**UNITEDSTATES********SECURITIES AND EXCHANGE COMMISSION**

**Washington,D.C. 20549**

 

**FORM 10-K/A**

 

**(Mark One)**

 
| **ý** | ** ** | **ANNUAL REPORT PURSUANT TO SECTION 13 OR  15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**                                                                                   |
|------------|------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ** ** | ** ** | **For the fiscal year ended March 31, 2005**                                                                                                                                     |
| ** ** | ** ** | **or**                                                                                                                                                                                |
| **o**      | ** ** | **TRANSITION REPORT PURSUANT TO SECTION 13 OR  15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**                                                                               |
|       |       |                                                                                                                                                                                  |
| ** ** | ** ** | **For the transition period  from            to            ** |

 

**CommissionFile No. 0-17895**

 

**MAIRHOLDINGS, INC.**

(Exact name of registrant asspecified in its charter)

 
| **Minnesota**                                                   | ** ** | **41-1616499**                        |
|-----------------------------------------------------------------|------------|---------------------------------------|
| (State or  other jurisdiction of incorporation or organization) |       | (I.R.S.  Employer Identification No.) |

 

**150South Fifth Street, Suite 1360****Minneapolis, Minnesota 55402**

(Address of principal executiveoffices) (Zip Code)

 

Registrant’s telephone number,including area code: **(612) 333-0021**

Securities registered pursuantto Section 12(b) of the Act: **None**

Securities registered pursuantto Section 12(g) of the Act: **CommonStock, par value $.01**

 

Indicateby check mark whether the registrant (1) has filed all reports required tobe filed by Section 13 or 15(d) of the Securities Exchange Act of1934 during the preceding 12 months, and (2) has been subject to suchfiling requirements for the past 90 days. Yes  ý     No o.

 

Indicateby check mark if disclosure of delinquent filers pursuant to Item 405 ofRegulation S-K is not contained herein, and will not be contained, to thebest of registrant’s knowledge, in definitive proxy or information statementsincorporated by reference in Part III of this Form 10-K or anyamendment to this Form 10-K.         o

 

Indicateby check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2of the Act).  Yes  ý      No  o.

 

Theaggregate market value of voting stock held by nonaffiliates of the registrantas of September 30, 2004 was approximately $84,000,000.

 

Asof July 1, 2005, there were 20,574,340 shares of common stock of theregistrant issued and outstanding.

 

 

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**PART III**

 

**Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT**

 

**Information ConcerningDirectors**

 

TheCompany’s Board of Directors consists of eight directors and is divided intothree separate classes.  The terms of theClass Two directors will expire at the 2005 annual meeting or until theirsuccessors are elected and qualified. The terms of the Class Three and Class One directors willexpire in 2006 and 2007, respectively, or until their successors are electedand qualified.  The Company must complywith the Nasdaq listing standard requiring that a majority of the Board of Directorsbe comprised of independent directors by its 2005 annual meeting, which must beheld by December 31, 2005.

 

Threeof the Company’s directors, Douglas M. Steenland, Mickey P. Foret and PiersonM. Grieve, were nominated pursuant to provisions of the Airline ServicesAgreement and the Regional Jet Services Agreement between the Company, MesabaAviation, Inc. (“Mesaba”), one of the Company’s wholly owned subsidiaries,and Northwest Airlines, Inc. (“Northwest”).  The agreements require the Company to nominateand recommend for election a sufficient number of directors designated byNorthwest so that if such directors were elected, there would be threedirectors designated by Northwest serving on the Board of Directors of theCompany and of Mesaba.  See Item 13 – “CertainRelationships and Related Transactions” for additional information regardingthe agreements.  Mickey P. Foret, througha company of which he is the sole owner, provides certain consulting servicesto Northwest.  Mr. Foret’sconsulting agreement provides that, at such time as Northwest requests, he willresign from the Company’s Board of Directors.

 

Theinformation set forth below regarding each director is based upon informationfurnished to the Company by the respective directors.

 

**Pierson M. Grieve**,age 77, a Class One director, became a director of the Company in October 1999.  Mr. Grieve has been a member ofPalladium Equity Partners, LLC, a New York private investment firm, since November 1998.  He was Chairman of the Metropolitan AirportsCommission - State of Minnesota from April 1995 to April 1999.

