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

****

**Form 10-Q**

****

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

Commission File Number 1-31300

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

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

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

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

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

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

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

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

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

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

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

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

As of November 8, 2010, 20,336,761 shares of common stock wereoutstanding.**

----

**TABLE OF CONTENTS**

| **PART I.**       |         | **FINANCIAL INFORMATION**                                                                                               |   | **PAGE** |
|-------------------|--------------|-------------------------------------------------------------------------------------------------------------------------|--------|----------|
| Item 1.           |         | Financial Statements:                                                                                                   |        |          |
|              |         | Condensed Consolidated Statements of Operations: Three Months Ended September 30, 2010 (Unaudited) and 2009 (Unaudited) |        | 1        |
|              |         | Condensed Consolidated Statements of Operations: Nine Months Ended September 30, 2010 (Unaudited) and 2009 (Unaudited)  |        | 1        |
|              |    | Condensed Consolidated Balance Sheets; September 30, 2010 (Unaudited) and December 31, 2009                             |        | 3        |
|              |    |   Assets                                                                                                      |        | 3        |
|              |    |   Liabilities and Stockholders’ Equity                                                                  |        | 4        |
|                   |              | Condensed Consolidated Statements of Cash Flows: Nine Months Ended September 30, 2010 (Unaudited) and 2009 (Unaudited)  |        | 5        |
|                   |              | Notes to Condensed Consolidated Financial Statements(Unaudited)                                                         |        | 6        |
| Item 2.           |         | Management’s Discussion and Analysis of Financial Conditionand Results of Operations                              |        | 23       |
| Item 3.           |         | Quantitative and Qualitative Disclosures About MarketRisk                                                               |        | 37       |
| Item 4.           |              | Controls and Procedures                                                                                                 |        | 38       |
| **PART II.** |         | **OTHER INFORMATION**                                                                                                   |        |          |
| Item 1.           |              | Legal Proceedings                                                                                                       |        | 39       |
| Item 1A.          |              | Risk Factors                                                                                                            |        | 40       |
| Item 2.           |              | Unregistered Sales of Equity Securities and Use ofProceeds                                                              |        | 41       |
| Item 3.           |              | Defaults Upon Senior Securities                                                                                         |        | 42       |
| Item 4.           |              | (Removed and Reserved)                                                                                                  |        | 42       |
| Item 5.           |              | Other Information                                                                                                       |        | 42       |
| Item 6.           |              | Exhibits                                                                                                                |        | 43       |
|                   |              | Signatures                                                                                                              |        | 44       |

**

----

**

Table of Contents

****

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

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  |   | **Three Months Ended September 30,** |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--|---|--------------------------------------|---|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  |   |                                      |   |
|                                                                                  |  |   | **2010**                             |   |  |  | **2009** |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  |   | ****                                 |   |  |  | **** |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  |   | (Unaudited)                          |   |  |  | (Unaudited) |  |
| Operating Revenue:                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |  |   |                                      |   |  |  |  |  |
|   Passenger                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |  | $ | 202,465                              |   |  | $ | 153,017 |  |
|   Corporate Aviation                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |  |   | 6,521                                |   |  |  | 18,045 |  |
|   Ground handling and other                                                                                                                                                                                                                                                                                                                                                                                                                                                            |  |   | 8,745                                |   |  |  | 8,138 |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  |   |                                      |   |  |  |  |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  |   | 217,731                              |   |  |  | 179,200 |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  |   |                                      |   |  |  |  |  |
| Operating Expenses:                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |  |   |                                      |   |  |  |  |  |
|   Wages, salaries and related costs                                                                                                                                                                                                                                                                                                                                                                                                                                                    |  |   | 89,835                               |   |  |  | 81,435 |  |
|   Maintenance, materials and repairs                                                                                                                                                                                                                                                                                                                                                                                                                                                   |  |   | 55,098                               |   |  |  | 43,977 |  |
|   Other rentals and landing fees                                                                                                                                                                                                                                                                                                                                                                                                                                                       |  |   | 20,160                               |   |  |  | 16,367 |  |
|   Aircraft fuel and related taxes                                                                                                                                                                                                                                                                                                                                                                                                                                                      |  |   | 13,374                               |   |  |  | 4,555 |  |
|   Outside services                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |  |   | 10,469                               |   |  |  | 6,344 |  |
|   Aircraft rentals                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |  |   | 6,792                                |   |  |  | 5,472 |  |
|   Depreciation and amortization                                                                                                                                                                                                                                                                                                                                                                                                                                                        |  |   | 6,487                                |   |  |  | 7,194 |  |
|   Ground handling                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |  |   | 1,345                                |   |  |  | 1,896 |  |
|   Other operating expenses                                                                                                                                                                                                                                                                                                                                                                                                                                                             |  |   | 19,236                               |   |  |  | 20,099 |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |  |   |                                      |   |  |  |  |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |  |   | 222,796                              |   |  |  | 187,339 |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |  |   |                                      |   |  |  |  |  |
| Operating Loss                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |  |   | (5,065                               | ) |  |  | (8,139 | ) |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |  |   |                                      |   |  |  |  |  |
| Non-operating Income (Expense):                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  |   |                                      |   |  |  |  |  |
|   Gain on sale of short-term investments, net                                                                                                                                                                                                                                                                                                                                                                                                                                          |  |   | 186                                  |   |  |  | 1,274 |  |
|   Extinguishment of debt                                                                                                                                                                                                                                                                                                                                                                                                                                                               |  |   | (1,342                               | ) |  |  | (934 | ) |
|   Amortization of debt discount                                                                                                                                                                                                                                                                                                                                                                                                                                                        |  |   | (1,398                               | ) |  |  | (1,583 | ) |
|   Interest expense, net of capitalized interest                                                                                                                                                                                                                                                                                                                                                                                                                                        |  |   | (1,228                               | ) |  |  | (1,825 | ) |
|   Interest income                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |  |   | 32                                   |   |  |  | 200 |  |
|   Other, net                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |  |   | 415                                  |   |  |  | 60 |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  |   |                                      |   |  |  |  |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  |   | (3,335                               | ) |  |  | (2,808 | ) |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  |   |                                      |   |  |  |  |  |
| Loss before Income Taxes                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |  |   | (8,400                               | ) |  |  | (10,947 | ) |
| Income Tax (Expense) Benefit                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |  |   | (1,494                               | ) |  |  | 1,902 |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |  |   |                                      |   |  |  |  |  |
| Net Loss                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |  | $ | (9,894                               | ) |  | $ | (9,045 | ) |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |  |   |                                      |   |  |  |  |  |
| Basic and Diluted Loss per Common Share                                                                                                                                                                                                                                                                                                                                                                                                                                                          |  | $ | (0.52                                | ) |  | $ | (0.61 | ) |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |  |   |                                      |   |  |  |  |  |
| Shares Used in Computing Basic and Diluted Loss per     Common Share                                                                                                                                                                                                                                                                                                                                                                                                         |  |   | 18,944                               |   |  |  | 14,851 |  |

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

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Table of Contents

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

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  |   | **Nine Months Ended September 30,** |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--|---|-------------------------------------|---|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  |   |                                     |   |
|                                                                                  |  |   | **2010**                            |   |  |  | **2009** |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  |   | ****                                |   |  |  | **** |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  |   | (Unaudited)                         |   |  |  | (Unaudited) |  |
| Operating Revenue:                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |  |   |                                     |   |  |  |  |  |
|   Passenger                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |  | $ | 557,134                             |   |  | $ | 447,361 |  |
|   Corporate Aviation                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |  |   | 29,936                              |   |  |  | 46,920 |  |
|   Ground handling and other                                                                                                                                                                                                                                                                                                                                                                                                                                                            |  |   | 26,982                              |   |  |  | 25,216 |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  |   |                                     |   |  |  |  |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  |   | 614,052                             |   |  |  | 519,497 |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  |   |                                     |   |  |  |  |  |
| Operating Expenses:                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |  |   |                                     |   |  |  |  |  |
|   Wages, salaries and related costs                                                                                                                                                                                                                                                                                                                                                                                                                                                    |  |   | 272,600                             |   |  |  | 240,729 |  |
|   Maintenance, materials and repairs                                                                                                                                                                                                                                                                                                                                                                                                                                                   |  |   | 148,756                             |   |  |  | 123,121 |  |
|   Other rentals and landing fees                                                                                                                                                                                                                                                                                                                                                                                                                                                       |  |   | 57,708                              |   |  |  | 45,491 |  |
|   Aircraft fuel and related taxes                                                                                                                                                                                                                                                                                                                                                                                                                                                      |  |   | 34,054                              |   |  |  | 10,175 |  |
|   Outside services                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |  |   | 20,508                              |   |  |  | 20,071 |  |
|   Aircraft rentals                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |  |   | 19,999                              |   |  |  | 16,416 |  |
|   Depreciation and amortization                                                                                                                                                                                                                                                                                                                                                                                                                                                        |  |   | 19,732                              |   |  |  | 22,981 |  |
|   Ground handling                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |  |   | 5,866                               |   |  |  | 7,497 |  |
|   Impairment of fixed assets                                                                                                                                                                                                                                                                                                                                                                                                                                                           |  |   | 3,075                               |   |  |  | — |  |
|   Other operating expenses                                                                                                                                                                                                                                                                                                                                                                                                                                                             |  |   | 60,047                              |   |  |  | 63,051 |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |  |   |                                     |   |  |  |  |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |  |   | 642,345                             |   |  |  | 549,532 |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |  |   |                                     |   |  |  |  |  |
| Operating Loss                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |  |   | (28,293                             | ) |  |  | (30,035 | ) |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |  |   |                                     |   |  |  |  |  |
| Non-operating Income (Expense):                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  |   |                                     |   |  |  |  |  |
|   Gain on sale of short-term investments, net                                                                                                                                                                                                                                                                                                                                                                                                                                          |  |   | 887                                 |   |  |  | 1,755 |  |
|   Extinguishment of debt                                                                                                                                                                                                                                                                                                                                                                                                                                                               |  |   | (3,059                              | ) |  |  | (1,017 | ) |
|   Amortization of debt discount                                                                                                                                                                                                                                                                                                                                                                                                                                                        |  |   | (4,687                              | ) |  |  | (3,257 | ) |
|   Interest expense, net of capitalized interest                                                                                                                                                                                                                                                                                                                                                                                                                                        |  |   | (4,312                              | ) |  |  | (5,835 | ) |
|   Interest income                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |  |   | 259                                 |   |  |  | 837 |  |
|   Equity investments loss, net                                                                                                                                                                                                                                                                                                                                                                                                                                                         |  |   | —                             |   |  |  | (377 | ) |
|   Other, net                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |  |   | 166                                 |   |  |  | (1,069 | ) |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  |   |                                     |   |  |  |  |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  |   | (10,746                             | ) |  |  | (8,963 | ) |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  |   |                                     |   |  |  |  |  |
| Loss before Income Taxes                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |  |   | (39,039                             | ) |  |  | (38,998 | ) |
| Income Tax (Expense) Benefit                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |  |   | (5,584                              | ) |  |  | 5,452 |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |  |   |                                     |   |  |  |  |  |
| Net Loss                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |  | $ | (44,623                             | ) |  | $ | (33,546 | ) |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |  |   |                                     |   |  |  |  |  |
| Basic and Diluted Loss per Common Share                                                                                                                                                                                                                                                                                                                                                                                                                                                          |  | $ | (2.43                               | ) |  | $ | (2.15 | ) |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |  |   |                                     |   |  |  |  |  |
| Shares Used in Computing Basic and Diluted Loss per     Common Share                                                                                                                                                                                                                                                                                                                                                                                                         |  |   | 18,394                              |   |  |  | 15,581 |  |

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

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Table of Contents

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

| **ASSETS**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |            |   | **September 30,** |        |   | **December 31,** |        |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|---|-------------------|--------|---|------------------|--------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |            |   | **2010**          |        |   | **2009**         |        |
|                                                                                          | ** ** |   | ****              |        |   | ****             |        |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |            |   | (Unaudited)       |        |   |                  |        |
| Current Assets:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |            |   |                   |        |   |                  |        |
|   Cash and cash equivalents                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |            | $ | 84,143            |   | $ | 80,980           |   |
|   Restricted cash                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |            |   | 15,552            |        |   | 17,738           |        |
|   Short-term investments                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |            |   | —           |        |   | 9,082            |        |
|   Accounts receivable, net of allowance of $0.8 million and $1.5     million, respectively                                                                                                                                                                                                                                                                                                                                                                                                                         |            |   | 8,933             |        |   | 9,351            |        |
|   Amounts due from Continental Airlines, net                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |            |   | 514               |        |   | —          |        |
|   Spare parts and supplies, net                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |            |   | 18,143            |        |   | 20,205           |        |
|   Income tax receivable                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |            |   | 812               |        |   | 18,523           |        |
|   Deferred Income Taxes – See Note 7                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |            |   | 7,286             |        |   | 8,469            |        |
|   Prepayments and other                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |            |   | 12,102            |        |   | 4,786            |        |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |            |   |                   |        |   |                  |        |
|     Total Current Assets                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |            |   | 147,485           |        |   | 169,134          |        |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |            |   |                   |        |   |                  |        |
| Property and Equipment:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |            |   |                   |        |   |                  |        |
|   Flight equipment                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |            |   | 209,163           |        |   | 209,704          |        |
|   Other                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |            |   | 134,048           |        |   | 140,412          |        |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |            |   |                   |        |   |                  |        |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |            |   | 343,211           |        |   | 350,116          |        |
|   Less:  Accumulated depreciation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |            |   | (174,561          | )      |   | (162,000         | )      |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |            |   |                   |        |   |                  |        |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |            |   | 168,650           |        |   | 188,116          |        |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |            |   |                   |        |   |                  |        |
| Debt Issuance Cost, net                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |            |   | —           |        |   | 1,056            |        |
| Other Assets, net                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |            |   | 7,518             |        |   | 2,152            |        |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |            |   |                   |        |   |                  |        |
|     Total Assets                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |            | $ | 323,653           |        | $ | 360,458          |        |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |            |   |                   |        |   |                  |   |

