  |
| **Three Months Ended September 30, 2008**                                                                          |  | **Contract (1)** |  | **Branded (2)** |  | **System (3)** |  |
|                                                                                                                    |  |  |  |  |  |  |  |
| Revenue Passenger Miles (RPM) (millions)....                                                                       |  | 2,046 |  | 367 |  | 2,439 |  |
| Available Seat Miles (ASM) (millions).............                                                                 |  | 2,684 |  | 455 |  | 3,164 |  |
| Passenger Load Factor................................                                                              |   | 76.2 | % | 80.7 | % | 77.1 | % |
| Block Hours................................................                                                        |  | 176,912 |  | 26,386 |  | 204,810 |  |
| Departures..................................................                                                       |  | 93,434 |  | 14,115 |  | 108,520 |  |
| Average Price per Gallon of Fuel, including   fuel taxes (dollars)...................................... |  | $2.79 |  | $3.10 |  | $3.15 |  |
| Fuel Gallons Consumed (000).......................                                                                 |  | 3 |  | 9,660 |  | 10,230 |  |
| Stage Length (miles)....................................                                                           |   | 590 |  | 648 |  | 597 |  |
|                                                                                                |  |  |  |  |  |  |  |
| **Nine Months Ended September 30, 2008**                                                                           |  | **Contract (1)** |  | **Branded (2)** |  | **System (3)** |  |
|                                                                                                                    |  |  |  |  |  |  |  |
| Revenue Passenger Miles (RPM) (millions)....                                                                       |  | 6,312 |  | 1,368 |  | 7,742 |  |
| Available Seat Miles (ASM) (millions).............                                                                 |  | 8,114 |  | 1,979 |  | 10,195 |  |
| Passenger Load Factor................................                                                              |   | 77.8 | % | 69.1 | % | 75.9 | % |
| Block Hours................................................                                                        |  | 548,457 |  | 115,003 |  | 669,943 |  |
| Departures..................................................                                                       |  | 286,563 |  | 59,907 |  | 350,685 |  |
| Average Price per Gallon of Fuel, including   fuel taxes (dollars)...................................... |  | $0.76 |  | $2.88 |  | $1.31 |  |
| Fuel Gallons Consumed (000).......................                                                                 |  | 129,021 |  | 41,715 |  | 172,784 |  |
| Stage Length (miles)....................................                                                           |   | 583 |  | 663 |  | 596 |  |

|    | (1)  | Excludes charter operations as statistics on charter aircraft do not provide meaningful load factor data due to the fact that pricing is based on cost versus expected passenger count. |
|--------------|-----------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|    | (2)  | Operations commenced April 2, 2007 and July 1, 2007.                                                                                                                                    |
|    | (3)  | Consolidated operations.                                                                                                                                                                |

**Future Costs**

            Even after successful implementation of our cost saving initiatives which include headcount reductions, wage concessions and third-party vendor concessions, we need to remain committed to providingcompetitively priced services by controlling our costs.  We believe that our costs may still increase in the future due to:

|         | •  | changes in wages, salaries and related fringe benefit costs, including changes to our self-insured medical and workers compensation costs;                               |
|--------------------------------------------|--------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|         | •  | changes in wages related to average seniority increases as a result of our fleet rationalization;                                                                        |
|                                            | •  | the aging of our fleet, resulting in higher aircraft maintenance costs;                                                                                                  |
|                                            | •  | changes in the costs of materials and outside services, including our information technology costs;                                                                      |
|                                            | •  | changes in governmental regulations, insurance and taxes affecting air transportation and the costs charged for airport access, including new security requirements; and |
|                                            | •  | financing costs incurred to satisfy any operating and/or financial obligations.                                                                                          |

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            In the long term, failure to control our costs would prevent us from remaining competitive and reduce our ability to limit losses including the opportunities to attract additional corporatecustomers or to survive economic downturns.

**Liquidity, Capital Resources and Financial Position**

            **Sources and Uses of Cash**

**

            At September 30, 2008, our available liquidity, including restricted and unrestricted cash, and our ARS, was $145.3 million.  Our primary source of liquidity is cash flow provided from ouroperations.  For the nine months ended September 30, 2008 and 2007, our operations (used) / provided ($44.4) million and $2.8 million, respectively.  As of September 30, 2008 and December 31, 2007, we had $24.7 million and $24.8 million of restricted cash,respectively, which is comprised of collateral for our workers’ compensation coverage, customer deposits for future charter flights, letters of credit, and holdbacks required under our credit card processing agreements.