 

**Raymond W. Zehr, Jr.**, age 58, a Class One director, became adirector of the Company in June 1995. Mr. Zehr has been Executive Vice President and Treasurer of PohladCompanies since 2000, and served in various other capacities with PohladCompanies since 1971.  He is also ChiefInvestment Manager of CRP Holdings, LLC, Vice President of Twins Sports, Inc.,the managing general partner of the Minnesota Twins baseball club, and is adirector of Genmar Holdings, Inc.

 

**Donald E. Benson,**age 75, a Class Two director, became adirector of the Company in June 1995. Mr. Benson has been Executive Vice President and a director ofMarquette Financial Companies, formerly Marquette Bancshares, Inc., since January 1993and with predecessor organizations since 1968. Mr. Benson is also a director of National Mercantile Bancorp, MassMutual Corporate Investors, Mass Mutual Participation Investors, and a directorand Vice President of Twins Sports, Inc., the managing general partner ofthe Minnesota Twins baseball club.

 

**Carl R. Pohlad**, age 89, a Class Two director and Chairmanof the Board of Directors, became a director of the Company in February 1995.  Mr. Pohlad has been Chairman of theBoard, President and a director of Marquette Financial Companies, formerlyMarquette Bancshares, Inc., since 1993. Prior to 1993, Mr. Pohlad was President and Chief Executive Officerof Marquette Bank Minneapolis and Bank Shares Incorporated.  Mr. Pohlad is an owner, director and Chairmanof the Board of Twins Sports, Inc., the managing general partner of theMinnesota Twins baseball club, and is a director of Genmar Holdings, Inc.  He is the father of Robert C. Pohlad, adirector of the Company.

 

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**Douglas M. Steenland,**age 53, a Class Two director, became adirector of the Company in October 1999. He resigned as a director in October 2003 and was reappointed tothe Board in May 2004.  Mr. Steenlandwas named President and CEO of Northwest Airlines Corporation and NorthwestAirlines, Inc. in April 2004 and was elected a director of bothcompanies in September 2001.  Mr. Steenlandpreviously served as President and in various other capacities for Northwestsince July 1991.

 

 **Paul F. Foley**,age 52, a Class Three director, became a director of the Company in October 1999.  Mr. Foley has been the President andChief Executive Officer of the Company since October 1999 and wasPresident and Chief Executive Officer of Mesaba from October 1999 to September 2002.  He was Vice President at Atlas Air, Inc.from December 1996 to September 1999. He presently serves as a director of Zomax Incorporated.

 

**Mickey P. Foret**,age 59, a Class Three director, became a director of the Company in May 2004.  Mr. Foret has been the principal ofAviation Consultants, LLC, an airline consulting firm, since December 2002.  He was Chief Financial Officer of NorthwestAirlines Corporation and Northwest Airlines, Inc. from September 1998to October 2002, and Chief Executive Officer of Northwest Airlines Cargo, Inc.from May 1999 to October 2002. He presently serves as a director of ADC Telecommunications, Inc.,URS Corporation and Nash Finch Company.

 

**Robert C. Pohlad**,age 51, a Class Three director, became a director of the Company in September 1995.  Mr. Pohlad has been a director andPresident of Pohlad Companies since 1987. Mr. Pohlad became the Chief Executive Officer of PepsiAmericas, Inc.in November 2000, was named Vice Chairman of PepsiAmericas, Inc. in January 2001and became Chairman in January 2002. Mr. Pohlad served as Chairman, Chief Executive Officer and adirector of P-Americas, Inc. from July 1998 until P-Americas, Inc.became a wholly owned subsidiary of PepsiAmericas, Inc. Mr. Pohladwas the Chief Executive Officer and a director of Delta Beverage Group, Inc.,a subsidiary of P-Americas, Inc., from March 1988 to May 2001.  He is the son of Carl R. Pohlad, a directorand Chairman of the Board of the Company.

 

**Information ConcerningExecutive Officers**

 

**Paul F. Foley**,age 52, is President, Chief Executive Officer and Director of the Company.   Biographical information about Mr. Foleycan be found under “Information Concerning Directors” above.

 

**Robert E. Weil**,age 40, hasbeen Vice President, Chief Financial Officer and Treasurer of the Company since January 2000 and also served as VicePresident, Chief Financial Officer of Mesaba from January 2000 to September 2002. Mr. Weil was the Managing Director of Finance - Ground Operation forNorthwest Airlines from December 1997 until joining the Company.  Healso held the position of Controller - Ground Operations and held various otherfinance positions at Northwest since 1991. Mr. Weil graduated with a Bachelor of Arts degree in Economics fromNorthwestern University and a Masters of Management degree from J. L. KelloggGraduate School of Management.