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

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Table of Contents

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

****

| **LIABILITIES AND STOCKHOLDERS' EQUITY**                                                                                                              |  |   | **September 30, 2010** |   |  |   | **December 31, 2009** |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------------|--|---|------------------------|---|--|---|-----------------------|---|
|                                                                                                                                                       |  |   | ****                   |   |  |   | ****                  |   |
|                                                                                                                                                       |  |   | (Unaudited)            |   |  |   |                       |   |
| Current Liabilities:                                                                                                                                  |  |   |                        |   |  |   |                       |   |
|   Current maturities of long-term debt                                                                                                      |  | $ | 3,459                  |   |  | $ | 3,459                 |   |
|   Current portion of 11.25% Convertible Secured Notes due 2023,     net of discount of $5,085 and $0, respectively      |  |   | 28,476                 |   |  |   | —               |   |
|   Accounts payable                                                                                                                          |  |   | 3,618                  |   |  |   | 4,144                 |   |
|   Accrued payroll and related costs                                                                                                         |  |   | 50,522                 |   |  |   | 37,914                |   |
|   Accrued airport service costs                                                                                                             |  |   | 7,393                  |   |  |   | 6,761                 |   |
|   Accrued maintenance, materials and repair costs                                                                                           |  |   | 17,880                 |   |  |   | 13,087                |   |
|   Accrued taxes                                                                                                                             |  |   | 8,978                  |   |  |   | 7,288                 |   |
|   Amounts due to Continental Airlines, net                                                                                                  |  |   | —                |   |  |   | 1,687                 |   |
|   Credit facility                                                                                                                           |  |   | —                |   |  |   | 5,000                 |   |
|   Accrued other liabilities                                                                                                                 |  |   | 11,098                 |   |  |   | 17,521                |   |
|                                                                                                                                                       |  |   |                        |   |  |   |                       |   |
|     Total Current Liabilities                                                                                                     |  |   | 131,424                |   |  |   | 96,861                |   |
|                                                                                                                                                       |  |   |                        |   |  |   |                       |   |
| Long-term Debt                                                                                                                                        |  |   | —                |   |  |   | 2,389                 |   |
|                                                                                                                                                       |  |   |                        |   |  |   |                       |   |
| 11.25% Convertible Secured Notes due 2023, net of discount of     $0 and $13,534, respectively                                    |  |   | —                |   |  |   | 38,577                |   |
|                                                                                                                                                       |  |   |                        |   |  |   |                       |   |
| Deferred Income Taxes – See Note 7                                                                                                              |  |   | 30,509                 |   |  |   | 26,134                |   |
|                                                                                                                                                       |  |   |                        |   |  |   |                       |   |
| Other Long-term Liabilities                                                                                                                           |  |   | 223                    |   |  |   | 367                   |   |
|                                                                                                                                                       |  |   |                        |   |  |   |                       |   |
| Commitments and Contingencies – See Note 9                                                                                                      |  |   |                        |   |  |   |                       |   |
|                                                                                                                                                       |  |   |                        |   |  |   |                       |   |
| Stockholders’ Equity:                                                                                                                           |  |   |                        |   |  |   |                       |   |
|   Preferred stock - $.01 par, 10,000,000 shares authorized, no     shares issued or outstanding, respectively           |  |   | —                |   |  |   | —               |   |
|   Common stock - $.01 par, 150,000,000 shares authorized, and     27,584,126 and 22,731,424 shares issued, respectively |  |   | 276                    |   |  |   | 227                   |   |
|   Additional paid-in capital                                                                                                                |  |   | 279,424                |   |  |   | 268,096               |   |
|   Accumulated loss                                                                                                                          |  |   | (98,013                | ) |  |   | (53,328               | ) |
|   Accumulated other comprehensive income                                                                                                    |  |   | 344                    |   |  |   | 644                   |   |
|   Common stock held in treasury, at cost, 7,243,842 and     7,084,450 shares, respectively                              |  |   | (20,534                | ) |  |   | (19,509               | ) |
|                                                                                                                                                       |  |   |                        |   |  |   |                       |   |
|     Total Stockholders’ Equity                                                                                              |  |   | 161,497                |   |  |   | 196,130               |   |
|                                                                                                                                                       |  |   |                        |   |  |   |                       |   |
|     Total Liabilities and Stockholders’ Equity                                                                              |  | $ | 323,653                |   |  | $ | 360,458               |   |
|                                                                                                                                                       |  |   |                        |   |  |   |                       |   |

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

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

| **                                                                                          ** |  |   | **Nine Months Ended September 30,** |   |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--|---|-------------------------------------|---|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  |   | ****                                |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  |   | **2010**                            |   |  |  | **2009** |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  |   | ****                                |   |  |  | **** |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  |   | (Unaudited)                         |   |  |  | (Unaudited) |  |
| Net Cash Flows provided by (used in) Operating Activities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |  | $ | 21,852                              |   |  | $ | (11,951 | ) |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  |   |                                     |   |  |  |  |  |
| Cash Flows from Investing Activities:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |  |   |                                     |   |  |  |  |  |
|   Capital expenditures                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |  |   | (2,802                              | ) |  |  | (3,941 | ) |
|   Proceeds from the sale of property and equipment                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |  |   | 799                                 |   |  |  | 10,230 |  |
|   Proceeds from sale of short-term investments                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |  |   | 9,668                               |   |  |  | 19,394 |  |
|   Recoveries of (Investments in) restricted cash                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |  |   | 1,099                               |   |  |  | (2,192 | ) |
|   Other                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |  |   | 92                                  |   |  |  | — |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  |   |                                     |   |  |  |  |  |
|   Net cash provided by investing activities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |  |   | 8,856                               |   |  |  | 23,491 |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  |   |                                     |   |  |  |  |  |
| Cash Flows from Financing Activities:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |  |   |                                     |   |  |  |  |  |
|   Repurchase of common stock                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |  |   | (2,500                              | ) |  |  | (3,380 | ) |
|   Payments on long-term debt and credit facility                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |  |   | (7,389                              | ) |  |  | (2,390 | ) |
|   Repurchases of convertible debt                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |  |   | (18,336                             | ) |  |  | (7,072 | ) |
|   Proceeds from debt financing                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |  |   | —                             |   |  |  | 5,000 |  |
|   Proceeds from issuance of common stock related to     benefit plans                                                                                                                                                                                                                                                                                                                                                                                                                                                              |  |   | 680                                 |   |  |  | 484 |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  |   |                                     |   |  |  |  |  |
|   Net cash used in financing activities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |  |   | (27,545                             | ) |  |  | (7,358 | ) |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  |   |                                     |   |  |  |  |  |
|   Net Increase in Cash and Cash Equivalents                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |  |   | 3,163                               |   |  |  | 4,182 |  |
| Cash and Cash Equivalents - Beginning of Period                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  |   | 80,980                              |   |  |  | 57,528 |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |  |   |                                     |   |  |  |  |  |
| Cash and Cash Equivalents - End of Period                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |  | $ | 84,143                              |   |  | $ | 61,710 |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  |   |                                     |   |  |  |  |  |
| Supplemental Cash Flow Information:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |  |   |                                     |   |  |  |  |  |
|   Interest paid, net                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |  | $ | 5,623                               |   |  | $ | 7,062 |  |
|   Income taxes paid (refunded)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |  | $ | (17,937                             | ) |  | $ | 284 |  |
|   Non-cash deferred sales incentive                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |  | $ | 11,367                              |   |  | $ | — |  |

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

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

           **Overview**

            ExpressJet Holdings, Inc.(“Holdings”) has strategic investments in the air transportation industry.  Our principal asset is all of theissued and outstanding shares of stock of XJT Holdings, Inc., the sole stockholder of ExpressJet Airlines, Inc. (referred to inthis report as “Airlines” and, together with Holdings, as “ExpressJet”, “we” or“us”).  Airlines currently operates a fleet of 244aircraft flying under contractual arrangements forContinental Airlines, Inc. (“Continental”) and United Airlines, Inc. (“United”), and within its CorporateAviation (charter) division. Subsequent to September 30, 2010, Continental and United successfully completed the previouslyannounced merger and are now wholly owned subsidiaries of United Continental Holdings, Inc. 

**           ****CorporateAviation (Charter).**   In September 2010, we determined that we would cease selling Corporate Aviation (charter) flightsduring the fourth quarter of 2010. We continue to pursue various strategic opportunities for the aircraft as we expect CorporateAviation (charter) operations to cease during the second half of 2011.

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

            On September 14, 2010, wereceived notice of early termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act in relation tothe Acquisition.  On October 18, 2010, we filed the definitive proxy statement relating to the Acquisition and scheduled thespecial meeting of our stockholders to approve the merger agreement with SkyWest, Inc. for November 10, 2010.  We receivedstockholder approval and expect the Acquisition to close on November 12, 2010.  Once the Acquisition closes, we will no longerbe listed as a public company on the New York Stock Exchange.

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

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****

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

******

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

**Note 2 – Contract Flying**

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

            Pursuant to the terms of thefirst and second amendments to the Amended Continental CPA, beginning in July 2009 and throughout the remainder of the term of theAmended Continental CPA, if Continental increases utilization of our aircraft above a pre-determined threshold,then Continental will be entitled to receive a discount on the block hour rates; provided that the aggregate discount received byContinental shall not exceed $10 million.  For the three and nine months endedSeptember30, 2010, there were increases in utilization of our aircraftabove the pre-determined threshold for such periods that resulted in Continental receiving discounts in the amount of $1.0 millionand $3.7 million, respectively.  To date, Continental has received discounts totaling $4.9 million for increases inutilization of our aircraft above the pre-determined threshold; therefore, the remaining discount available is $5.1million.

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

****

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

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            In addition, inFebruary 2010, we entered into the First Amendment to the United Express Agreement with United, which provided that we would fly upto 10 additional aircraft for United in the current ExpressJet livery from May 2010 through December 2010.  On August 11,2010, we entered into the Second Amendment to the United Express Agreement with United, which amended and replaced the FirstAmendment to the United Express Agreement in its entirety. Pursuant to the terms of the Second Amendment, we extended the term ofthe 10 additional aircraft that were previously covered by the First Amendment through April 4, 2011.  The Second Amendmentalso provides that we will also operate two additional aircraft for United beginning December 16, 2010 through April 4, 2011. TheSecond Amendment does not contain a specific renewal option for these twelve aircraft.  As ofSeptember30, 2010, we operated a total of 32 aircraft as United Expressfor United.

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

            We receive payments under theUnited Express Agreement at a pre-determined rate based on block hours and departures flown at variable mark-up ratesbased upon Airlines’ performance, including on-time departure performance and completion percentage ratesas determined within the United Express Agreement.  We are also reimbursed for various pass-through expenses,including passenger liability insurance, hull insurance, war risk insurance, landing fees and fuel.  As part of the UnitedExpress Agreement, we agreed to a temporary mark-up discount through June 2010, which resulted in approximately $1 million in costsavings for United.

           The UnitedExpress Agreement also provides for incentives and penalties.

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

*           *As part of the United Express Agreement, on February 17, 2010, we issued a warrant to United for the purchase of 2.7million shares of common stock with an exercise price of $0.01 per share of common stock (the “United Warrant”). The United Warrant contained certain restrictions preventing sale, transfer or other disposition.  On September 27, 2010,United exercised, on a cashless basis, its rights under the United Warrant and received approximately 2.7 million shares of ourcommon stock. The United Warrant terminated and became void upon execution.

*           *Per guidance contained in the Financial Accounting Standards Board’s (“FASB”) Accounting StandardsCodification (“ASC”) Topic 605-50, Customer Payments and Incentives, (“Topic 605-50”), we characterized theissuance of the United Warrant as a sales incentive to United, and we are amortizing the measured cost as a reduction of revenueover the initial term of the United Express Agreement utilizing an option pricing model.  We estimated that the fair value ofthe United Warrant was $11.4 million on February 17, 2010, the measurement date.  As such, we recorded a deferred salesincentive of $11.4 million representing the future discount to passenger revenue that will be recognized over the initial term ofthe United Express Agreement.  During the three and nine months ended September 30, 2010, we recognized $1.0 million and $2.9million, respectively, of the deferred sales incentive as a reduction to passenger revenue.  As of September 30, 2010, thebalance of the deferred sales incentive was $8.5 million, of which $4.1 million is current.

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**Note 3 – Impairment of Fixed Assets**

            In accordance withASC Subtopic 360-10, “Overall – Impairment or Disposal of Long-Lived Assets” we record impairment charges onlong-lived assets used in operations when events and circumstances indicate that the assets may be impaired, the undiscounted cashflows estimated to be generated by those assets are less than the carrying amount of those assets and the net book value of theassets exceeds their estimated fair value.  As a result of our impairment test, we concluded the carrying value of certain ofour aircraft leasehold improvements related to our contract flying segment were no longer recoverable.  Consequently, duringthe three months endedJune30, 2010, werecorded impairment charges of $3.1 million to write these long-lived assets down to their estimated fair values.  Fair valueswere determined based on estimated future cash flows which were considered nominal. No portion of the impairment charge will resultin future cash expenditures.  All other long-lived assets for our reportable segments were tested for impairment but wereconcluded to be recoverable.

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

****

**Note 4 *–* Segment Reporting**

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

           A significant portion of our operating expenses and infrastructure is integrated across segments (e.g., non-airportfacility rentals, outside services and general and administrative expenses) in order to support our entire fleet of aircraft;therefore, we do not allocate these costs to the individual segments identified above, but evaluate them for our consolidatedoperation.  The presentation of our consolidated shared costs is consistent with the manner in which these expenses are viewedby our chief operating decision makers.  Consequently, the unaudited tables below present (in thousands) our operatingrevenues, including inter-segment revenues, and segment profit generated per reportable segment for the three and nine monthsendedSeptember30, 2010 and 2009.  We also included ourreconciliation of the consolidated operating revenue to consolidated loss before income taxes and of our total assets for the threeand nine months ended and as ofSeptember30, 2010 and2009.