            For the nine months ended September 30, 2008 and 2007, we spent $9.1 million and $43.8 million, respectively, on capital expenditures.  The majority of the expenditures for 2007 were spent onflight and ground equipment to support our fleet deliveries and the increase in our flight schedules under the amended Continental CPA.  We anticipate capital expenditures for the remainder of 2008 to be approximately $2.0 million primarily related to technologyfor our charter operation and flight equipment.

            In light of the amended Continental CPA, aircraft withdrawals, dramatically lower utilization, dramatically lower block hour rates, our diminished stock price and the potential increases in theprice of fuel, we believe cost restructuring and cash preservation is crucial to sustain our liquidity and meet our financial obligations through the third quarter of 2009.  Additional cost savings initiatives are essential at this time to maintain anappropriate operating margin and preserve our cash.  Our proposed initiatives needed to contribute toward these goals include, but not limited to, reduction-in-force, wage and benefit concessions, third-party vendor concessions, reduction in capitalexpenditures, borrowing against or liquidating our ARS and selling our unencumbered assets.

            Our 2008 cash flows as of the date of this filing have included the following sources of cash outside of normal operating revenues:

|           | •  | $37.8 million tax refund for prior year loss carryback provisions, received in June 2008;                                                                                                                               |
|--------------------------------------------------------|--------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|           | •  | $23.1 million, of which approximately $21 million was received in the 3rd quarter of 2008 non-operating gain from the monetization of fuel fixed forward contracts subsequent to capacity reductions in September 2008; |
|           | •  | $11.7 million in sales of unencumbered assets; and                                                                                                                                                       |
|           | •  | $4.0 million in purchase deposits previously held by our fuel vendor was refunded in October 2008.                                                                                                                 |

            We believe that our existing liquidity and projected 2008 cash flows, including the incremental sources of liquidity described above and implementation of cost saving initiatives, if needed, willbe sufficient to fund current operations and our financial obligations through the twelve months ending September 30, 2009.  However, as noted above, factors outside our control may dictate that we alter our current plans and expectations and could have amaterial adverse impact on our ability to sustain operations over the long term.

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**Debt**

            We did not enter into any new financing transactions in the nine months ended September 30, 2008.  As of September 30, 2008, long-term debt, including current maturities, totaled $52.6million, which consisted of the 11.25% convertible notes and the secured debt owed to Export Development Canada, (“EDC”). 

            In July 2008, we commenced our repurchase offer for $128.2 million aggregate principal amount of our 4.25% Convertible Notes due 2023 and provided written notice to the trustee of our intention topay the repurchase price wholly in shares of our common stock. On August 1, 2008 we satisfied $59.7 million in aggregate principal of outstanding notes that had been validly tendered through the issuance of 16.4 million shares (reverse split adjusted) of our commonstock.  Following the completion of the tender offer in August 2008 of our then 4.25% Convertible Notes due 2023, $68.5 million aggregate principal of our convertible notes remains outstanding.  Additionally, as provided in the amended indenture governingthe notes, such notes have become our 11.25% Convertible Secured Notes due 2023.  In accordance with EITF 96-19 “Debtor's Accounting for a Modification or Exchange of Debt Instruments,” we accounted for this exchange as an extinguishment ofdebt, since the net present value of the cash flows under the exchanged terms was more than 10% of the net present value of the cash flows under the terms of the original instrument.  As required by accounting rules, we recorded the convertible notes to a fairvalue of $40.7 million, net of a fair value adjustment of $27.8 million that will be amortized over the life of the new instrument up to the first date at which we may be required to repurchase the notes in August 2011.  Such adjustment was recorded as anon-recurring gain under non-operating income for the third quarter.  The net balance of the 11.25% Convertible Secured Notes as of September 30, 2008 was $42.2 million.