 

**Ruth M. Timm**,age 35, joined the Company in April 2005 as its Vice President, GeneralCounsel.  Ms. Timm was GeneralCounsel at Integris Metals, Inc. from October 2004 until February 2005,when the company was sold to a competitor. Ms. Timm was an associate in the corporate department of Leonard,Street and Deinard Professional Association from October 2000 until September 2004,and an associate at Maun & Simon, PLC from September 1999 to October 2000.  Ms. Timm served as a judicial law clerkfor the Honorable Paul A. Magnuson, Chief Judge, U.S. District Court for theDistrict of Minnesota from 1997 to 1999. She received her law degree from Valparaiso University School of Law in1997.

 

**Information Concerning ourAudit Committee**

 

TheCompany’s Audit Committee consists of Donald E. Benson, Pierson M. Grieve andRaymond W. Zehr, Jr., each of whom is independent as defined by thelisting standards of the Nasdaq

 

3

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NationalMarket (NASD Marketplace Rule 4200(a)(15)) and Rule 10A-3 ofthe Securities Exchange Act of 1934.  Mr. Bensonis the Chairman of the Audit Committee. The Board of Directors has determined that Mr. Benson and Mr. Zehrare both “audit committee financial experts,” as defined by Item 401(h) ofRegulation S-K.  Mr. Zehr wasappointed to the Audit Committee in October 1995 and Messrs. Bensonand Grieve were appointed to the Audit Committee in October 1999.

 

**Section 16(a) BeneficialOwnership Reporting Compliance**

 

Section 16(a) ofthe Securities Exchange Act of 1934 requires directors and executive officersof the Company and persons who own more than 10% of the Company’s Common Stockto file with the SEC initial reports of ownership and reports of changes inownership of the Company’s Common Stock. Initial reports on Form 3 are required to be filed within 10business days of an individual becoming a director, executive officer or ownerof 10% or more of the Company’s Common Stock. Reports of changes in ownership are required to be filed within twobusiness days after a change occurs. During the Company’s fiscal year ended March 31, 2005, JohnSpanjers filed two Form 4s one day late to report the exercise of stockoptions and the sale of such shares. Additionally, five Form 4s were filed in August for stockappreciation rights granted in June to the following officers of Mesaba:  John Spanjers, Randy Strobel, JeffreyWehrenberg, William Poerstel and Scott Bussell. All other Section 16(a) filing requirements applicable to theCompany’s officers, directors and greater than 10% beneficial owners requiredfor the fiscal year ended March 31, 2005 were completed on a timely basis.

 

**Code** of Ethics

 

 TheCompany’s Code of Business Conduct is available on the Company’s website atwww.mairholdings.com.  The Company’s Code of BusinessConduct is applicable to all of the Company’s employees.

 

**Item 11. EXECUTIVE COMPENSATION**

 

**Compensation CommitteeReport on Executive Compensation**

 

TheCompensation Committee consists of four non-employee directors appointed by theBoard of Directors.  The Committee hasbeen authorized by the Board of Directors to set the annual salary andincentive compensation of each of the executive officers of the Company and toreview and approve overall compensation levels and benefit plans of theCompany.  The Company’s Chief ExecutiveOfficer and the officers and directors of the Company’s subsidiaries haveprincipal responsibility for determining compensation and benefits foremployees of the subsidiaries.

 

***Compensation Philosophy***

 

TheCompany’s executive compensation policies, as endorsed by the CompensationCommittee, are designed to:

 

•                                          Attract, motivate and retainexecutives whom the Committee believes are critical to the long-term success ofthe Company;

 

•                                          Reward individualcontributions to the Company’s accomplishment of certain profit and operationalgoals;

 

•                                          Promote apay-for-performance philosophy by placing a significant portion of totalcompensation “at risk” while providing a level of compensation opportunity thatis competitive with companies of similar profitability, complexity and size;and

 

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•                                          Provide an opportunity toown the Company’s Common Stock so that executives will have common interestswith the Company’s shareholders.

 

TheCompensation Committee believes that each of these factors is important to thefinancial performance of the Company.  Inimplementing its executive compensation program, the Company and the Committeeseek to link executive compensation directly to earnings performance and,consequently, to increases in shareholder value.