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|                                                                                                                                                                                                                                                                                                                                                                                          |   | **Contract Flying** |        |   | **Aviation Services** |        |        | **Eliminations** |   |        | **Consolidated** |   |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|---|---------------------|--------|---|-----------------------|--------|--------|------------------|---|--------|------------------|---|
| **                                                              ** |   | ****                |        |   | ****                  |        |        | ****             |   |        | ****             |   |
| **Three Months Ended September 30, 2010:**                                                                                                                                                                                                                                                                                                                                               |   |                     |        |   |                       |        |   |                  |   |   |                  |   |
| Revenue from customers                                                                                                                                                                                                                                                                                                                                                                   | $ | 208,986             |   | $ | 9,937                 |   | $      | (1,192           | ) | $      | 217,731          |   |
| Direct segment expenses                                                                                                                                                                                                                                                                                                                                                                  |   | 187,341             |        |   | 7,214                 |        |        | (1,192           | ) |        | 193,363          |   |
|                                                                                                                                                                                                                                                                                                                                                                                          |   |                     |        |   |                       |        |        |                  |   |        |                  |   |
|     Segment profit                                                                                                                                                                                                                                                                                                                                                   | $ | 21,645              |        | $ | 2,723                 |        | $      | —          |   | $      | 24,368           |   |
| Other shared expenses (1)                                                                                                                                                                                                                                                                                                                                                                |   |                     |        |   |                       |        |        |                  |   |        | (29,433          | ) |
| Non-operating expense                                                                                                                                                                                                                                                                                                                                                                    |   |                     |        |   |                       |        |        |                  |   |        | (3,335           | ) |
|                                                                                                                                                                                                                                                                                                                                                                                          |   |                     |        |   |                       |        |        |                  |   |        |                  |   |
| Consolidated loss before income taxes                                                                                                                                                                                                                                                                                                                                                    |   |                     |        |   |                       |        |        |                  |   | $      | (8,400           | ) |
|                                                                                                                                                                                                                                                                                                                                                                                          |   |                     |        |   |                       |        |        |                  |   |        |                  |   |
| **Nine Months Ended September 30, 2010:**                                                                                                                                                                                                                                                                                                                                                |   |                     |        |   |                       |        |   |                  |   |   |                  |   |
| Revenue from customers                                                                                                                                                                                                                                                                                                                                                                   | $ | 587,070             |        | $ | 32,386                |   | $      | (5,404           | ) | $      | 614,052          |   |
| Direct segment expenses                                                                                                                                                                                                                                                                                                                                                                  |   | 536,785             |        |   | 23,631                |        |        | (5,404           | ) |        | 555,012          |   |
|                                                                                                                                                                                                                                                                                                                                                                                          |   |                     |        |   |                       |        |        |                  |   |        |                  |   |
|     Segment profit                                                                                                                                                                                                                                                                                                                                                   | $ | 50,285              |        | $ | 8,755                 |        | $      | —          |   | $      | 59,040           |   |
| Other shared expenses (2)                                                                                                                                                                                                                                                                                                                                                                |   |                     |        |   |                       |        |        |                  |   |        | (84,258          | ) |
| Impairment of fixed assets                                                                                                                                                                                                                                                                                                                                                               |   | (3,075              | )      |   |                       |        |        |                  |   |        | (3,075           | ) |
| Non-operating expense                                                                                                                                                                                                                                                                                                                                                                    |   |                     |        |   |                       |        |        |                  |   |        | (10,746          | ) |
|                                                                                                                                                                                                                                                                                                                                                                                          |   |                     |        |   |                       |        |        |                  |   |        |                  |   |
| Consolidated loss before income taxes                                                                                                                                                                                                                                                                                                                                                    |   |                     |        |   |                       |        |        |                  |   | $      | (39,039          | ) |
|                                                                                                                                                                                                                                                                                                                                                                                          |   |                     |        |   |                       |        |        |                  |   |        |                  |   |
| **Assets as of September 30, 2010**                                                                                                                                                                                                                                                                                                                                                      |   |                     |        |   |                       |        |        |                  |   |        |                  |   |
| Segment assets                                                                                                                                                                                                                                                                                                                                                                           | $ | 154,886             |        | $ | 13,764                |        | $      | —          |   | $      | 168,650          |   |
| Other shared assets (3)                                                                                                                                                                                                                                                                                                                                                                  |   |                     |        |   |                       |        |        |                  |   |        | 155,003          |   |
|                                                                                                                                                                                                                                                                                                                                                                                          |   |                     |        |   |                       |        |        |                  |   |        |                  |   |
|     Total consolidated assets                                                                                                                                                                                                                                                                                                                                        |   |                     |        |   |                       |        |        |                  |   | $      | 323,653          |   |
|                                                                                                                                                                                                                                                                                                                                                                                          |   |                     |        |   |                       |        |        |                  |   |        |                  |   |

|    | (1)  | The major components of other shared expenses for the three months ended September 30, 2010 aregeneral and administrative labor and related expenses – $11.1 million; other general and administrative expenses – $8.8million; and outside services – $9.5 million.                                                  |
|--------------|-----------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|              | (2)  | The major components of other shared expenses for the nine months ended September 30, 2010 aregeneral and administrative labor and related expenses – $34.6 million; other general and administrative expenses –$29.6 million; outside services – $19.2 million; and non-airport rentals – $0.9 million.  |
|    | (3)  | Other shared assets include assets that are interchangeable between segments.                                                                                                                                                                                                                                                          |

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|                                                        |   | **Contract Flying** |        |   | **Aviation Services** |        |        | **Eliminations** |   |        | **Consolidated** |   |
|--------------------------------------------------------|---|---------------------|--------|---|-----------------------|--------|--------|------------------|---|--------|------------------|---|
|                                                        |   | ****                |        |   | ****                  |        |        | ****             |   |        | ****             |   |
| **Three months ended September 30, 2009:  ** |   |                     |        |   |                       |        |   |                  |   |   |                  |   |
| Revenue from customers                                 | $ | 171,062             |   | $ | 10,034                |   | $      | (1,896           | ) | $      | 179,200          |   |
| Direct segment expenses                                |   | 152,661             |        |   | 6,615                 |        |        | (1,896           | ) |        | 157,380          |   |
|                                                        |   |                     |        |   |                       |        |        |                  |   |        |                  |   |
|     Segment profit                 | $ | 18,401              |        | $ | 3,419                 |        | $      | —          |   | $      | 21,820           |   |
| Other shared expenses (1)                              |   |                     |        |   |                       |        |        |                  |   |        | (29,959          | ) |
| Non-operating expense                                  |   |                     |        |   |                       |        |        |                  |   |        | (2,808           | ) |
|                                                        |   |                     |        |   |                       |        |        |                  |   |        |                  |   |
| Consolidated loss before income taxes                  |   |                     |        |   |                       |        |        |                  |   | $      | (10,947          | ) |
|                                                        |   |                     |        |   |                       |        |        |                  |   |        |                  |   |
|                                                        |   |                     |        |   |                       |        |        |                  |   |        |                  |   |
| **Nine months ended September 30, 2009:  **  |   |                     |        |   |                       |        |   |                  |   |   |                  |   |
| Revenue from customers                                 | $ | 494,281             |   | $ | 31,448                |   | $      | (6,232           | ) | $      | 519,497          |   |
| Direct segment expenses                                |   | 443,644             |        |   | 19,740                |        |        | (6,232           | ) |        | 457,152          |   |
|                                                        |   |                     |        |   |                       |        |        |                  |   |        |                  |   |
|     Segment profit                 | $ | 50,637              |        | $ | 11,708                |        | $      | —          |   | $      | 62,345           |   |
| Other shared expenses (2)                              |   |                     |        |   |                       |        |        |                  |   |        | (92,380          | ) |
| Non-operating expense                                  |   |                     |        |   |                       |        |        |                  |   |        | (8,963           | ) |
|                                                        |   |                     |        |   |                       |        |        |                  |   |        |                  |   |
| Consolidated loss before income taxes                  |   |                     |        |   |                       |        |        |                  |   | $      | (38,998          | ) |
|                                                        |   |                     |        |   |                       |        |        |                  |   |        |                  |   |
|                                                        |   |                     |        |   |                       |        |        |                  |   |        |                  |   |
| **Assets as of September 30, 2009**                    |   |                     |        |   |                       |        |        |                  |   |        |                  |   |
| Segment assets                                         | $ | 176,809             |        | $ | 18,791                |        | $      | —          |   | $      | 195,600          |   |
| Other shared assets (3)                                |   |                     |        |   |                       |        |        |                  |   |        | 149,404          |   |
|                                                        |   |                     |        |   |                       |        |        |                  |   |        |                  |   |
|     Total consolidated assets      |   |                     |        |   |                       |        |        |                  |   | $      | 345,004          |   |
|                                                        |   |                     |        |   |                       |        |        |                  |   |        |                  |   |

| (1)  | The major components of other shared expenses for the three months ended September 30, 2009 aregeneral and administrative labor and related expenses – $12.8 million; other general and administrative expenses –$10.9 million; outside services – $5.7 million; and non-airport rentals – $0.6 million.  |
|-----------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (2)  | The major components of other shared expenses for the nine months ended September 30, 2009 aregeneral and administrative labor and related expenses – $37.1 million; other general and administrative expenses –$35.6 million; outside services – $17.0 million; and non-airport rentals – $2.7 million.  |
| (3)  | Other shared assets include assets that are interchangeable between segments.                                                                                                                                                                                                                                                          |

**Note 5 – Fair Value Measurements**

           Our auctionrate securities (“ARS”) were classified as available-for-sale securities and were reflected at fair value.  The fair value was calculated using a discounted cash flow valuation model under accounting guidance on fairvalue measurements. Declines in fair value are reflected as non-operating losses on the condensed consolidated statements ofoperations andrecoveries of fair value are recorded to other comprehensive income.  For a detailed discussion of our ARS, refer to our 2009 10-K.

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           During thethree months ended September 30, 2010, we sold our remaining ARS for $1.0 million, resulting in $0.2 million in gains on thesales.  During the nine months ended September 30, 2010, we sold $9.1 million of ARS resulting in gains on the sales of $0.6million.

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

|                                                                                                                                                                                                                                                                                                | **As of September 30, 2010 Fair Value Measurements Using** |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------------------------------------------------------|
|                                                                                                                                                                                                                                                                                                |                                                            | **Total** |  |  | **Level 1** |  |  | **Level 2** |  |  | **Level 3** |
| **                                               ** |                                                            | **** |  |  | **** |  |  | **** |  |  | **** |
| Cash equivalents                                                                                                                                                                                                                                                                               | $                                                          | 78,464 |    | $ | 78,464 |    | $ | — |    | $ | — |
|                                                                                                                                                                                                                                                                                                |                                                            | **** |  |  | **** |  |  | **** |  |  | **** |
| Total                                                                                                                                                                                                                                                                                          | $                                                          | 78,464 |  | $ | 78,484 |  | $ | — |  | $ | — |
|                                                                                                                                                                                                                                                                                                |                                                            |  |  |  |  |  |  |  |  |  |  |

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

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |            |   | **Nine Months Ended September 30,** |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|---|-------------------------------------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |            |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |            |   | ****                                |
|                                                                                      | ** ** |   | **2010**                            |  |  | **2009** |  |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |            |   | ****                                |  |  | **** |  |   |
| Beginning Balance Short-Term Investments                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |            | $ | 9,082                               |  | $ | 41,369 |  |   |
| Proceeds from Sales                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |            |   | —                             |  |  | (3,631 | ) |   |
| Gross realized gains on sales                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |            |   | —                             |  |  | 482 |  |   |
| Temporary (declines) recoveries in Market Value   (included in other comprehensive income)                                                                                                                                                                                                                                                                                                                                                                                                                     |            |   | 48                                  |  |  | (628 | ) |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |            |   |                                     |  |  |  |  |   |
| Balance Short-Term Investments at March 31                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |            | $ | 9,130                               |  | $ | 37,592 |  |   |
| Proceeds from Sales                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |            |   | (8,700                              | ) |  | — |  |   |
| Gross realized gains on sales                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |            |   | 700                                 |  |  | — |  |   |
| Temporary (declines) recoveries in Market Value   (included in other comprehensive income)                                                                                                                                                                                                                                                                                                                                                                                                                     |            |   | (162                                | ) |  | 957 |  |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |            |   |                                     |  |  |  |  |   |
| Balance Short-Term Investments at June 30                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |            | $ | 968                                 |  | $ | 38,549 |  |   |
| Proceeds from Sales                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |            |   | (968                                | ) |  | (15,763 | ) |   |
| Gross realized gains on sales                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |            |   | 186                                 |  |  | 1,166 |  |   |
| Temporary (declines) recoveries in Market Value   (included in other comprehensive income)                                                                                                                                                                                                                                                                                                                                                                                                                     |            |   | (186                                | ) |  | 166 |  |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |            |   |                                     |  |  |  |  |   |
| Balance Short-Term Investments at September 30                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |            | $ | —                             |  | $ | 24,118 |  |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |            |   |                                     |  |  |  |  |   |

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****

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

**Note 6 –– Long-term Debt**

            As of September 30, 2010and December 31, 2009, our debt consisted of the following (in thousands):

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   |        | **September 30,** |   |        |   | **December 31,** |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|-------------------|--------|--------|--------|------------------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   |        | **2010**          |   |   |   | **2009**         |
| **                                                                                            ** |   |        |                   |   |        |   |                  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |        |        | (Unaudited)       |        |        |        |                  |
| Current Debt:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |   |        |              |   |        |   |             |
|   Current maturities of EDC Loans                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   | $      | 3,459             |   |        | $      | 3,459            |
|   Current portion of 11.25% Convertible Secured Notes due     2023, net of discount of $5,085 and $0, respectively                                                                                                                                                                                                                                                                                                                                                                                                                        |        |        | 28,476            |        |        |        | —          |
|   Citigroup Credit Facility                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   |        | —           |   |        |   | 5,000            |
| Long-term Debt:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   |        |                   |   |        |   |             |
|   EDC Loans                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   |        | —           |   |        |        | 2,389            |
|   11.25% Convertible Secured Notes due 2023, net of discount****    of $0 and $13,534, respectively                                                                                                                                                                                                                                                                                                                                                                                                                                            |   |        | —           |   |        |   | 38,577           |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   |        |                   |   |        |   |                  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   | $      | 31,935            |   |        | $      | 49,425           |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   |   |                   |   |        |   |                  |

           Other than the 11.25% Convertible Secured Notes due 2023, we do not have any material long-term borrowings oravailable lines of credit.  Pursuant to the terms of the amended indenture governing the 11.25% Convertible Secured Notes due2023, we granted a security interest, with a pro-rata portion (based on the portion that the remaining notes represent of the totalconvertible notes that were issued) of assets with an appraised value of approximately $173.2 million, including approximately$79.4 million in spare parts and $93.8 million of spare engines.  We agreed that we will not as of any fiscal year end permitthe aggregate outstanding principal amount of the notes divided by the fair market value of the pledged collateral to be greaterthan certain percentages.  If such collateral ratios are greater than the applicable maximum, we will pledge additional spareparts, spare aircraft engines and / or cash and cash equivalents.  If such collateral ratios are less than the requiredpercentages, we are permitted to request a release of the security interest granted under the amended indenture on excess spareparts, spare aircraft engines and / or cash and cash equivalents.  In December 2009, the trustee under the amended indenturegranted our request for the release of the security interest on approximately $39.9 million in spare parts and $58.6 million ofspare engines.  Pursuant to the terms of the amended indenture, we are required to deliver a certificateto the trustee from a third-party appraiser dated no later than 15 business days after January 1 of each year certifying the valueof the pledged collateral for the remaining balance of the notes as of January 1 or such later date.  We delivered acertificate from our independent appraiser in January 2010 indicating that the appraised value of the spare parts that remainsubject to the lien and security interest following the foregoing release was $39.5 million and the fair value of the spare enginesthat remain subject to the lien and security interest following the foregoing release was $35.3 million.  Based on theprincipal amount of notes remaining outstanding as of September 30, 2010, the pledged collateral required under the 11.25%Convertible Secured Notes due 2023 is approximately $25.2 million of spare parts and $22.2 million of spareengines.

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            During the ninemonths ended September 30, 2010, we repurchased $18.6 million par value (book value of $15.2 million including $0.4 million ofequity value) of our 11.25% Convertible Secured Notes due 2023 for $18.3 million, resulting in a net realized loss of $3.1million. During the nine months ended September 30, 2009, we repurchased $8.7 million parvalue (book value, primarily debt, of $6.1 million) of our 11.25% Convertible Secured Notes due 2023 for $7.1 million, resulting ina net realized loss of $1.0 million.We estimated the fair value of our bondrepurchases based on an average of market trading activity for the convertible notes on the date of repurchase. Subsequent to these repurchases, our interest expense, calculated using the effective interest method,related to the debt discount will be $1.4 million for the remainder of 2010 and $3.7 million for the seven months ending July 31,2011.