            Other than our 11.25% Convertible Secured Notes due 2023, we do not have any material long-term borrowings or available lines of credit.  Pursuant to the terms of the amended indenturegoverning the convertible notes outstanding, we granted a security interest on certain of our property including spare parts and spare aircraft engines.  In granting the security interest, we agreed that we will not as of any fiscal year end permit the aggregateoutstanding principal amount of the Notes divided by the fair market value of the pledged collateral to be greater than certain percentages.  If such collateral ratios are greater than the applicable maximum, we will pledge additional spare parts, spare aircraftengines and / or cash and cash equivalents as security for the notes.

**Purchase Commitments and Contingencies**

            As of September 30, 2008, we had options for 50 ERJ-145XR aircraft that may be exercised for an ERJ-145 or similar aircraft.  We retain the right to exercise these option aircraft and fly themfor other airlines or under our own code, subject to some restrictions; however, we will have to finance our acquisition of these aircraft independently.  Currently, we do not have any firm commitments for aircraft purchases. 

**            Credit Card Holdbacks. ** The level of credit card holdback under the agreement with our Visa and MasterCard processors is subject to adjustments based on specific financial triggers thatrequire, among other things, that we maintain certain financial ratios and levels of operating income and unrestricted cash.  This holdback, which is included in restricted cash in our consolidated balance sheet, totaled approximately $3.3 million and $4.9million as of September 30, 2008 and December 31, 2007, respectively.  The funds held back bear interest and will be made available to us as our liability to past customers diminishes.

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**           ** Under our American Express credit card processing agreement, certain proceeds from advance ticket sales are held back to serve as collateral to cover any possible chargebacks or otherdisputed charges that may occur. These holdbacks, which are included in restricted cash in our consolidated balance sheets, totaled approximately $0.4 million and $3.6 million as of September 30, 2008 and December 31, 2007, respectively.  The funds held back byAmerican Express bear interest and are subsequently made available to us as our liability to past customers diminishes.

            As of September 30, 2008, we included $0.6 million in restricted cash on our consolidated balance sheet for credit card holdbacks under our processing agreement with Discover.  The funds heldback bear interest and will be made available to us as our liability to past customers diminishes.

            We believe that substantially all of the restricted cash associated with the credit card holdbacks will be reclassed to unrestricted cash during the 4th quarter of 2008. 

****

**            Aircraft, Simulator and Spare Engine Leases****. ** As of September 30, 2008, we had significant lease and sublease obligations for aircraft, a simulator and spare engines that areclassified as operating leases, which are not reflected as assets or liabilities on our balance sheet.  These leases expire between 2013 and 2022.  As of September 30, 2008, our expected total minimum rental expense for the full year 2008 under current andfuture firm order aircraft, simulator operating leases and spare engine operating leases is  $201.4 ****million, net of deferred credits amortized through September 30, 2008.  Approximately $7.3 million represents the incremental increase of 200 basispoints on the 69 aircraft released from the original Continental CPA. As defined in the amended Continental CPA that went into effect July 1, 2008, Continental will bear all the rent expense for aircraft operating within that arrangement.  For the 30 aircraftretained outside of the amended Continental CPA, we incur rent expense at reduced rental rates.  As of September 30, 2008, our expected total 2008 minimum rental expense for the 30 aircraft retained outside of the amended Continental CPA is approximately $10.9****million.  A substantial portion of our aircraft is leased directly by Continental from third parties and subleased by Continental to us.  If Continental were to default under these leases, our ability to retain access to the aircraft could beadversely affected.  Pursuant to the terms of the amended indenture governing our 11.25% Convertible Secured Notes due 2023, we granted a security interest on certain of our property including spare parts and spare aircraft engines.  We agreed that ifcertain collateral ratios are greater than the applicable maximum, we will pledge additional spare parts, spare aircraft engines and / or cash and cash equivalents. 

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

            We have been and are subject to market risks, including commodity price risk, such as aircraft fuel prices, and interest rate risk.  See the Notes to Consolidated Financial Statements includedin our 2007 10-K for a description of our accounting policies and other information related to these financial instruments.

**Aircraft Fuel**

            Prior to July 1, 2008, Continental provided all of our aircraft fuel needs for the aircraft covered by the original Continental CPA, and we incurred fuel expense and fuel tax equal to the lower ofthe actual cost of the fuel and the related taxes or agreed-upon caps of 66.0 cents and 5.2 cents per gallon, respectively.  As a result, our cost of fuel was 71.2 cents per gallon for the six months ended June 30, 2008 and the nine months ended September 30,2007.  Under the amended Continental CPA, Continental is responsible for the cost of providing fuel for all flights and, therefore, effective July 1, 2008, fuel expense is no longer included in our statements of operations for aircraft flying within thisarrangement.