 

Thecomponents of the Company’s current executive compensation program are comprisedof base salary, cash incentive compensation, long-term incentive awardsprincipally in the form of stock option grants and, in some cases, a retentioncomponent.

 

***Base Salary and Cash IncentiveCompensation***

 

TheCompensation Committee establishes, for recommendation to the Board ofDirectors, the base salary and incentive compensation of the Chief ExecutiveOfficer, Chief Financial Officer and General Counsel.  Base salary levels are reviewed annually bythe Committee and adjusted based upon competitive market factors and theofficer’s ability to contribute to the overall success of the Company’smission.  Incentive compensation is basedon the individual’s contribution to the Company’s annual performance, asmeasured against goals determined at the beginning of each fiscal year andapproved by the Board.  Incentivecompensation generally will not exceed 100% of an officer’s base salary,although officers may on occasion receive a larger portion of their totalcompensation through incentive compensation than from salary, thereby placing agreater percentage of their compensation at risk.

 

Historically,executive compensation has been based on three elements:

 

•                  Financial results of the Company and itssubsidiaries;

 

•                  Operational performance of the Company andits subsidiaries; and

 

•                  Individual performance.

 

TheCommittee also considers such other compensation elements as the 401(k)plan,  short and long term disabilitybenefits, executive benefits such as annual physicals and life insurance.

 

Insetting its compensation recommendations for fiscal 2005, the CompensationCommittee obtained reports and analyses from a compensation consulting groupand outside legal counsel.

 

Basedon the factors described above, the Compensation Committee concluded that Mr. Foleyhas continued to excel in his leadership role. Accordingly, the Compensation Committee found it appropriate to assurethe retention of Mr. Foley by recommending that the Company execute afour-year employment agreement with him. Under the employment agreement, Mr. Foley’s total compensationincludes a base salary of $350,000, a one-time bonus of $500,000 that must berepaid in prorated amounts if Mr. Foley’s employment terminates prior to September 30,2008, annual cash incentive compensation targeted at 100% of his annualizedbase salary, a vesting retention component and an annual discretionary stockoption grant.  The employment agreementalso grants Mr. Foley travel privileges with Northwest and Mesaba andprovides for severance payments upon Mr. Foley’s termination.  For his performance in fiscal 2005, Mr. Foleyreceived cash incentive compensation in the amount of $350,000.  The Compensation Committee also approved arelocation assistance agreement for Mr. Foley in fiscal 2006.  Mr. Foley’s annual living allowance willterminate following his relocation to Minneapolis, Minnesota.

 

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***Long-Term Incentive Compensation***

 

TheCompany’s stock option program is intended to strengthen the Company’s abilityto attract and retain key employees and to furnish additional incentives tosuch persons by encouraging them to become owners of Common Stock.  The Compensation Committee believes thatstock option grants allow executives and key employees to participate in thesuccess of the Company and link their interests directly with those of theshareholders.  If there is no priceappreciation in the Company’s Common Stock, option holders receive no benefit,because stock options are granted with an exercise price equal to the fairmarket value of the Common Stock on the day of grant.  The number of stock options granted toexecutives, including the Chief Executive Officer, is based primarily on basesalary level, the number of options previously granted, individual performanceand retention considerations and the Company’s financial and operationalperformance during the year.  Theexecutive officers named in the Summary Compensation Table who received optionsin fiscal 2005 were granted options principally to secure their commitment tothe future success of the Company.

 

Respectfullysubmitted,

 

THECOMPENSATION COMMITTEE

 

RaymondW. Zehr, Jr., Chairman

DonaldE. Benson

RobertC. Pohlad

Douglas M. Steenland

 

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**Summary Compensation Table**

 

Thefollowing table discloses the annual and long-term compensation received ineach of the last three fiscal years by (i) all persons serving in thecapacity of Chief Executive Officer of the Company during the last fiscal year,(ii) the Company’s four most highly compensated executive officers, inaddition to the Chief Executive Officer, serving at the end of the last fiscalyear whose salary and incentive compensation exceeded $100,000 in the lastfiscal year, and (iii)  any executive officer of the Company who resignedduring the last fiscal year whose salary and incentive compensation exceeded$100,000 in the last fiscal year.  Inaccordance with SEC rules, information is included for certain officers of oneof the Company’s wholly owned subsidiaries, Mesaba.