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

|                                                                           |  |  |   | **September 30, 2010** |   |              |   | **December 31, 2009** |   |
|---------------------------------------------------------------------------|--|--|---|------------------------|---|--------------|---|-----------------------|---|
|                                                                           |  |  |   | ****                   |   |              |   | ****                  |   |
|                                                                           |  |  |   | (Unaudited)            |   |              |   |                       |   |
| Principal amount of 11.25% Convertible Secured   Notes due 2023 |  |  | $ | 33.6                   |   |    | $ | 52.1                  |   |
| Unamortized debt discount                                                 |  |  |   | (5.1                   | ) |              |   | (13.5                 | ) |
|                                                                           |  |  |   |                        |   |              |   |                       |   |
| Net carrying amount                                                       |  |  | $ | 28.5                   |   |              | $ | 38.6                  |   |
|                                                                           |  |  |   |                        |   |              |   |                       |   |

           At September 30, 2010, the unamortized discount had a remaining recognition period of approximately10 months.

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

            We estimatedthe fair values of our $33.6 million and $52.1 million (carrying value) 11.25% Convertible Secured Notes due 2023 to be $33.4million and $50.3 million as of September 30, 2010 and December 31, 2009, respectively, based upon actual quoted marketprices-which are Level 2 fair value measurements under ASC Topic 820.  For a detailed background of our convertible notes,refer to our 2009 10-K.

           Thefollowing table presents the changes in the carrying value of the debt component of our 11.25% Convertible Secured Notes due 2023(in millions):

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      | ** ** |   | **Nine Months Ended September 30,** |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|---|-------------------------------------|---|
|                                                                                |            |   | ****                                |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |            |   | **2010**                            |   |  |  | **2009** |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |            |   | ****                                |   |  |  | **** |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |            |   | (Unaudited)                         |   |  |  | (Unaudited) |  |
| Beginning Balance in convertible notes, net                                                                                                                                                                                                                                                                                                                                                                                                                                          |            | $ | 38.6                                |   |   | $ | 39.7 |  |
| Repurchases                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |            |   | (14.8                               | ) |  |  | (6.0 | ) |
| Amortization of debt discount                                                                                                                                                                                                                                                                                                                                                                                                                                                        |            |   | 4.7                                 |   |  |  | 3.3 |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |            |   |                                     |   |  |  |  |  |
| Ending Balance in convertible notes, net                                                                                                                                                                                                                                                                                                                                                                                                                                             |            | $ | 28.5                                |   |  | $ | 37.0 |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |            |   |                                     |   |  |  |  |  |

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           We are alsoparty to aseries of secured loan agreements with Export Development Canada (“EDC”), whichconsistof a $10.7 million loan entered into in May 2003 and a $6.6 million loan entered intoin September 2003(the “EDC Loans”).  The EDC Loans are secured bycertain of our flight simulators, flight data software and other equipment related to the simulators.  The amount due to EDCaccrues interest at the six-month LIBOR plus 1.75% per annum.  Each of the EDC Loans has a term of 96 months and each containscustomary representations, warranties and covenants.  Additionally, Continental is the guarantor of the EDC Loans, and adefault under the guarantee would cause an acceleration of the loans.  During the nine months ended September 30, 2010, wemade payments in the amount of $2.5 million on the EDC Loans, of which $2.4 million related to principal.  As of September 30,2010, the outstanding principal balance of the EDC Loans was $3.5 million.

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

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

|                                                              |        |   | **Condensed Consolidated Balance Sheet September 30, 2010 (In thousands) (Unaudited)** |   |
|--------------------------------------------------------------|--------|---|----------------------------------------------------------------------------------------|---|
|                                                              |        |   | ****                                                                                   |   |
|                                                              |        |   | **Holdings**                                                                           |   |  |  | **Airlines** |  |  |  | **Other Non- Guarantor Subsidiaries** |  |  |  | **Eliminations** |  |  |  | **Consolidated Totals** |  |
|                                                              |   |   |                                                                                        |   |   |  |  |  |   |  |  |  |  |  |  |  |   |  |  |  |
| Current assets                                               |   | $ | 558                                                                                    |   |  | $ | 142,666 |  |  | $ | 4,261 |  |  | $ | — |  |  | $ | 147,485 |  |
| Property and equipment, net                                  |   |   | 101                                                                                    |   |  |  | 160,157 |  |  |  | 8,392 |  |  |  | — |  |  |  | 168,650 |  |
| Other assets                                                 |   |   | 490                                                                                    |   |  |  | 7,028 |  |  |  | — |  |  |  | — |  |  |  | 7,518 |  |
|                                                              |        |   |                                                                                        |   |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Total assets                                                 |        | $ | 1,149                                                                                  |   |  | $ | 309,851 |  |  | $ | 12,653 |  |  | $ | — |  |  | $ | 323,653 |  |
|                                                              |        |   |                                                                                        |   |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Current liabilities                                          |        |   | 29,115                                                                                 |   |  |  | 101,216 |  |  |  | 1,093 |  |  |  | — |  |  |  | 131,424 |  |
| Intercompany payables (receivables)                          |        |   | (329,729                                                                               | ) |  |  | 333,404 |  |  |  | (3,675 | ) |  |  | — |  |  |  | — |  |
| Long-term debt                                               |        |   | —                                                                                |   |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |
| Other liabilities                                            |        |   | —                                                                                |   |  |  | 30,733 |  |  |  | (1 | ) |  |  | — |  |  |  | 30,732 |  |
| Stockholders’ equity                                   |        |   | 301,763                                                                                |   |  |  | (155,502 | ) |  |  | 15,236 |  |  |  | — |  |  |  | 161,497 |  |
|                                                              |        |   |                                                                                        |   |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Total liabilities and stockholders’   equity |        | $ | 1,149                                                                                  |   |  | $ | 309,851 |  |  | $ | 12,653 |  |  | $ | — |  |  | $ | 323,653 |  |
|                                                              |        |   |                                                                                        |   |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

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

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|                                   |        | **** | **Condensed Consolidated Results of Operations Three Months Ended September 30, 2010 (In thousands) (Unaudited)** |   |
|-----------------------------------|--------|------|-------------------------------------------------------------------------------------------------------------------|---|
|                                   |        |      | ****                                                                                                              |   |
|                                   |        |      | **Holdings**                                                                                                      |   |  |  | **Airlines** |  |  |  | **Other Non- Guarantor Subsidiaries** |  |  |  | **Eliminations** |  |  |  | **Consolidated Totals** |  |
|                                   |        |      | ****                                                                                                              |   |  |  | **** |  |  |  | **** |  |  |  | **** |  |  |  | **** |  |
| Operating revenue                 |   | $    | —                                                                                                           |   |   | $ | 216,614 |  |   | $ | 2,309 |  |  | $ | (1,192 | ) |   | $ | 217,731 |  |
| Operating expenses                |   |      | 11                                                                                                                |   |  |  | 221,051 |  |  |  | 2,926 |  |  |  | (1,192 | ) |  |  | 222,796 |  |
|                                   |   |      |                                                                                                                   |   |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Operating income (loss)           |   |      | (11                                                                                                               | ) |  |  | (4,437 | ) |  |  | (617 | ) |  |  | — |  |  |  | (5,065 | ) |
|                                   |        |      |                                                                                                                   |   |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Non-operating income (expense)    |        |      | 518                                                                                                               |   |  |  | (3,933 | ) |  |  | 80 |  |  |  | — |  |  |  | (3,335 | ) |
|                                   |        |      |                                                                                                                   |   |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Income (loss) before income taxes |        |      | 507                                                                                                               |   |  |  | (8,370 | ) |  |  | (537 | ) |  |  | — |  |  |  | (8,400 | ) |
| Income tax benefit                |        |      | —                                                                                                           |   |  |  | (1,494 | ) |  |  | — |  |  |  | — |  |  |  | (1,494 | ) |
|                                   |        |      |                                                                                                                   |   |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Net income (loss)                 |        | $    | 507                                                                                                               |   |  | $ | (9,864 | ) |  | $ | (537 | ) |  | $ | — |  |  | $ | (9,894 | ) |
|                                   |        |      |                                                                                                                   |   |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

|                                   |        |   | **Condensed Consolidated Results of Operations Nine Months Ended September 30, 2010 (In thousands) (Unaudited)** |   |
|-----------------------------------|--------|---|------------------------------------------------------------------------------------------------------------------|---|
|                                   |        |   | ****                                                                                                             |   |
|                                   |        |   | **Holdings**                                                                                                     |   |  |  | **Airlines** |  |  |  | **Other Non- Guarantor Subsidiaries** |  |  |  | **Eliminations** |  |  |  | **Consolidated Totals** |  |
|                                   |        |   | ****                                                                                                             |   |  |  | **** |  |  |  | **** |  |  |  | **** |  |  |  | **** |  |
| Operating revenue                 |   | $ | —                                                                                                          |   |   | $ | 609,796 |  |   | $ | 9,660 |  |  | $ | (5,404 | ) |   | $ | 614,052 |  |
| Operating expenses                |   |   | 10                                                                                                               |   |  |  | 637,660 |  |  |  | 10,079 |  |  |  | (5,404 | ) |  |  | 642,345 |  |
|                                   |   |   |                                                                                                                  |   |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Operating income (loss)           |   |   | (10                                                                                                              | ) |  |  | (27,864 | ) |  |  | (419 | ) |  |  | — |  |  |  | (28,293 | ) |
|                                   |        |   |                                                                                                                  |   |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Non-operating income (expense)    |        |   | 1,468                                                                                                            |   |  |  | (12,325 | ) |  |  | 111 |  |  |  | — |  |  |  | (10,746 | ) |
|                                   |        |   |                                                                                                                  |   |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Income (loss) before income taxes |        |   | 1,458                                                                                                            |   |  |  | (40,189 | ) |  |  | (308 | ) |  |  | — |  |  |  | (39,039 | ) |
| Income tax benefit                |        |   | —                                                                                                          |   |  |  | (5,584 | ) |  |  | — |  |  |  | — |  |  |  | (5,584 | ) |
|                                   |        |   |                                                                                                                  |   |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Net income (loss)                 |        | $ | 1,458                                                                                                            |   |  | $ | (45,773 | ) |  | $ | (308 | ) |  | $ | — |  |  | $ | (44,623 | ) |
|                                   |        |   |                                                                                                                  |   |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

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|                                                                                                                                                                                                                                                                                                                                                        |        |   | **Condensed Consolidating Results of Operations Three Months Ended September 30, 2009 (In thousands)** |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---|--------------------------------------------------------------------------------------------------------|---|
|                                                                                                                                                                                                                                                                                                                                                        |        |   | ****                                                                                                   |   |
|                                                                                                                                                                                                                                                                                                                                                        |        |   | **Holdings**                                                                                           |   |  |  | **Airlines** |  |  |  | **Other Non- Guarantor Subsidiaries** |  |  |  | **Eliminations** |  |  |  | **Consolidated Totals** |  |
|                                                           |        |   | ****                                                                                                   |   |  |  | **** |  |  |  | **** |  |  |  | **** |  |  |  | **** |  |
| Operating revenue                                                                                                                                                                                                                                                                                                                                      |   | $ | —                                                                                                |   |   | $ | 177,877 |  |   | $ | 3,219 |  |  | $ | (1,896 | ) |   | $ | 179,200 |  |
| Operating expenses                                                                                                                                                                                                                                                                                                                                     |   |   | 1                                                                                                      |   |  |  | 186,307 |  |  |  | 2,927 |  |  |  | (1,896 | ) |  |  | 187,339 |  |
|                                                                                                                                                                                                                                                                                                                                                        |   |   |                                                                                                        |   |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Operating income (loss)                                                                                                                                                                                                                                                                                                                                |   |   | (1                                                                                                     | ) |  |  | (8,430 | ) |  |  | 292 |  |  |  | — |  |  |  | (8,139 | ) |
|                                                                                                                                                                                                                                                                                                                                                        |        |   |                                                                                                        |   |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Non-operating income (expense)                                                                                                                                                                                                                                                                                                                         |        |   | 170                                                                                                    |   |  |  | (3,196 | ) |  |  | 218 |  |  |  | — |  |  |  | (2,808 | ) |
|                                                                                                                                                                                                                                                                                                                                                        |        |   |                                                                                                        |   |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Income (loss) before income taxes                                                                                                                                                                                                                                                                                                                      |        |   | 169                                                                                                    |   |  |  | (11,626 | ) |  |  | 510 |  |  |  | — |  |  |  | (10,947 | ) |
| Income tax benefit (expense)                                                                                                                                                                                                                                                                                                                           |        |   | —                                                                                                |   |  |  | 1,902 |  |  |  | — |  |  |  | — |  |  |  | 1,902 |  |
|                                                                                                                                                                                                                                                                                                                                                        |        |   |                                                                                                        |   |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Net income (loss)                                                                                                                                                                                                                                                                                                                                      |        | $ | 169                                                                                                    |   |  | $ | (9,724 | ) |  | $ | 510 |  |  | $ | — |  |  | $ | (9,045 | ) |
|                                                                                                                                                                                                                                                                                                                                                        |        |   |                                                                                                        |   |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

|                                                                                                                                                                                                                                                                                                                                            |        |   | **Condensed Consolidating Results of Operations Nine Months Ended September 30, 2009 (In thousands)** |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---|-------------------------------------------------------------------------------------------------------|---|
|                                                                                                                                                                                                                                                                                                                                            |        |   | ****                                                                                                  |   |
|                                                                                                                                                                                                                                                                                                                                            |        |   | **Holdings**                                                                                          |   |  |  | **Airlines** |  |  |  | **Other Non- Guarantor Subsidiaries** |  |  |  | **Eliminations** |  |  |  | **Consolidated Totals** |  |
|                                                         |        |   | ****                                                                                                  |   |  |  | **** |  |  |  | **** |  |  |  | **** |  |  |  | **** |  |
| Operating revenue                                                                                                                                                                                                                                                                                                                          |   | $ | —                                                                                               |   |   | $ | 514,729 |  |   | $ | 11,001 |  |  | $ | (6,233 | ) |  | $ | 519,497 |  |
| Operating expenses                                                                                                                                                                                                                                                                                                                         |   |   | 15                                                                                                    |   |  |  | 545,025 |  |  |  | 10,725 |  |  |  | (6,233 | ) |  |  | 549,532 |  |
|                                                                                                                                                                                                                                                                                                                                            |   |   |                                                                                                       |   |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Operating income (loss)                                                                                                                                                                                                                                                                                                                    |   |   | (15                                                                                                   | ) |  |  | (30,296 | ) |  |  | 276 |  |  |  | — |  |  |  | (30,035 | ) |
|                                                                                                                                                                                                                                                                                                                                            |        |   |                                                                                                       |   |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Non-operating income (expense)                                                                                                                                                                                                                                                                                                             |        |   | (3,447                                                                                                | ) |  |  | (13,475 | ) |  |  | 1,495 |  |  |  | 6,464 |  |  |  | (8,963 | ) |
|                                                                                                                                                                                                                                                                                                                                            |        |   |                                                                                                       |   |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Income (loss) before income taxes                                                                                                                                                                                                                                                                                                          |        |   | (3,462                                                                                                | ) |  |  | (43,771 | ) |  |  | 1,771 |  |  |  | 6,464 |  |  |  | (38,998 | ) |
| Income tax benefit (expense)                                                                                                                                                                                                                                                                                                               |        |   | —                                                                                               |   |  |  | 5,452 |  |  |  | — |  |  |  | — |  |  |  | 5,452 |  |
|                                                                                                                                                                                                                                                                                                                                            |        |   |                                                                                                       |   |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Net income (loss)                                                                                                                                                                                                                                                                                                                          |        | $ | (3,462                                                                                                | ) |  | $ | (38,319 | ) |  | $ | 1,771 |  |  | $ | 6,464 |  |  | $ | (33,546 | ) |
|                                                                                                                                                                                                                                                                                                                                            |        |   |                                                                                                       |   |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