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            Branded Flying operations were significantly impacted by changes in the price and availability of aircraft fuel.  Efforts to reduce our exposure to increases in the price and availability ofaviation fuel consisted of the utilization of forward-purchase contracts at fixed prices and fuel tankering, where feasible.  Fixed-price arrangements consist of an agreement to purchase defined quantities of aviation fuel from a third party at a stated price,limiting our exposure to market volatility.  Upon the decision to suspend operations for Airlines’ Branded Flying on July 8, 2008, we sold our fixed forward purchase contracts for periods subsequent to September 2, 2008, which resulted in a non-operatinggain of approximately $23 million.  To date, we have received approximately $21 million in cash from World Fuel Services with the remaining $2 million held in deposit for future fuel purchases within our Corporate Aviation division.  The funds held indeposit by World Fuel Services earn interest. 

            For the nine months ended September 30, 2008, Airlines’ consolidated fuel cost, including related fuel taxes, was $1.31 per gallon.  This results from over 75% of our fuel consumptionbeing capped at a lower rate per gallon within our agreements with Continental.

**Interest Rates**

            We have potential interest rate exposure with respect to our loan agreement with EDC, which bears interest at the six-month LIBOR plus 1.75% per annum.  The interest rate applicable to thisvariable rate note may rise, increasing our interest expense.  The impact of market risk is estimated using a hypothetical increase in interest rates by 100 basis points for our variable rate long-term debt.  Based on this hypothetical assumption, anyadditional amounts incurred in interest expense for the nine months ended September 30, 2008 and 2007 would not be material. 

            As of September 30, 2008 and December 31, 2007, we estimated the fair value of our $68.5 million and $134.7 million (carrying values) convertible notes to be $40.7 million and $130.7 million,respectively, based upon the average of market trading activity for the convertible notes subsequent to the exchange in August 2008.  Changes in the fair market value of our fixed-rate debt could be affected by a variety of factors including general investorbehavior, industry specific risks and interest rate risks.  Holders of this debt had the right to require that we repurchase their notes on August 1, 2008.  On that date we satisfied $59.7 million in aggregate principal of outstanding notes that had beenvalidly tendered. Following the completion of the tender offer, $68.5 million aggregate principal of our then 4.25% Convertible Notes due 2023 remains outstanding.  Additionally, as provided in the amended indenture governing the notes, the coupon associatedwith the notes increased from 4.25% to 11.25% which results in an approximate $2.3 million increase in interest expense on an annual basis.  In accordance with EITF 96-19, we recorded a fair value adjustment of $27.8 million to reflect the $68.5 millionaggregate principal of our convertible notes at their fair market value of $40.7 million.  The $27.8 million fair value adjustment will be accreted to interest expense until the first available repurchase date on August 1, 2011 in conjunction with $2.0 millionof capitalized fees associated with the convertible debt refinancing.  This will result in an additional $9.9 million in interest expense on an annual basis.

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**Item 4.  Controls and Procedures.**

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

**           ***(b) Changes in internal control over financial reporting. * We have not identified any material weakness in our internal control over financial reporting as of September 30, 2008;however, the transition in our business model caused us to make several material changes in our internal controls over financial reporting during the 3rd quarter of 2008.  We removed certain internal controls related to our suspended operations andadded new controls where appropriate.  In addition, our corporate restructurings included an approximate 25% reduction in force in the finance and accounting departments.  As such, the performance of many of our internal controls over financial reportingwere reassigned to new or different personnel. 

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**PART II. OTHER INFORMATION**

**Item 1.  Legal Proceedings.**

****

**              ** None.

**Item 1A. Risk Factors.**

****

*            **A significant percentage of our common stock outstanding is held by a small number of institutional stockholders.  These institutional stockholders will be able to exert significantcontrol over the election of our Board of Directors and the management of our business and their interests may differ from those of our other stockholders.  ***

            As reported in their filings with the Securities and Exchange Commission, four large, institutional investors currently own or control a significant amount of our common stock, which is approaching50% of the total number of shares of common stock outstanding.  By virtue of the number of shares they control, these stockholders may be able to elect members to our board of directors, significantly influence or control our management andaffairs, and cause or prevent corporate transactions such as mergers, consolidation or the sale of all or substantially all of our assets.  The interests of these institutional investors may differ from that of other stockholders, with the result that theinstitutional investors may cause us to change our business strategy or objectives in ways that may not be viewed favorably by our strategic partners or other stockholders.  