 
| ** **                            | ** ** | ** ** | ** ** | ** **               | ** ** | ** **     | ** ** | **Long-Term  Compensation** | ** ** | ** **     | ** ** |
|---------------------------------------|------------|------------|------------|--------------------------|------------|----------------|------------|-----------------------------|------------|----------------|------------|
| ** **                            | ** ** | ** ** | ** ** | ** **               | ** ** | ** **     | ** ** | **Awards**                  | ** ** | **Payouts**    | ** ** | ** ** | ** ** |
| ** **                            | ** ** | ** ** | ** ** | ** **               | ** ** | ** **     | ** ** | **# of  Securities**        | ** ** | ** **     | ** ** | ** ** | ** ** |
| ** **                            | ** ** | **Fiscal** | ** ** | **Annual  Compensation** | ** ** | **Underlying** | ** ** | **LTIP**                    | ** ** | **All  Other** | ** ** |
| **Name and Principal Position**       | ** ** | **Year**   | ** ** | **Salary**               | ** ** | **Bonus  (1)** | ** ** | **Options/SARs**            | ** ** | **Payouts**    | ** ** | **Compensation** | ** ** |
| ** **                            | ** ** | ** ** | ** ** | ** **               | ** ** | ** **     | ** ** | ** **                  | ** ** | ** **     | ** ** | ** ** | ** ** |
| Paul F. Foley                         |       | 2005       |       | $                        | 350,000    |           | $          | 350,000                     |       | 150,000        |       | $ | 500,000 | (2) | $ | 79,713(3) |   |
| President and  Chief Executive        |       | 2004       |       | 350,000                  |       | 350,000        |       | —                      |       |           |       | 76,756 | (4) |
| Officer of the  Company               |       | 2003       |       | 345,192                  |       | 350,000        |       | 150,000                     |       |           |       | 78,900 | (5) |
|                                  |       |       |       |                     |       |           |       |                        |       |           |       |   |   |
| Robert E. Weil                        |       | 2005       |       | $                        | 183,423    |           | $          | 111,000                     |       | 50,000         |       |   |   | $ | 3,799 | (6) |
| Vice President,  Chief Financial      |       | 2004       |       | 172,307                  |       | 105,000        |       | —                      |       |           |       | 2,585 | (6) |
| Officer and  Treasurer of the Company |       | 2003       |       | 164,231                  |       | 99,000         |       | 50,000                      |       |           |       | 2,463 | (6) |
|                                  |       |       |       |                     |       |           |       |                        |       |           |       |   |   |
| John G. Spanjers                      |       | 2005       |       | $                        | 183,077    |           | $          | 111,000                     |       | 60,000         |       |   |   | $ | 2,388 | (6) |
| President and  Chief Operating        |       | 2004       |       | 175,000                  |       | 105,000        |       | 120,000                     |       |           |       | 2,210 | (6) |
| Officer of Mesaba                     |       | 2003       |       | 162,231                  |       | 105,000        |       | —                      |       |           |       | 2,270 | (6) |
|                                  |       |       |       |                     |       |           |       |                        |       |           |       |   |   |
| William T.  Poerstel                  |       | 2005       |       | $                        | 136,300    |           | $          | 55,120                      |       | 30,000         |       |   |   | $ | 1,913 | (6) |
| Vice President,  Flight               |       | 2004       |       | 130,000                  |       | 59,500         |       | 70,000                      |       |           |       | 22,857 | (7) |
| Operations of  Mesaba                 |       | 2003       |       | 110,000                  |       | 47,710         |       | 20,000                      |       |           |       | 45,000 | (8) |
|                                  |       |       |       |                     |       |           |       |                        |       |           |       |   |   |
| Randy W. Strobel  (9)                 |       | 2005       |       | $                        | 135,096    |           | $          | 55,000                      |       | 30,000         |       |   |   | $ | 1,709 | (6) |
| Vice President,  Finance              |       | 2004       |       | 125,000                  |       | 57,500         |       | 75,000                      |       |           |       | 288 | (6) |
| of Mesaba                             |       | 2003       |       | 118,372                  |       | 50,000         |       | —                      |       |           |       | — | (4) |
|                                       |            |            |            |                          |            |                |            |                             |            |                |            |  |  |  |  |  |  |

 

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(1)                                  Incentive compensation for servicesrendered has been included as compensation for the year earned even though aportion of such compensation is paid in the following year.  Incentive compensation is based upon theachievement of Company and individual performance criteria as described under “CompensationCommittee Report on Executive Compensation.”