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|                                                                                                                                                                                                                                |        |   | **Condensed Consolidated Cash Flows Nine Months Ended September 30, 2010 (In thousands) (Unaudited)** |  |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---|-------------------------------------------------------------------------------------------------------|--|
|                                       |        |   |                                                                                                       |  |
|                                                                                                                                                                                                                                |        |   | **Holdings**                                                                                          |  |  |  | **Airlines** |  |  |  | **Other Non- Guarantor Subsidiaries** |  |  |  | **Eliminations** |  |  |  | **Consolidated Totals** |  |
|                                                                                                                                                                                                                                |        |   |                                                                                                       |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Operating activities                                                                                                                                                                                                           |   | $ | —                                                                                               |  |   | $ | 21,986 |  |  | $ | (1,197 | ) |   | $ | 1,063 |  |   | $ | 21,852 |  |
| Investing activities                                                                                                                                                                                                           |   |   | —                                                                                               |  |  |  | 8,856 |  |  |  | — |  |  |  | — |  |  |  | 8,856 |  |
| Financing activities                                                                                                                                                                                                           |   |   | —                                                                                               |  |  |  | (27,545 | ) |  |  | 1,063 |  |  |  | (1,063 | ) |  |  | (27,545 | ) |
|                                                                                                                                                                                                                                |   |   |                                                                                                       |  |  |  |  |  |  |  |  |  |   |  |  |  |  |  |  |  |
| Net decrease in cash                                                                                                                                                                                                           |   |   | —                                                                                               |  |  |  | 3,297 |  |  |  | (134 | ) |  |  | — |  |  |  | 3,163 |  |
| Cash at the beginning of the period                                                                                                                                                                                            |   |   | —                                                                                               |  |  |  | 80,678 |  |  |  | 302 |  |  |  | — |  |  |  | 80,980 |  |
|                                                                                                                                                                                                                                |   |   |                                                                                                       |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Cash at the end of the period                                                                                                                                                                                                  |   | $ | —                                                                                               |  |  | $ | 83,975 |  |  | $ | 168 |  |  | $ | — |  |  | $ | 84,143 |  |
|                                                                                                                                                                                                                                |        |   |                                                                                                       |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

|                                                                                                                                                                                                                                                                                                                                                        |        |   | **Condensed Consolidating Cash Flows Nine Months Ended September 30, 2009 (In thousands)** |  |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---|--------------------------------------------------------------------------------------------|--|
|                                                                                                                                                                                                                                                                                                                                                        |        |   | ****                                                                                       |  |
|                                                           |        |   | **Holdings**                                                                               |  |  |  | **Airlines** |  |  |  | **Other Non- Guarantor Subsidiaries** |  |  |  | **Eliminations** |  |  |  | **Consolidated Totals** |  |
|                                                                                                                                                                                                                                                                                                                                                        |   |   |                                                                                            |  |   |  |  |  |   |  |  |  |  |  |  |  |   |  |  |  |
| Operating activities                                                                                                                                                                                                                                                                                                                                   |   | $ | —                                                                                    |  |  | $ | (5,764 | ) |  | $ | (6,187 | ) |  | $ | — |  |  | $ | (11,951 | ) |
| Investing activities                                                                                                                                                                                                                                                                                                                                   |   |   | —                                                                                    |  |  |  | 17,873 |  |  |  | 5,442 |  |  |  | 176 |  |  |  | 23,491 |  |
| Financing activities                                                                                                                                                                                                                                                                                                                                   |   |   | —                                                                                    |  |  |  | (7,357 | ) |  |  | 175 |  |  |  | (176 | ) |  |  | (7,358 | ) |
|                                                                                                                                                                                                                                                                                                                                                        |   |   |                                                                                            |  |  |  |  |  |  |  |  |  |   |  |  |  |  |  |  |  |
| Net increase (decrease) in cash                                                                                                                                                                                                                                                                                                                        |   |   | —                                                                                    |  |  |  | 4,752 |  |  |  | (570 | ) |  |  | — |  |  |  | 4,182 |  |
| Cash at the beginning of the period                                                                                                                                                                                                                                                                                                                    |   |   | —                                                                                    |  |  |  | 56,672 |  |  |  | 856 |  |  |  | — |  |  |  | 57,528 |  |
|                                                                                                                                                                                                                                                                                                                                                        |   |   |                                                                                            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Cash at the end of the period                                                                                                                                                                                                                                                                                                                          |   | $ | —                                                                                    |  |  | $ | 61,424 |  |  | $ | 286 |  |  | $ | — |  |  | $ | 61,710 |  |
|                                                                                                                                                                                                                                                                                                                                                        |        |   |                                                                                            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

****

**Note 7 –– Income Taxes**

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

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

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

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

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

****

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

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

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

|                                                                        |   | **Three Months Ended September 30,** |   |   | **Nine Months Ended September 30,** |
|------------------------------------------------------------------------|---|--------------------------------------|---|---|-------------------------------------|
|                                                                        |   |                                      |   |
|                                                                        |   | ****                                 |   |   | ****                                |
|                                                                        |   | **2010**                             |   |   | **2009**                            |  |  | **2010** |  |  | **2009** |  |
|                                                                        |   | ****                                 |   |   | ****                                |  |  | **** |  |  | **** |  |
| **Numerator:**                                                         |   |                                      |   |   |                                     |  |  |  |  |  |  |  |
| Net loss                                                               | $ | (9,894                               | ) | $ | (9,045                              | ) | $ | (44,623 | ) | $ | (33,546 | ) |
| Income impact of assumed conversion of   convertible debt    |   | —                              |   |   | —                             |  |  | — |  |  | — |  |
| Income impact from recognition of deferred   sales incentive |   | —                              |   |   | —                             |  |  | — |  |  | — |  |
|                                                                        |   |                                      |   |   |                                     |  |  |  |  |  |  |  |
|                                                                        | $ | (9,894                               | ) | $ | (9,045                              | ) | $ | (44,623 | ) | $ | (33,546 | ) |
|                                                                        |   |                                      |   |   |                                     |  |  |  |  |  |  |  |
| **Denominator:**                                                       |   |                                      |   |   |                                     |  |  |  |  |  |  |  |
| Weighted average common shares   outstanding                 |   | 18,944                               |   |   | 14,851                              |  |  | 18,394 |  |  | 15,581 |  |
| Effect of stock options and restricted   stock outstanding   |   | —                              |   |   | —                             |  |  | — |  |  | — |  |
| Assumed conversion of convertible debt                                 |   | —                              |   |   | —                             |  |  | — |  |  | — |  |
|                                                                        |   |                                      |   |   |                                     |  |  |  |  |  |  |  |
|                                                                        |   | 18,944                               |   |   | 14,851                              |  |  | 18,394 |  |  | 15,581 |  |
|                                                                        |   |                                      |   |   |                                     |  |  |  |  |  |  |  |
| Basic & diluted loss per common share                              | $ | (0.52                                | ) | $ | (0.61                               | ) | $ | (2.43 | ) | $ | (2.15 | ) |
|                                                                        |   |                                      |   |   |                                     |  |  |  |  |  |  |  |

            We excluded 1.4 million shares ofrestricted stock from the weighted average shares used in computing Basic EPS and Diluted EPS for the three and nine months endedSeptember 30, 2010 and 0.8 million shares of restricted stock from the weighted average shares used in computing Basic EPS andDiluted EPS for the three and nine months ended September 30, 2009, as these shares were not vested as of these dates.

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

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

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**Note 9 –– Commitments and Contingencies**

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

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

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

           ***Legal Proceedings******.***  Between August 5, 2010 and August 25, 2010, nine substantially similar putative shareholderclass action suits (collectively, the "Texas State Actions") were filed by individual ExpressJet stockholders in the District Courtof Harris County, Texas against ExpressJet and its directors. Many of the petitions also name SkyWest, Inc. and Atlantic Southeastand/or merger sub (together, the "Additional Defendants") as defendants in the litigation.

           The petitions filed in the Texas State Actions generally allege that the ExpressJet director defendantsbreached their fiduciary duties in connection with the negotiation and approval of the merger agreement and that the AdditionalDefendants aided and abetted such alleged breaches of fiduciary duties. The Texas State Actions seek, among other things, aninjunction enjoining the merger and the transactions contemplated by the merger agreement and rescission of any transactionscontemplated by the merger agreement which may be completed. On August 18, 2010, plaintiff Rayside filed a motion to consolidatethe Texas State Actions into Case No. 2010-48784 in the first-filed court (the "189th District Court"). On August 20, 2010,plaintiffs Levine, Tejeda, Doraiswamy and Swanepoel filed a similar motion in the 189th District Court. On September 10, 2010, the189th District Court ordered the consolidation of the Texas State Actions with and into Case No. 2010-48784 (the consolidatedaction is referred to herein as the "Consolidated Texas State Action").

           On September 10, 2010, a putative stockholder class action (the "Texas Federal Action" and, togetherwith the Consolidated Texas State Action, the "Actions") was commenced in the United States District Court for the SouthernDistrict of Texas, Houston Division. The complaint filed in the Texas Federal Action includes substantially identical allegationsto and requests substantially the same relief as the petitions in the Texas State Actions but also includes allegations related tothe ExpressJet preliminary proxy statement filed with the SEC on September 3, 2010.

           On September 20, 2010, the 189th District Court appointed counsel for plaintiff Rayside, Edison,McDowell & Hetherington LLP and Robbins Geller Rudman & Dowd LLP, as interim class counsel ("Class Counsel") in theConsolidated Texas State Action, with authority to speak for all plaintiffs in the Consolidated Texas State Action in mattersregarding pre-trial procedure, trial and settlement negotiations. On September 27, 2010, plaintiff Levine filed a motion forclarification order seeking the appointment of Class Counsel as interim class counsel and liaison counsel and his counsel, Powers& Frost L.L.P. and Faruqi & Faruqi, LLP, as interim co-class counsel.

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           Subsequent to September 30, 2010, counsel for the defendants in the Actions, Class Counsel and counselfor plaintiff in the Texas Federal Action agreed to and executed a memorandum of understanding (the "MOU") containing the terms ofan agreement in principle to resolve the Actions. The MOU provides that, in consideration for the settlement of the Actions,ExpressJet will make certain disclosures in the definitive proxy statement to be sent to the ExpressJet stockholders solicitingapproval of the merger. In the MOU, the defendants in the Actions acknowledge that they considered the claims raised by theplaintiffs in the Actions in connection with the disclosures contemplated by the MOU. In exchange, the parties to the MOU haveagreed to use their best efforts to draft and execute a definitive stipulation of settlement that includes a plaintiff classconsisting of all record and beneficial holders of ExpressJet stock, other than defendants in the Consolidated Texas State Actionand any firm, trust, corporation or other entity controlled by any such defendant, during the period beginning on and includingDecember 2, 2009, through and including the date of the consummation of the merger. If approved by the parties and the 189thDistrict Court, the settlement will result in the dismissal with prejudice of the Consolidated Texas State Action and release bythe plaintiff class of all claims under federal and state law that were or could have been asserted in the Actions or which ariseout of or relate to the transactions contemplated by the merger. The MOU further provides that, in the event the Consolidated TexasState Action is dismissed in accordance with the settlement stipulation, the parties to the MOU will use their best efforts toobtain the dismissal with prejudice of the Texas Federal Action. The settlement of the Consolidated Texas State Action is subjectto numerous conditions set forth in the MOU and to be contained in any stipulation of settlement, including the completion of themerger.

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

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

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

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

**SkyWest, Inc. Merger**

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

            The Boards of Directors of bothcompanies unanimously approved the definitive merger agreement.   The transaction is not subject to a financing condition, butis subject to approval by ExpressJet stockholders and to receipt of certain regulatory approvals and customaryconditions.

            On September 14, 2010, wereceived notice of early termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act in relation tothe Acquisition.  On October 18, 2010, we filed the definitive proxy statement relating to the Acquisition and scheduled thespecial meeting of our stockholders to approve the merger agreement with SkyWest, Inc. for November 10, 2010.  We receivedstockholder approval and expect the Acquisition to close on November 12, 2010.  Once the Acquisition closes, we will no longerbe listed as a public company on the New York Stock Exchange.