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

****

Issuer Purchases of Equity Securities

****

**           ** In July 2005, our board of directors authorized the expenditure of up to $30 million to repurchase shares of our common stock.  In February 2006, the board authorized the inclusion ofour 4.25% (now 11.25%) Convertible Secured Notes due 2023 within the previously announced $30 million program.  We did not repurchase any of our convertible notes during the quarter ended September 30, 2008, however, we did repurchase 1.1 million shares (reversesplit adjusted) of our common stock.  As of September 30, 2008, we had a balance of $5.0 million remaining within the program for additional purchases.  As discussed In Note 5 – “Earnings / (Loss) Per Share”, ****stockholders approvedto effect a one-for-ten reverse split of our common stock.  All information in the following table has been adjusted to reflect the Reverse Split.

| **Period**                                                   |                    | **(a) Total number of shares purchased(1)** |        |   | **(b) Average price paid per share** |        |        | **(c) Total number of shares purchased as part of publicly announced program(2)** |        |   | **(d) Maximum value of shares / notes that may yet be purchased under the program (in millions)(3)** |     |
|--------------------------------------------------------------|--------------------|---------------------------------------------|--------|---|--------------------------------------|--------|--------|-----------------------------------------------------------------------------------|--------|---|------------------------------------------------------------------------------------------------------|-----|
|                                                              |     |                                             |        |   |                                      |   |        |                                                                                   |        |   |                                                                                                      |     |
| July 1 to July 31, 2008.............................         |               | 2,546                                       |   | $ | 3.09                                 |        |   | —                                                                           |   | $ | 15.8                                                                                                 |     |
| August 1 to August 31, 2008....................              |                    | 2,203                                       |        | $ | 2.23                                 |        |        | —                                                                           |        | $ | 15.5                                                                                                 |     |
| September 1 to September 30, 2008.........                   |                    | 1,187                                       |        | $ | 2.01                                 |        |        | 1,057,710                                                                         |        | $ | 13.5                                                                                                 |     |
|                                                              |                    |                                             |        |   |                                      |        |        |                                                                                   |        |   |                                                                                                      |     |
| Total....................................................... |                    | 5,936                                       |        | $ | 2.56                                 |        |        | 1,057,710                                                                         |        |   | 5.0                                                                                                  | (4) |
|                                                              |                    |                                             |        |   |                                      |        |        |                                                                                   |        |   |                                                                                                      |     |

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|    | (1)  | Shares shown were withheld to satisfy individual employee tax obligations arising upon the vesting of restricted stock awards and do not count against our securities repurchase program. |
|--------------|-----------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|    | (2)  | Amounts shown relate to shares of our common stock repurchased within our securities repurchase program.                                                                                  |
|    | (3)  | Amounts shown reflect the remaining balance available for repurchases of our common stock within our securities repurchase program.                                                       |
|    | (4)  | Amounts shown reflect repurchases of $16.5 million of our common stock and $8.5 million of our convertible notes included within our securities repurchase program.                       |

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

               None.

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

            On June 30, 2008, we held a special meeting of the stockholders of the company to vote on two proposals.  Proposal (1) for the approval of the issuance of such number of shares of our commonstock as may be reasonably necessary to repurchase all of our outstanding 4.25% Convertible Notes due 2023 was approved with 33,528,340 votes “For,” 2,917,625 votes “Against,” 51,380 abstentions and zero broker non-votes.  Proposal (2)for the approval of an amendment to our certificate of incorporation to increase the authorized number of shares of common stock from 200 million to 400 million shares was approved with 32,328,694 votes “For,” 4,119,037 votes “Against,” 49,614abstentions and zero broker non-votes. 

            On October 1, 2008, we held a special meeting of the stockholders of the company to vote on a proposal to effect a one-for-ten reverse split of the Company’s par value $0.01 common stock andto reduce the number of authorized shares of the Company’s common stock from 400,000,000 to 150,000,000.  The proposal was approved with 172,669,620 votes “For,” 6,954,225 votes “Against,” 85,623 abstentions and zero brokernon-votes. 