(2)                                  Consists of a one-time retention bonuspayment pursuant to Mr. Foley’s employment agreement, portions of whichmust be paid back to the Company if Mr. Foley’s employment terminatesprior to September 30, 2008.  See “EmploymentContracts” below.

(3)                                  Consists of living and travel expenses of$75,295 and matching contributions of $4,418 made by the Company on behalf of Mr. Foleypursuant to the Company’s 401(k) Retirement Savings Plan.

(4)                                  Consists of living and travel expenses of$73,914 and matching contributions of $2,842 made by the Company on behalf of Mr. Foleypursuant to the Company’s 401(k) Retirement Savings Plan.

(5)                                  Consists of living and travel expenses of$76,049 and matching contributions of $2,851 made by the Company on behalf of Mr. Foleypursuant to the Company’s 401(k) Retirement Savings Plan.

(6)                                  Consists of matching contributions madeby the Company on behalf of such executive officer pursuant to the Company’s401(k) Retirement Savings Plan.

(7)                                  Consists of moving expenses of $22,257related to a move to Minneapolis, Minnesota and matching contributions of $600made by the Company on behalf of Mr. Poerstel pursuant to the Company’s401(k) Retirement Savings Plan.

(8)                                  Consists of moving expenses related to amove to Detroit, Michigan.

(9)                                  Mr. Strobel resigned from Mesabaeffective June 21, 2005.

 

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**Options and StockAppreciation Rights Granted In Last Fiscal Year**

 

Thefollowing table provides information about stock appreciation rights (“SARs”)and stock options granted during the fiscal year ended March 31, 2005 toeach executive officer named in the Summary Compensation Table.  The SARs were granted under the Mesaba 2003Incentive Award Plan, and the options were granted under the Company’s 2000Stock Incentive Plan.  Upon exercise of aSAR, the holder is entitled to receive a cash payment equal to the excess ofthe fair market value of the Company’s Common Stock on the date of exerciseover the grant price.  No shares of stockare issuable under the Mesaba 2003 Incentive Award Plan.  

 
| **Individual Grants**             | ** ** | ** **                                                     | ** ** | ** **                                                                    | ** ** |
|-----------------------------------|------------|----------------------------------------------------------------|------------|-------------------------------------------------------------------------------|------------|
| **Name**                          | ** ** | **Number of  Securities  Underlying  Options/  SARs  Granted** | ** ** | **Percent of  Total  Options/  SARs  Granted to  Employees  in Fiscal  Year** | ** ** | **Exercise  Price** | ** ** | **Expiration  Date** | ** ** | ** ** | ** ** | ** ** | ** ** |
| **Potential Realizable Value at** |
| **Assumed Annual Rates of**       |
| **Stock Price Appreciation for**  |
| **Options/SARs Term (1)**         |
| **5%**                            | ** ** | **10%**                                                        |
|                              |       |                                                           |       |                                                                          |       | **($/sh)** |   |   |   |   |   |   |   |
|                              |       |                                                           |       |                                                                          |       |   |   |   |   |   |   |   |   |
| Options                           |       |                                                           |       |                                                                          |       |   |   |   |   |   |   |   |   |
|                              |       |                                                           |       |                                                                          |       |   |   |   |   |   |   |   |   |
| Paul. F. Foley                    |       | 150,000                                                        |       | 71.4                                                                          | %          | $ | 8.28 |   | 08/18/2014 |   | $ | 781,087 |   | $ | 1,979,428 |   |
|                              |       |                                                           |       |                                                                          |       |   |   |   |   |   |   |   |   |
| Robert E. Weil                    |       | 50,000                                                         |       | 23.8                                                                          | %          | $ | 8.28 |   | 08/18/2014 |   | $ | 260,362 |   | $ | 659,809 |   |
|                              |       |                                                           |       |                                                                          |       |   |   |   |   |   |   |   |   |
| John G. Spanjers                  |       | —                                                         |       | —                                                                        |       | — |   | — |   | — |   | — |   |
|                              |       |                                                           |       |                                                                          |       |   |   |   |   |   |   |   |   |
| William T. Poerstel               |       | —                                                         |       | —                                                                        |       | — |   | — |   | — |   | — |   |
|                              |       |                                                           |       |                                                                          |       |   |   |   |   |   |   |   |   |
| Randy W. Strobel                  |       | —                                                         |       | —                                                                        |       | — |   | — |   | — |   | — |   |
|                              |       |                                                           |       |                                                                          |       |   |   |   |   |   |   |   |   |
| SARs                              |       |                                                           |       |                                                                          |       |   |   |   |   |   |   |   |   |
|                              |       |                                                           |       |                                                                          |       |   |   |   |   |   |   |   |   |
| Paul F. Foley (2)                 |       | —                                                         |       | —                                                                        |       | — |   | — |   | — |   | — |   |
|                              |       |                                                           |       |                                                                          |       |   |   |   |   |   |   |   |   |
| Robert E. Weil (2)                |       | —                                                         |       | —                                                                        |       | — |   | — |   | — |   | — |   |
|                              |       |                                                           |       |                                                                          |       |   |   |   |   |   |   |   |   |
| John G. Spanjers                  |       | 60,000                                                         |       | 16.4                                                                          | %          | $ | 7.80 |   | 06/04/2014 |   | $ | 294,323 |   | $ | 745,871 |   |
|                              |       |                                                           |       |                                                                          |       |   |   |   |   |   |   |   |   |
| William T. Poerstel               |       | 30,000                                                         |       | 8.2                                                                           | %          | $ | 7.80 |   | 06/04/2014 |   | $ | 147,161 |   | $ | 372,936 |   |
|                              |       |                                                           |       |                                                                          |       |   |   |   |   |   |   |   |   |
| Randy W. Strobel                  |       | 30,000                                                         |       | 8.2                                                                           | %          | $ | 7.80 |   | 06/04/2014 |   | $ | 147,161 |   | $ | 372,936 |   |