**Operations Review**

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

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Table of Contents

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

**Operating Revenue and Segment Profit**

**

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

|                                                         |   | **Three Months Ended September 30,** |   |        |                     |   |        |   |          |   |
|---------------------------------------------------------|---|--------------------------------------|---|--------|---------------------|---|--------|---|----------|---|
|                                                         |   | ****                                 |   |        |                     |   |        |   |          |   |
|                                                         |   | **2010**                             |   |        | **Total Revenue %** |   |        |   | **2009** |   |  | **Total Revenue %** |  |  |  | **Increase/ (Decrease)** |  |  | **Change %** |  |
|                                                         |   | ****                                 |   |        | ****                |   |        |   | ****     |   |  | **** |  |  |  | **** |  |  | **** |  |
| Revenue from customers:                                 |   |                                      |   |   |                     |   |        |   |          |   |   |  |  |  |  |  |  |  |  |  |
|    Contract Flying                       | $ | 208,986                              |   |        | 96.0                | % |   | $ | 171,062  |   |  | 95.5 | % |   | $ | 37,924 |  |  | 22.2 | % |
|    Aviation Services                     |   | 9,937                                |   |        | 4.6                 |   |        |   | 10,034   |   |  | 5.6 |  |  |  | (97 | ) |  | (1.0 | ) |
|    Eliminations                          |   | (1,192                               | ) |        | (0.5                | ) |        |   | (1,896   | ) |  | (1.1 | ) |  |  | 704 |  |  | 37.1 |  |
| Total revenue from customers                            |   | 217,731                              |   |        | 100.0               |   |        |   | 179,200  |   |  | 100.0 |  |  |  | 38,531 |  |  | 21.5 |  |
| Direct segment costs:                                   |   |                                      |   |        |                     |   |        |   |          |   |  |  |  |  |  |  |  |  |  |  |
|    Contract Flying                       |   | 187,341                              |   |        | 86.0                |   |        |   | 152,661  |   |  | 85.2 |  |  |  | 34,680 |  |  | 22.7 |  |
|    Aviation Services                     |   | 7,214                                |   |        | 3.3                 |   |        |   | 6,615    |   |  | 3.7 |  |  |  | 599 |  |  | 9.1 |  |
|    Eliminations                          |   | (1,192                               | ) |        | (0.5                | ) |        |   | (1,896   | ) |  | (1.1 | ) |  |  | 704 |  |  | 37.1 |  |
| Total direct segment costs                              |   | 193,363                              |   |        | 88.8                |   |        |   | 157,380  |   |  | 87.8 |  |  |  | 35,983 |  |  | 22.9 |  |
| Segment profit                                          |   | 24,368                               |   |        | 11.2                | % |        |   | 21,820   |   |  | 12.2 | % |  |  | 2,548 |  |  | 11.7 | % |
| Other shared expenses                                   |   | (29,433                              | ) |        |                     |   |        |   | (29,959  | ) |  |  |  |  |  |  |  |  |  |  |
| Non-operating expenses, net                             |   | (3,335                               | ) |        |                     |   |        |   | (2,808   | ) |  |  |  |  |  |  |  |  |  |  |
|                                                         |   | ****                                 |   |        |                     |   |        |   | ****     |   |  |  |  |  |  |  |  |  |  |  |
| Consolidated loss before income    taxes | $ | (8,400                               | ) |        |                     |   |        | $ | (10,947  | ) |  |  |  |  |  |  |  |  |  |  |
|                                                         |   |                                      |   |        |                     |   |        |   |          |   |  |  |  |  |  |  |  |  |  |  |

----

Table of Contents

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

|                        |        |   | **Contract Flying** |            |        | **Aviation Services** |        |
|------------------------|--------|---|---------------------|------------|--------|-----------------------|--------|
|                        |        |   |                     | ** ** |        |                       |        |
|                        |        |   | **2010**            |            |        | **Total Revenue %**   |        |  | **2010** |  |  | **Total Revenue %** |  |
|                        |        |   |                     |            |   |                       |   |  |  |   |  |  |  |
| Revenue from customers |   | $ | 208,986             |            |        | 100.0                 | %      | $ | 9,937 |  |  | 100.0 | % |
| Direct segment costs   |        |   | 187,341             |            |        | 89.6                  |        |  | 7,214 |  |  | 72.6 |  |
|                        |        |   |                     |            |        |                       |        |  |  |  |  |  |  |
| Segment profit         |        | $ | 21,645              |            |        | 10.4                  | %      | $ | 2,723 |  |  | 27.4 | % |

|                        |        |   | **Contract Flying** |            |        | **Aviation Services** |        |
|------------------------|--------|---|---------------------|------------|--------|-----------------------|--------|
|                        |        |   |                     | ** ** |        |                       |        |
|                        |        |   | **2009**            |            |        | **Total Revenue %**   |        |  | **2009** |  |  | **Total Revenue %** |  |
|                        |        |   |                     |            |   |                       |   |  |  |   |  |  |  |
| Revenue from customers |   | $ | 171,062             |            |        | 100.0                 | %      | $ | 10,034 |  |  | 100.0 | % |
| Direct segment costs   |        |   | 152,661             |            |        | 89.2                  |        |  | 6,615 |  |  | 65.9 |  |
|                        |        |   |                     |            |        |                       |        |  |  |  |  |  |  |
| Segment profit         |        | $ | 18,401              |            |        | 10.8                  | %      | $ | 3,419 |  |  | 34.1 | % |

****

**           *****Contract Flying. ***The increase in revenue and direct segment costs within our ContractFlying segment is attributable primarily to the increased block hours with the addition of flying under the United ExpressAgreement and higher aircraft utilization within the Amended Continental CPA.  The overall segment profit margin is consistentquarter over quarter.

**           *****Aviation Services.***  The reduction in the segmentprofit margin within our Aviation Services segment from 34.1% to 27.4% is due to increased labor rates and fringe benefit costs andour transition to new contracts in our ground handling business with Continental.

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Table of Contents

**Operating Expenses**

**

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

|                                    |   | **Three Months Ended September 30,** |        |                     |   |        |   |          |        |                     |
|------------------------------------|---|--------------------------------------|--------|---------------------|---|--------|---|----------|--------|---------------------|
|                                    |   | ****                                 |        |                     |   |        |   |          |        |                     |
|                                    |   | **2010**                             |        | **Total Revenue %** |   |        |   | **2009** |        | **Total Revenue %** |  |  |  | **Increase / (Decrease)** |  |  | **Change %** |  |
|                                    |   |                                      |   |                     |   |        |   |          |   |                     |  |  |  |  |  |   |  |  |
| Wages, salaries, and related costs | $ | 89,835                               |        | 41.3                | % |   | $ | 81,435   |        | 45.4                | % |   | $ | 8,400 |  |  | 10.3 | % |
| Maintenance, materials and repairs |   | 55,098                               |        | 25.3                |   |        |   | 43,977   |        | 24.5                |  |  |  | 11,121 |  |  | 25.3 |  |
| Other rentals and landing fees     |   | 20,160                               |        | 9.3                 |   |        |   | 16,367   |        | 9.1                 |  |  |  | 3,793 |  |  | 23.2 |  |
| Aircraft fuel and related taxes    |   | 13,374                               |        | 6.1                 |   |        |   | 4,555    |        | 2.5                 |  |  |  | 8,819 |  |  | nm |  |
| Outside services                   |   | 10,469                               |        | 4.8                 |   |        |   | 6,344    |        | 3.5                 |  |  |  | 4,125 |  |  | 65.0 |  |
| Aircraft rentals                   |   | 6,792                                |        | 3.1                 |   |        |   | 5,472    |        | 3.1                 |  |  |  | 1,320 |  |  | 24.1 |  |
| Depreciation and amortization      |   | 6,487                                |        | 3.0                 |   |        |   | 7,194    |        | 4.0                 |  |  |  | (707 | ) |  | (9.8 | ) |
| Ground handling                    |   | 1,345                                |        | 0.6                 |   |        |   | 1,896    |        | 1.1                 |  |  |  | (551 | ) |  | (29.1 | ) |
| Other operating expenses           |   | 19,236                               |        | 8.8                 |   |        |   | 20,099   |        | 11.2                |  |  |  | (863 | ) |  | (4.3 | ) |
|                                    |   |                                      |        |                     |   |        |   |          |        |                     |  |  |  |  |  |  |  |  |
| Total operating expenses           | $ | 222,796                              |        | 102.3               | % |        | $ | 187,339  |        | 104.5               | % |  | $ | 35,457 |  |  | 18.9 | % |
|                                    |   |                                      |        |                     |   |        |   |          |        |                     |  |  |  |  |  |  |  |  |

**           *****Wages, salaries & related costs***increased 10.3% due to our 13.8%increase in block hours quarter over quarter with the addition of our United Express operations in early 2010.  The overallincrease is offset slightly by productivity gains in certain of our work groups.

***           ******Maintenance, materials and repairs***increased 25.3% primarily due to our 19.2% increase indepartures combined with the impact of scheduled rate increases in many of our long-term maintenance contracts and increased scopeof repairs as our aircraft age.

**           *****Other rentals and landing fees***increased 23.2% primarily due to a 19.2%increase in departures within our Continental Express and United Express operations.  In addition, in the third quarter of2009 we benefited from one-time landing fee reconciliation adjustments related to previous periods.

***            Aircraft Fuel and relatedtaxes***increased $8.8 million due to the increased volume attributable to the UnitedExpress Agreement. Fuel and related taxes are reimbursed by United.

***            Outsideservices ***increased 65.0% primarily due to legal, consultingand advisory fees related to the Acquisition that were incurred during the third quarter of 2010.

******

***            Aircraftrentals ***increased 24.1% due to our subleasing eight aircraft from Continentalstarting in December 2009 that were previously operated as Continental Express under the Amended Continental CPA and for which wewere not recognizing aircraft rental expense in our condensed consolidated financial statements.  The last of the eightaircraft transitioned in April 2010.

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Table of Contents

**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, 2010 to thethree months ended September 30, 2009.

|                                                                 |   | **Three Months Ended September 30,** |   |  |                     |    |  |   |          |   |
|-----------------------------------------------------------------|---|--------------------------------------|---|--|---------------------|----|--|---|----------|---|
|                                                                 |   | ****                                 |   |  |                     |    |  |   |          |   |
|                                                                 |   | **2010**                             |   |  | **Total Revenue %** |    |  |   | **2009** |   |  | **Total Revenue %** |  |  |  | **Increase / (Decrease)** |  |  | **Change %** |  |
|                                                                 |   | ****                                 |   |  | ****                |    |  |   | ****     |   |  | **** |  |  |  | **** |  |  | **** |  |
| Gain on sale of short-term    investments, net   | $ | 186                                  |   |  | 0.1                 | %  |  | $ | 1,274    |   |  | 0.7 | % |   | $ | (1,088 | ) |  | (85.4 | %) |
| Extinguishment of debt                                          |   | (1,342                               | ) |  | (0.6                | )  |  |   | (934     | ) |  | (0.5 | ) |  |  | (408 | ) |  | (43.7 | ) |
| Amortization of debt discount                                   |   | (1,398                               | ) |  | (0.6                | )  |  |   | (1,583   | ) |  | (0.9 | ) |  |  | 185 |  |  | 11.7 |  |
| Interest expense, net of capitalized    interest |   | (1,228                               | ) |  | (0.6                | )  |  |   | (1,825   | ) |  | (1.0 | ) |  |  | 597 |  |  | 32.7 |  |
| Interest income                                                 |   | 32                                   |   |  | 0.0                 |    |  |   | 200      |   |  | 0.1 |  |  |  | (168 | ) |  | (84.0 | ) |
| Other, net                                                      |   | 415                                  |   |  | 0.2                 |    |  |   | 60       |   |  | 0.0 |  |  |  | 355 |  |  | nm |  |
|                                                                 |   |                                      |   |  |                     |    |  |   |          |   |  |  |  |  |  |  |  |  |  |  |
| Total non-operating expenses                                    | $ | (3,335                               | ) |  | (1.5                | %) |  | $ | (2,808   | ) |  | (1.6 | %) |  | $ | (527 | ) |  | (18.8 | %) |
|                                                                 |   |                                      |   |  |                     |    |  |   |          |   |  |  |  |  |  |  |  |  |  |  |

**            *Total non-operatingexpenses***increased primarily due to the reduction in gains realized from sales of our auction ratesecurities (“ARS”) during the three months ended September 30, 2010.  In addition, we saw a reduction in interestexpense due to repurchases of our 11.25% Convertible Secured Notes due 2023, offset partially by a decline in interestincome.

----

Table of Contents

***Comparison of Nine Months Ended September 30, 2010 to Nine Months Ended September 30,2009***

**Operating Revenue and Segment Profit**

**

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

|                                                         |   | **Nine Months Ended September 30,** |   |        |                     |   |        |   |          |   |
|---------------------------------------------------------|---|-------------------------------------|---|--------|---------------------|---|--------|---|----------|---|
|                                                         |   | ****                                |   |        |                     |   |        |   |          |   |
|                                                         |   | **2010**                            |   |        | **Total Revenue %** |   |        |   | **2009** |   |  | **Total Revenue %** |  |  |  | **Increase/ (Decrease)** |  |  | **Change %** |  |
|                                                         |   | ****                                |   |        | ****                |   |        |   | ****     |   |  | **** |  |  |  | **** |  |  | **** |  |
| Revenue from customers:                                 |   |                                     |   |   |                     |   |        |   |          |   |   |  |  |  |  |  |  |  |  |  |
|    Contract Flying                       | $ | 587,070                             |   |        | 95.6                | % |   | $ | 494,281  |   |  | 95.1 | % |   | $ | 92,789 |  |  | 18.8 | % |
|    Aviation Services                     |   | 32,386                              |   |        | 5.3                 |   |        |   | 31,448   |   |  | 6.1 |  |  |  | 938 |  |  | 3.0 |  |
|    Eliminations                          |   | (5,404                              | ) |        | (0.9                | ) |        |   | (6,232   | ) |  | (1.2 | ) |  |  | 828 |  |  | 13.3 |  |
| Total revenue from customers                            |   | 614,052                             |   |        | 100.0               |   |        |   | 519,497  |   |  | 100.0 |  |  |  | 94,555 |  |  | 18.2 |  |
| Direct segment costs:                                   |   |                                     |   |        |                     |   |        |   |          |   |  |  |  |  |  |  |  |  |  |  |
|    Contract Flying                       |   | 536,785                             |   |        | 87.4                |   |        |   | 444,387  |   |  | 85.5 |  |  |  | 92,398 |  |  | 20.8 |  |
|    Aviation Services                     |   | 23,631                              |   |        | 3.8                 |   |        |   | 18,997   |   |  | 3.7 |  |  |  | 4,634 |  |  | 24.4 |  |
|    Eliminations                          |   | (5,404                              | ) |        | (0.9                | ) |        |   | (6,232   | ) |  | (1.2 | ) |  |  | 828 |  |  | 13.3 |  |
| Total direct segment costs                              |   | 555,012                             |   |        | 90.4                |   |        |   | 457,152  |   |  | 88.0 |  |  |  | 97,860 |  |  | 21.4 |  |
| Segment profit                                          |   | 59,040                              |   |        | 9.6                 | % |        |   | 62,345   |   |  | 12.0 | % |  |  | (3,305 | ) |  | (5.3 | %) |
| Other shared expenses                                   |   | (84,258                             | ) |        |                     |   |        |   | (92,380  | ) |  |  |  |  |  |  |  |  |  |  |
| Impairment of fixed assets                              |   | (3,075                              | ) |        |                     |   |        |   | —  |   |  |  |  |  |  |  |  |  |  |  |
| Non-operating expenses, net                             |   | (10,746                             | ) |        |                     |   |        |   | (8,963   | ) |  |  |  |  |  |  |  |  |  |  |
|                                                         |   | ****                                |   |        |                     |   |        |   | ****     |   |  |  |  |  |  |  |  |  |  |  |
| Consolidated loss before income    taxes | $ | (39,039                             | ) |        |                     |   |        | $ | (38,998  | ) |  |  |  |  |  |  |  |  |  |  |
|                                                         |   |                                     |   |        |                     |   |        |   |          |   |  |  |  |  |  |  |  |  |  |  |

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Table of Contents

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

|                        |        |   | **Contract Flying** |            |        | **Aviation Services** |        |
|------------------------|--------|---|---------------------|------------|--------|-----------------------|--------|
|                        |        |   |                     | ** ** |        |                       |        |
|                        |        |   | **2010**            |            |        | **Total Revenue %**   |        |  | **2010** |  |  | **Total Revenue %** |  |
|                        |        |   |                     |            |   |                       |   |  |  |   |  |  |  |
| Revenue from customers |   | $ | 587,070             |            |        | 100.0                 | %      | $ | 32,386 |  |  | 100.0 | % |
| Direct segment costs   |        |   | 536,785             |            |        | 91.4                  |        |  | 23,631 |  |  | 73.0 |  |
|                        |        |   |                     |            |        |                       |        |  |  |  |  |  |  |
| Segment profit         |        | $ | 50,285              |            |        | 8.6                   | %      | $ | 8,755 |  |  | 27.0 | % |

|                        |        |   | **Contract Flying** |            |        | **Aviation Services** |        |
|------------------------|--------|---|---------------------|------------|--------|-----------------------|--------|
|                        |        |   |                     | ** ** |        |                       |        |
|                        |        |   | **2009**            |            |        | **Total Revenue %**   |        |  | **2009** |  |  | **Total Revenue %** |  |
|                        |        |   |                     |            |   |                       |   |  |  |   |  |  |  |
| Revenue from customers |   | $ | 494,281             |            |        | 100.0                 | %      | $ | 31,448 |  |  | 100.0 | % |
| Direct segment costs   |        |   | 444,387             |            |        | 89.9                  |        |  | 18,997 |  |  | 60.4 |  |
|                        |        |   |                     |            |        |                       |        |  |  |  |  |  |  |
| Segment profit         |        | $ | 49,894              |            |        | 10.1                  | %      | $ | 12,451 |  |  | 39.6 | % |

**           *****Contract Flying. ***The increase in revenue and direct segment costs within our ContractFlying segment is due primarily to the increased block hours with the addition of flying under the United Express Agreement andhigher aircraft utilization within the Amended Continental CPA.  The decline in overall segment profit margin in the ninemonths ended September 30, 2010, is primarily due to certain startup costs associated with the United Express Agreement and $2.9million in amortization of the warrant we issued to United for the purchase of 2.7 million shares of common stock with an exerciseprice of $0.01 per share of common stock (the “United Warrant”) as a reduction to passenger revenue.