**Item 5.  Other Information.**

****

               None.

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**Item 6.  Exhibits.**

| 3.1    |     | Restated Certificate of Incorporation, as amended by the Certificate of Amendment dated July 1, 2008 and Certificate of Amendment dated October 1, 2008. (1)                                                                            |
|--------|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 3.2    |     | Amended and Restated Bylaws (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on May 24, 2007, File No. 1-31300).                                                                       |
| 10.1   |                    | First Amendment to the Second Amended and Restated Capacity Purchase Agreement among Continental Airlines, Inc., ExpressJet Holdings, Inc., XJT Holdings, Inc. and ExpressJet Airlines, Inc., dated as of August 29, 2008. (1)   * |
| 10.2   |                    | Employment Agreement of LamPhung Ngo-Burns, dated September 11, 2008. (1)                                                                                                                                                          |
| 31.1   |                    | Rule 13a-14(a)/15d-14(a) Certification by Chief Executive Officer.(1)                                                                                                                                                                   |
| 31.2   |                    | Rule 13a-14(a)/15d-14(a) Certification by Chief Financial Officer.(1)                                                                                                                                                                   |
| 32.1   |                    | Section 1350 Certification by Chief Executive Officer.(2)                                                                                                                                                                          |
| 32.2   |                    | Section 1350 Certification by Chief Financial Officer.(2)                                                                                                                                                                               |
|   |                    |                                                                                                                                                                                                                                         |
|        |                    | (1) Filed herewith.                                                                                                                                                                                                                |
|        |                    | (2) Furnished herewith.                                                                                                                                                                                                            |
|        |                    |                                                                                                                                                                                                                               |
|        |                    | *The Company has applied to the Securities and Exchange Commission for confidential treatment for portions of the exhibit.                                                                                                              |

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**SIGNATURES**

            Pursuant to the requirements of the Securities Exchange Act of 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 12, 2008 |                         | **/s/PhungNgo-Burns                                               ** |
|                               |                                                                                                         | Vice President and Chief Financial Officer (Principal Financial Officer)                                                                                                                                                                                                                                        |
|                     |                                                                                                                                            |                                                                                                                                                                                                                                                                                                                 |
| Date:  November 12, 2008 |                         | **/s/Robert Bickmore                                     **                                                            |
|                               |                                                                                                         | Robert Bickmore Senior Director and Controller (Principal Accounting Officer)                                                                                                                                                                                                                                   |

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

| 3.1    |     | Restated Certificate of Incorporation, as amended by the Certificate of Amendment dated July 1, 2008 and Certificate of Amendment dated October 1, 2008. (1)                                                                            |
|--------|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 3.2    |     | Amended and Restated Bylaws (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on May 24, 2007, File No. 1-31300).                                                                       |
| 10.1   |                    | First Amendment to the Second Amended and Restated Capacity Purchase Agreement among Continental Airlines, Inc., ExpressJet Holdings, Inc., XJT Holdings, Inc. and ExpressJet Airlines, Inc., dated as of August 29, 2008. (1)   * |
| 10.2   |                    | Employment Agreement of LamPhung Ngo-Burns, dated September 11, 2008. (1)                                                                                                                                                          |
| 31.1   |                    | Rule 13a-14(a)/15d-14(a) Certification by Chief Executive Officer.(1)                                                                                                                                                                   |
| 31.2   |                    | Rule 13a-14(a)/15d-14(a) Certification by Chief Financial Officer.(1)                                                                                                                                                                   |
| 32.1   |                    | Section 1350 Certification by Chief Executive Officer.(2)                                                                                                                                                                          |
| 32.2   |                    | Section 1350 Certification by Chief Financial Officer.(2)                                                                                                                                                                               |
|   |                    |                                                                                                                                                                                                                                         |
|        |                    | (1) Filed herewith.                                                                                                                                                                                                                |
|        |                    | (2) Furnished herewith.                                                                                                                                                                                                            |
|        |                    |                                                                                                                                                                                                                               |
|        |                    | *The Company has applied to the Securities and Exchange Commission for confidential treatment for portions of the exhibit.                                                                                                              |

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