 

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(1)                                  The potentialrealizable value is the amount that would accrue to the holder if the SARs wereexercised immediately prior to expiration and if the per share value hadappreciated at the compounded annual rate indicated in each column.  The assumed rates of appreciation areprescribed by the rules of the SEC regarding disclosure of executivecompensation.  The assumed annual ratesof appreciation are not intended to forecast possible future appreciation, ifany, with respect to the price of the Company’s Common Stock.

 

(2)                                  Mr. Foleyand Mr. Weil are not eligible to participate in the Mesaba 2003 IncentiveAward Plan.

 

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**Aggregated Option and SARsExercises In Last Fiscal Year and Fiscal Year-End Option and SARs Values**

 

Thefollowing table provides information about the exercise of stock options duringthe fiscal year ended March 31, 2005 and the value of unexercised stockoptions and SARs held at the end of such fiscal year for each executive officernamed in the Summary Compensation Table.

 
| ** **          | ** ** | **Shares**                | ** ** | ** **              | ** ** | **Number of Securities Underlying  Unexercised Options/SARs at** | ** ** | **Value of Unexercised In-the-Money  Options/SARs** | ** ** |
|---------------------|------------|---------------------------|------------|-------------------------|------------|------------------------------------------------------------------|------------|-----------------------------------------------------|------------|
| **Name**            | ** ** | **Acquired  on Exercise** | ** ** | **Value  Realized (1)** | ** ** | **March 31, 2005 (1)**                                      | ** ** | **at March 31, 2005 (1)**                      | ** ** |
| **Exercisable**     | ** ** | **Unexercisable**         | ** ** | **Exercisable**         | ** ** | **Unexercisable**                                                |
| ** **          | ** ** | ** **                | ** ** | ** **              | ** ** | ** **                                                       | ** ** | ** **                                          | ** ** | ** ** | ** ** | ** ** | ** ** |
| Options             |       |                      |       |                    |       |                                                             |       |                                                |       |   |   |   |   |
|                |       |                      |       |                    |       |                                                             |       |                                                |       |   |   |   |   |
| Paul F. Foley       |       | 100,000                   |       | $                       | 366,675    |                                                             | 382,500    |                                                | 287,500    |   | $ | 1,041,300 |   | $ | 463,000 |   |
|                |       |                      |       |                    |       |                                                             |       |                                                |       |   |   |   |   |
| Robert E. Weil      |       | —                    |       | —                  |       | 107,500                                                          |       | 92,500                                              |       | $ | 289,300 |   | $ | 144,700 |   |
|                |       |                      |       |                    |       |                                                             |       |                                                |       |   |   |   |   |
| John G. Spanjers    |       | 4,231                     |       | $                       | 12,948     |                                                             | 78,269     |                                                | 17,500     |   | $ | 77,184 |   | $ | 29,000 |   |
|                |       |                      |       |                    |       |                                                             |       |                                                |       |   |   |   |   |
| William T. Poerstel |       | 9,269                     |       | $                       | 30,355     |                                                             | —     |                                                | 10,000     |   | — |   | $ | 28,600 |   |
|                |       |                      |       |                    |       |                                                             |       |                                                |       |   |   |   |   |
| Randy W. Strobel    |       | —                    |       | —                  |       | 11,250                                                           |       | 6,250                                               |       | $ | 8,700 |   | $ | 8,700 |   |
|                |       |                      |       |                    |       |                                                             |       |                                                |       |   |   |   |   |