**           *****Aviation Services.***  The reduction in our Aviation Segment profitmargin from 39.6% to 27.0% is due to increased labor rates and fringe benefit costs and our transition to new contracts in ourground handling business with Continental.

----

Table of Contents

**Operating Expenses**

**

            Thetablebelow (in thousands, except percentage data) sets forththe changes in operating expenses from the ninemonths ended September 30, 2010 to the nine months ended September 30, 2009.

|                                    |   | **Nine Months Ended September 30,** |        |                     |   |        |   |          |  |                     |
|------------------------------------|---|-------------------------------------|--------|---------------------|---|--------|---|----------|--|---------------------|
|                                    |   | ****                                |        |                     |   |        |   |          |  |                     |
|                                    |   | **2010**                            |        | **Total Revenue %** |   |        |   | **2009** |  | **Total Revenue %** |  |  |  | **Increase / (Decrease)** |  |  | **Change %** |  |
|                                    |   |                                     |   |                     |   |        |   |          |  |                     |  |  |  |  |  |  |  |  |
| Wages, salaries, and related costs | $ | 272,600                             |        | 44.4                | % |   | $ | 240,729  |  | 46.3                | % |   | $ | 31,871 |  |  | 13.2 | % |
| Maintenance, materials and repairs |   | 148,756                             |        | 24.2                |   |        |   | 123,121  |  | 23.7                |  |  |  | 25,635 |  |  | 20.8 |  |
| Other rentals and landing fees     |   | 57,708                              |        | 9.4                 |   |        |   | 45,491   |  | 8.8                 |  |  |  | 12,217 |  |  | 26.9 |  |
| Aircraft fuel and related taxes    |   | 34,054                              |        | 5.5                 |   |        |   | 10,175   |  | 2.0                 |  |  |  | 23,879 |  |  | nm |  |
| Outside services                   |   | 20,508                              |        | 3.3                 |   |        |   | 20,071   |  | 3.9                 |  |  |  | 437 |  |  | 2.2 |  |
| Aircraft rentals                   |   | 19,999                              |        | 3.3                 |   |        |   | 16,416   |  | 3.2                 |  |  |  | 3,583 |  |  | 21.8 |  |
| Depreciation and amortization      |   | 19,732                              |        | 3.2                 |   |        |   | 22,981   |  | 4.4                 |  |  |  | (3,249 | ) |  | (14.1 | ) |
| Ground handling                    |   | 5,866                               |        | 1.0                 |   |        |   | 7,497    |  | 1.4                 |  |  |  | (1,631 | ) |  | (21.8 | ) |
| Impairment of fixed assets         |   | 3,075                               |        | 0.5                 |   |        |   | —  |  | 0.0                 |  |  |  | 3,075 |  |  | nm |  |
| Other operating expenses           |   | 60,047                              |        | 9.8                 |   |        |   | 63,051   |  | 12.1                |  |  |  | (3,004 | ) |  | (4.8 | ) |
|                                    |   |                                     |        |                     |   |        |   |          |  |                     |  |  |  |  |  |  |  |  |
| Total operating expenses           | $ | 642,345                             |        | 104.6               | % |        | $ | 549,532  |  | 105.8               | % |  | $ | 92,813 |  |  | 16.9 | % |
|                                    |   |                                     |        |                     |   |        |   |          |  |                     |  |  |  |  |  |  |  |  |

**           *****Wages, salaries & related costs***increased 13.2%due primarily to our 14.5% increase in block hours period over period.  In addition, we experienced higher wage and fringerates due to the increased seniority of our workforce offset by slight productivity gains in certain work groups.

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******

***           ******Maintenance, materials and repairs***increased 20.8% due to our 20.1% increase in departurescombined with the impact of 2010 scheduled rate increases in many of our long-term maintenance contracts and the increased scope ofrepairs as our aircraft age.

**           *****Other rentals and landing fees***increased 26.9% over 2009 due to a 20.1%increase in departures within our Continental Express and United Express operations in addition to a $1.3 million landing feecredit recorded in 2009.  No such credit was recorded during the same period in 2010.

******

***            Aircraft Fuel and relatedtaxes***increased $23.9 million due to the increased volume attributable to the UnitedExpress Agreement.  These expenses are reimbursed by United.

***            Aircraftrentals ***increased 21.8% due to our subleasing eight aircraft from Continentalstarting in December 2009 that were previously operated as Continental Express under the Amended Continental CPA and for which wewere not recognizing aircraft rental expense in our condensed consolidated financial statements.  The last of the eightaircraft transitioned in April 2010.

******

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

**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, 2010 to the ninemonths ended September 30, 2009.

|                                                                 |   | **Nine Months Ended September 30,** |   |  |                     |    |  |   |          |   |
|-----------------------------------------------------------------|---|-------------------------------------|---|--|---------------------|----|--|---|----------|---|
|                                                                 |   | ****                                |   |  |                     |    |  |   |          |   |
|                                                                 |   | **2010**                            |   |  | **Total Revenue %** |    |  |   | **2009** |   |  | **Total Revenue %** |  |  |  | **Increase / (Decrease)** |  |  | **Change %** |  |
|                                                                 |   | ****                                |   |  | ****                |    |  |   | ****     |   |  | **** |  |  |  | **** |  |  | **** |  |
| Gain on sale of short-term    investments, net   | $ | 887                                 |   |  | 0.1                 | %  |  | $ | 1,755    |   |  | 0.3 | % |   | $ | (868 | ) |  | (49.5 | %) |
| Extinguishment of debt                                          |   | (3,059                              | ) |  | (0.5                | )  |  |   | (1,017   | ) |  | (0.2 | ) |  |   | (2,042 | ) |  | nm |  |
| Amortization of debt discount                                   |   | (4,687                              | ) |  | (0.8                | )  |  |   | (3,257   | ) |  | (0.6 | ) |  |  | (1,430 | ) |  | (43.9 | ) |
| Interest expense, net of capitalized    interest |   | (4,312                              | ) |  | (0.7                | )  |  |   | (5,835   | ) |  | (1.1 | ) |  |  | 1,523 |  |  | 26.1 |  |
| Interest income                                                 |   | 259                                 |   |  | 0.0                 |    |  |   | 837      |   |  | 0.2 |  |  |  | (578 | ) |  | (69.1 | ) |
| Equity investment loss                                          |   | —                             |   |  | —             |    |  |   | (377     | ) |  | (0.1 | ) |  |  | 377 |  |  | 100.0 |  |
| Other, net                                                      |   | 166                                 |   |  | 0.0                 |    |  |   | (1,069   | ) |  | (0.2 | ) |  |  | 1,235 |  |  | nm |  |
|                                                                 |   |                                     |   |  |                     |    |  |   |          |   |  |  |  |  |  |  |  |  |  |  |
| Total non-operating expenses                                    | $ | (10,746                             | ) |  | (1.8                | %) |  | $ | (8,963   | ) |  | (1.7 | %) |  | $ | (1,783 | ) |  | (19.9 | %) |
|                                                                 |   |                                     |   |  |                     |    |  |   |          |   |  |  |  |  |  |  |  |  |  |  |

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**            *Total non-operatingexpenses***increased primarily due to the higher losses recognized from repurchases of our11.25% Convertible Secured Notes due 2023***. ***During the nine months ended September 30, 2010, we repurchased $18.6 million par value (book value of $15.2 millionincluding $0.4 million of equity value) of our 11.25% Convertible Secured Notes due 2023 for $18.3 million, resulting in a netrealized loss of $3.1 million compared to a net realized loss of $1.0 million from debt repurchases during the nine months endedSeptember 30, 2009.  In addition, we saw a reduction in interest expense due to recent pay downsof our 11.25% Convertible Secured Notes due 2023, offset partially by a decline in interest income.   We also incurredlosses on disposal of fixed assets in the nine months ended September 30, 2009, which are represented in “Other, net”in the table above.

**Certain Operational Information**

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

|                                                                              |        | **For the Three Months Ended September 30,** |
|------------------------------------------------------------------------------|--------|----------------------------------------------|
|                                                                              |        | ****                                         |
|                                                                              |        | **2010**                                     |  |  | **2009** |  |  | **Change** |  |  | **%** |  |
|                                                                              |        | ****                                         |  |  | **** |  |  | **** |  |  | **** |  |
| Operating Statistics:                                                        |        |                                              |  |   |  |  |   |  |  |   |  |  |
| Revenue passenger miles (millions) (1)                                       |   | 2,561                                        |  |  | 2,212 |  |  | 349 |  |  | 15.8 | % |
| Available seat miles (millions) (2)                                          |        | 3,176                                        |  |  | 2,779 |  |  | 397 |  |  | 14.3 |  |
| Passenger load factor (3)                                                    |        | 80.6                                         | % |  | 79.6 | % |  | 1.0 | pts |  | 1.0 |  |
| Operating cost per available seat mile (cents) (4)                           |        | 7.02                                         |  |  | 6.74 |  |  | 0.28 |  |  | 4.2 |  |
| Block hours (5)                                                              |        | 202,081                                      |  |  | 177,649 |  |  | 24,432 |  |  | 13.8 |  |
| Operating cost per block hour (dollars) (6)                                  |        | 1,103                                        |  |  | 1,055 |  |  | 48 |  |  | 4.5 |  |
| Departures                                                                   |        | 116,734                                      |  |  | 97,920 |  |  | 18,814 |  |  | 19.2 |  |
| Average price per gallon of fuel, including fuel   taxes (dollars) |        | 2.51                                         |  |  | 2.38 |  |  | 0.13 |  |  | 5.5 |  |
| Fuel gallons consumed (thousands)                                            |        | 5,337                                        |  |  | 1,916 |  |  | 3,421 |  |  | nm |  |
| Average length of aircraft flight (miles)                                    |        | 545                                          |  |  | 569 |  |  | (24 | ) |  | (4.2 | ) |
| Average daily utilization of each aircraft (hours) (7)                       |        | 9.00                                         |  |  | 7.91 |  |  | 1.09 |  |  | 13.8 |  |
| Completion factor                                                            |        | 98.6                                         | % |  | 99.2 | % |  | (0.6 | ) pts |  | (0.6 | ) |
| Revenue passengers (thousands)                                               |        | 4,598                                        |  |  | 3,744 |  |  | 854 |  |  | 22.8 |  |
| Actual aircraft in fleet at end of period                                    |        | 244                                          |  |  | 244 |  |  | — |  |  | 0.0 | % |

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|                                                                              |        | **For the Nine Months Ended September 30,** |
|------------------------------------------------------------------------------|--------|---------------------------------------------|
|                                                                              |        | ****                                        |
|                                                                              |        | **2010**                                    |  |  | **2009** |  |  | **Increase / (Decrease)** |  |  | **% Increase / (Decrease)** |  |
|                                                                              |        | ****                                        |  |  | **** |  |  | **** |  |  | **** |  |
| **Operating Statistics:**                                                    |        |                                             |  |   |  |  |   |  |  |   |  |  |
| Revenue passenger miles (millions) (1)                                       |   | 7,191                                       |  |  | 6,005 |  |  | 1,186 |  |  | 19.8 | % |
| Available seat miles (millions) (2)                                          |        | 9,097                                       |  |  | 7,836 |  |  | 1,261 |  |  | 16.1 |  |
| Passenger load factor (3)                                                    |        | 79.0                                        | % |  | 76.6 | % |  | 2.4 | pts |  | 2.4 |  |
| Operating cost per available seat mile (cents) (4)                           |        | 7.07                                        |  |  | 7.01 |  |  | 0.06 |  |  | 0.9 |  |
| Block hours (5)                                                              |        | 580,949                                     |  |  | 507,317 |  |  | 73,632 |  |  | 14.5 |  |
| Operating cost per block hour (dollars) (6)                                  |        | 1,107                                       |  |  | 1,083 |  |  | 24 |  |  | 2.2 |  |
| Departures                                                                   |        | 326,960                                     |  |  | 272,275 |  |  | 54,685 |  |  | 20.1 |  |
| Average price per gallon of fuel, including fuel   taxes (dollars) |        | 2.46                                        |  |  | 2.36 |  |  | 0.10 |  |  | 4.2 |  |
| Fuel gallons consumed (thousands)                                            |        | 13,845                                      |  |  | 4,305 |  |  | 9,540 |  |  | nm |  |
| Average length of aircraft flight (miles)                                    |        | 558                                         |  |  | 577 |  |  | (19 | ) |  | (3.3 | ) |
| Average daily utilization of each aircraft (hours) (7)                       |        | 8.72                                        |  |  | 7.62 |  |  | 1.10 |  |  | 14.4 |  |
| Completion factor                                                            |        | 97.8                                        | % |  | 98.3 | % |  | (0.5 | ) pts |  | (0.5 | ) |
| Revenue passengers (thousands)                                               |        | 12,604                                      |  |  | 10,047 |  |  | 2,557 |  |  | 25.5 |  |
| Actual aircraft in fleet at end of period                                    |        | 244                                         |  |  | 244 |  |  | — |  |  | 0.0 | % |

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

**Liquidity, Capital Resources and Financial Position**

            ***Sources and Uses ofCash***

            At September 30, 2010, ouravailable liquidity, including restricted and unrestricted cash was $99.7 million.  For the nine months ended September 30,2010 and 2009, our operations provided $21.9 million and used $12.0 million, respectively, in cash flow.  For the nine monthsended September 30, 2010 and 2009, we generated $8.9 million and $23.5 million, respectively in cash flow from investingactivities, primarily from the sale of short-term investments.  As of September 30, 2010 and December 31, 2009, we had $15.6million and $17.7 million of restricted cash, respectively, which is comprised of collateral for our workers’ compensationcoverage, customer deposits for future charter flights and letters of credit.

            We spent$2.8 million and $3.9 million on capital expenditures during the nine months ended September 30, 2010 and 2009, respectively. These capital expenditures related primarily to aircraft spare parts and technology needed to support our various lines ofbusiness.  We anticipate capital expenditures for the remainder of 2010 to be approximately $1.3 million, to be funded by cashgenerated from operations.

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******

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

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

            During the quarter endedSeptember 30, 2010, we redeemed $10.0 million of the principal balance of our 11.25% Convertible Secured Notes due 2023.  Theredemptions were carried out in three separate transactions and were part of our overall strategy to reduce our debt balances andfuture interest expense.

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

            ***Securities RepurchaseProgram***

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

**

***            Long-termDebt***

            We did not enter into anymaterial financing transactions during the nine months ended September 30, 2010.  As of September 30, 2010, total debt,including current maturities, totaled $31.9 million net of a discount of $5.1 million.  Our debt consisted of the 11.25%Convertible Secured Notes due 2023 and a series of secured loan agreements with Export Development Canada (“EDC”),which consist of a $10.7 million loan entered into in May 2003 and a $6.6 million loan entered into in September 2003 (the“EDC Loans”).

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****

            The EDC Loans are secured bycertain of our flight simulators, flight data software and other equipment related to the simulators.  The amount due to EDCaccrues interest at the six-month LIBOR plus 1.75% per annum.  Each of the EDC Loans has a term of 96 months and each containscustomary representations, warranties and covenants.  Additionally, Continental is the guarantor of the EDC Loans, and adefault under the guarantee would cause an acceleration of the loans.  During the nine months ended September 30, 2010, wemade payments in the amount of $2.5 million on the EDC Loans, of which $2.4 million related to principal.  As of September 30,2010, the outstanding principal balance of the EDC Loans was $3.5 million.

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

            During the quarterended September 30, 2010, weredeemed$10.0million of our 11.25% Convertible Secured Notes due 2023 in three separate transactions at 100% of the aggregate principalamount.

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

***            Off-Balance SheetArrangements***

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

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

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           ***Aircraft, Simulator and Spare Engine Leases*****. **As of September30, 2010, we had lease and sublease obligations for aircraft, flight training devices and spare engines that are classified asoperating leases, which are not reflected as assets or liabilities on our balance sheet.  These leases expire between 2015 and2022.  As of September 30, 2010, our expected total minimum annual rental payments under current and future non-cancelableaircraft operating leases for aircraft operating outside of the Continental Express operations, simulator operating leases andspare engine operating leases for 2010 was $30.1 million.  Under the Amended Continental CPA, Continental will bear all therent expense for aircraft operating for Continental under that arrangement.  For the aircraft retained outside of the AmendedContinental CPA, we incur rent expense at reduced rental rates.  As of September 30, 2010, our expected total 2010 minimumrental expense for aircraft operating outside of the Continental Express operations was approximately $26.8 million.  Asubstantial portion of our aircraft are leased directly by Continental from third parties and subleased to us by Continental. If Continental were to default under these leases, our ability to retain access to the aircraft could be adversely affected. Pursuant to the terms of the amended indenture governing our 11.25% Convertible Secured Notes due 2023, we granted a securityinterest on certain of our property, including spare parts and spare aircraft engines.  We agreed that if certain collateralratios are greater than the applicable maximum, we will pledge additional spare parts, spare aircraft engines and/or cash and cashequivalents. Conversely, as the 11.25% Convertible Secured Notes due 2023 are repurchased or redeemed the collateral pool can bereduced proportionately under the terms of the indenture.

**Item 3.  Quantitative and Qualitative Disclosure about MarketRisk**

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

**Aircraft Fuel**

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

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

            As of September 30, 2010, we heldapproximately $3.2 million in deposits with fuel vendors for future fuel purchases for flights performing outside of theContinental Express operations.

**Interest Rates**

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

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           As of September 30, 2010 and December 31, 2009, we estimated the fair value of our $33.6 million and $52.1 million(carrying values) convertible notes to be $33.4 million and $50.3 million, respectively, based upon a fair valuation model thatconsidered quoted market prices.  Changes in the fair market value of our fixed-rate debt could be affected by a variety offactors including general investor behavior, industry specific risks and interest rate risks.  In 2008, we recorded a $27.8million discount in connection with our 11.25% Convertible Secured Notes due 2023 that is being accreted to “Amortization ofdebt discount” in our Condensed Consolidated Statements of Operations and will continue until August 1, 2011. Subsequent to repurchases made through September 30, 2010, our interest expense, calculated using the effective interest method,related to the non-cash debt discount will be $5.0 million in 2010 and $3.7 million for the seven months ending July 31, 2011. Inconjunction with the amortization of debt discount, we are currently amortizing $2.0 million of capitalized fees associated withthe convertible debt refinancing to interest expense until August 1, 2011.

**Item 4. Controls and Procedures**

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

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

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

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

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**PART II.  OTHER INFORMATION**

**Item 1.  Legal Proceedings.**

**           *****Legal Proceedings******.*** 

            Between August 5,2010 and August 25, 2010, nine substantially similar putative shareholder class action suits (collectively, the "Texas StateActions") were filed by individual ExpressJet stockholders in the District Court of Harris County, Texas against ExpressJet and itsdirectors. Many of the petitions also name SkyWest, Inc. and Atlantic Southeast and/or merger sub (together, the "AdditionalDefendants") as defendants in the litigation.

           The petitions filed in the Texas State Actions generally allege that the ExpressJet director defendantsbreached their fiduciary duties in connection with the negotiation and approval of the merger agreement and that the AdditionalDefendants aided and abetted such alleged breaches of fiduciary duties. The Texas State Actions seek, among other things, aninjunction enjoining the merger and the transactions contemplated by the merger agreement and rescission of any transactionscontemplated by the merger agreement which may be completed. On August 18, 2010, plaintiff Rayside filed a motion to consolidatethe Texas State Actions into Case No. 2010-48784 in the first-filed court (the "189th District Court"). On August 20, 2010,plaintiffs Levine, Tejeda, Doraiswamy and Swanepoel filed a similar motion in the 189th District Court. On September 10, 2010, the189th District Court ordered the consolidation of the Texas State Actions with and into Case No. 2010-48784 (the consolidatedaction is referred to herein as the "Consolidated Texas State Action").

           On September 10, 2010, a putative stockholder class action (the "Texas Federal Action" and, togetherwith the Consolidated Texas State Action, the "Actions") was commenced in the United States District Court for the SouthernDistrict of Texas, Houston Division. The complaint filed in the Texas Federal Action includes substantially identical allegationsto and requests substantially the same relief as the petitions in the Texas State Actions but also includes allegations related tothe ExpressJet preliminary proxy statement filed with the SEC on September 3, 2010.

           On September 20, 2010, the 189th District Court appointed counsel for plaintiff Rayside, Edison,McDowell & Hetherington LLP and Robbins Geller Rudman & Dowd LLP, as interim class counsel ("Class Counsel") in theConsolidated Texas State Action, with authority to speak for all plaintiffs in the Consolidated Texas State Action in mattersregarding pre-trial procedure, trial and settlement negotiations. On September 27, 2010, plaintiff Levine filed a motion forclarification order seeking the appointment of Class Counsel as interim class counsel and liaison counsel and his counsel, Powers& Frost L.L.P. and Faruqi & Faruqi, LLP, as interim co-class counsel.

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           Subsequent to September 30, 2010, counsel for the defendants in the Actions, Class Counsel and counselfor plaintiff in the Texas Federal Action agreed to and executed a memorandum of understanding (the "MOU") containing the terms ofan agreement in principle to resolve the Actions. The MOU provides that, in consideration for the settlement of the Actions,ExpressJet will make certain disclosures in the definitive proxy statement to be sent to the ExpressJet stockholders solicitingapproval of the merger. In the MOU, the defendants in the Actions acknowledge that they considered the claims raised by theplaintiffs in the Actions in connection with the disclosures contemplated by the MOU. In exchange, the parties to the MOU haveagreed to use their best efforts to draft and execute a definitive stipulation of settlement that includes a plaintiff classconsisting of all record and beneficial holders of ExpressJet stock, other than defendants in the Consolidated Texas State Actionand any firm, trust, corporation or other entity controlled by any such defendant, during the period beginning on and includingDecember 2, 2009, through and including the date of the consummation of the merger. If approved by the parties and the 189thDistrict Court, the settlement will result in the dismissal with prejudice of the Consolidated Texas State Action and release bythe plaintiff class of all claims under federal and state law that were or could have been asserted in the Actions or which ariseout of or relate to the transactions contemplated by the merger. The MOU further provides that, in the event the Consolidated TexasState Action is dismissed in accordance with the settlement stipulation, the parties to the MOU will use their best efforts toobtain the dismissal with prejudice of the Texas Federal Action. The settlement of the Consolidated Texas State Action is subjectto numerous conditions set forth in the MOU and to be contained in any stipulation of settlement, including the completion of themerger.

            Please refer to ourForm 10-K for the year ended December 31, 2009 under Part I, Item 3, Legal Proceedings.  There were no other materialdevelopments to legal proceedings during the quarter ended September 30, 2010.

**Item 1A.  Risk Factors.**

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

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

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

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

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

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

***            The Merger of Continentaland United may impact our long-term fleet rationalization plans.***

            On October 1, 2010, Continentaland United merged their two companies.  The merger could impact United’s decision to further expand the use of ouraircraft.

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

            As part of the United ExpressAgreement, on February 17, 2010, we issued a warrant to United for the purchase of 2.7 million shares of common stock with anexercise price of $0.01 per share of common stock (the “United Warrant”).  The United Warrant is fully vested andnon-forfeitable and United has no future performance commitment with respect to the United Warrant.  On September 27, 2010,United exercised, on a cashless basis, its rights under the United Warrant and received approximately 2.7 million shares of ourcommon stock.

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

Issuer Purchases of Equity Securities

            On September 27, 2010, Unitedexercised, on a cashless basis, its rights under the United Warrant and received approximately 2.7 million shares of our commonstock.

           In July2005, our Board of Directors authorized the expenditure of up to $30 million to repurchase shares of our common stock.  InFebruary 2006, the Board authorized the inclusion of our Original 4.25% Convertible Notes due 2023 (now our 11.25% ConvertibleSecured Notes due 2023), within the previously announced program.  Since that time, our Board has authorized an additional $15million in 2008, $10 million in 2009 and $20 million in April 2010 to be utilized for purchases within this program. Purchases have been made from time to time in the open market and in privately negotiated transactions.  The timing of anyrepurchases under the program depends on a variety of factors, including market conditions, and the program may be suspended ordiscontinued at any time.  After repurchases of a portion of our 11.25% Convertible Secured Notes due 2023 and adjustments toexclude prepaid interest related to bond repurchases, the program had an available balance remaining of $11.8 million at September30, 2010.

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| **Period**        |        | **(a) Total number of shares purchased(1)** |        |   | **(b) Average price paid per share** |        |        | **(c) Total number of shares purchased as part of publicly announced program(2)** |        |   | **(d) Maximum value of shares / notes that may yet be purchased under the program (in millions)**(3) |
|-------------------|--------|---------------------------------------------|--------|---|--------------------------------------|--------|--------|-----------------------------------------------------------------------------------|--------|---|------------------------------------------------------------------------------------------------------|
|                   |        |                                             |        |   |                                      |   |        |                                                                                   |        |   |                                                                                                      |
| 7/1/10 to 7/31/10 |   | 958                                         |   | $ | 2.67                                 |        |   | —                                                                           |   | $ | 18.6                                                                                                 |
| 8/1/10 to 8/31/10 |   | 21                                          |   |   | 5.06                                 |        |   | —                                                                           |   |   | 11.8                                                                                                 |
| 9/1/10 to 9/30/10 |   | 67                                          |   |   | 6.67                                 |        |   | —                                                                           |   |   | 11.8                                                                                                 |
|                   |        |                                             |        |   |                                      |        |        |                                                                                   |        |   |                                                                                                      |
| Total             |        | 1,046                                       |        | $ | 2.98                                 |        |        | —                                                                           |        | $ | 11.8                                                                                                 |
|                   |        |                                             |        |   |                                      |        |        |                                                                                   |        |   |                                                                                                      |

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

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

              None.

**Item 4.  (Removed andReserved)**

**Item 5.  Other Information.**

              None.

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**Item 6.  Exhibits.**

| 2.1     |    | Agreement and Plan of Merger, dated as of August 3, 2010, by and among SkyWest, Inc., ExpressDelaware Merger Co. and ExpressJet Holding, Inc. (incorporated by reference to Exhibit 2.1 to the Company’s Current Report onForm 8-K filed on August 4, 2010, File No. 1-31300).                                                         |
|---------|--------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 3.1     |    | Restated Certificate of Incorporation, as amended by the Certificate of Amendment dated July 1, 2008 and Certificate of Amendmentdated October 1, 2008 (incorporated by reference to Exhibit 3.1 to the Company’s Quarterly Report on Form 10-Q for thequarter ended September 30, 2008 filed on November 12, 2008, File No. 1-31300). |
| 3.2     |    | Amended and Restated Bylaws (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed onMay 24, 2007, File No. 1-31300).                                                                                                                                                                             |
| 4.1     |    | Third Amendment to ExpressJet’s Amended and Restated Rights Agreement, dated as of August 3, 2010, between ExpressJetHoldings, Inc. and Mellon Investor Services LLC (incorporated by reference to Exhibit 4.1 to the Company’s Current Report onForm 8-K filed on August 4, 2010, File No. 1-31300).                            |
| 10.1(c) |              | Second Amendment to United Express Agreement between United Air Lines, Inc. andExpressJet Airlines, Inc. dated as of August 4, 2010.(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 Certificationby Chief Executive Officer.(2)                                                                                                                                                                                                                                                                                |
| 32.2    |              | Section 1350 Certificationby Chief Financial Officer.(2)                                                                                                                                                                                                                                                                                     |
|         |              |                                                                                                                                                                                                                                                                                                                                         |
|         |              | (1) Filed herewith.                                                                                                                                                                                                                                                                                                                     |
|         |              | (2) Furnished herewith.                                                                                                                                                                                                                                                                                                                 |
|         |              | *  Pursuant to 17 CFR 240.24b-2, thisexhibit has been filed separately with the Securities and Exchange Commission pursuant to a Confidential TreatmentApplication.                                                                                                                                                                |

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**SIGNATURES**

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

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

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