| SARs                |       |                      |       |                    |       |                                                             |       |                                                |       |   |   |   |   |
|                |       |                      |       |                    |       |                                                             |       |                                                |       |   |   |   |   |
| Paul F. Foley (2)   |       | —                    |       | —                  |       | —                                                           |       | —                                              |       | — |   | — |   |
|                |       |                      |       |                    |       |                                                             |       |                                                |       |   |   |   |   |
| Robert E. Weil (2)  |       | —                    |       | —                  |       | —                                                           |       | —                                              |       | — |   | — |   |
|                |       |                      |       |                    |       |                                                             |       |                                                |       |   |   |   |   |
| John G. Spanjers    |       | —                    |       | —                  |       | 30,000                                                           |       | 150,000                                             |       | — |   | $ | 63,600 |   |
|                |       |                      |       |                    |       |                                                             |       |                                                |       |   |   |   |   |
| William T. Poerstel |       | —                    |       | —                  |       | 17,500                                                           |       | 82,500                                              |       | — |   | $ | 31,800 |   |
|                |       |                      |       |                    |       |                                                             |       |                                                |       |   |   |   |   |
| Randy W. Strobel    |       | —                    |       | —                  |       | 18,750                                                           |       | 86,250                                              |       | — |   | $ | 31,800 |   |
|                     |            |                           |            |                         |            |                                                                  |            |                                                     |            |  |  |  |  |  |  |  |  |  |  |  |  |

 

____________________

 

(1)                                  Value is calculated as the excess of themarket value of the Common Stock at the date of exercise or March 31,2005, as applicable, over the exercise price. The closing price per share of the Company’s Common Stock was $8.86 on March 31,2005, as quoted on the Nasdaq Stock Market.

 

(2)                                  Mr. Foley and Mr. Weil are noteligible to participate in the Mesaba 2003 Incentive Award Plan.

 

**Employment Contracts**

** **

EffectiveOctober 1, 2004, the Company entered into a four-year ManagementCompensation Agreement with Paul F. Foley, the Company’s President and ChiefExecutive Officer.  Under the terms ofthe Agreement, Mr. Foley will receive an annual base salary of $350,000and may also receive annual discretionary bonuses targeted at 100% of hisannualized base salary, based upon achievement of personal and Company goals asdetermined by the Compensation Committee of the Company’s board of directors. Upon execution of the Agreement, Mr. Foley received a $500,000 one-timebonus.  Subject to certain exceptions articulated in the Agreement, Mr. Foleymust repay the Company a prorated portion of the one-time bonus if hisemployment terminates prior to the end of the four-year term of theAgreement.  Mr. Foley is also entitled to a vesting retention bonus,of which $100,000 will be paid upon the second anniversary, $100,000 will bepaid upon the third anniversary and $200,000 will be paid upon the fourthanniversary of the effective date of the Agreement, provided that Mr. Foleyremains employed by the Company as of such dates.  Mr. Foley also receivesan annual living expense allowance of $75,000 and

 

9

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suchfringe benefits as are made available to other senior executives of theCompany.  In fiscal 2006, the Company’sCompensation Committee approved a relocation assistance agreement for Mr. Foley.  Mr. Foley’s annual living allowance willterminate following his relocation to Minneapolis, Minnesota.

 

 Eitherthe Company or Mr. Foley may terminate the Agreement without cause at anytime, upon one month’s written notice to the other party.  The Company mayterminate Mr. Foley’s employment and the Agreement for cause without priornotice.  The Agreement also terminates in the event of Mr. Foley’sdeath or other inability to carry out his essential job functions.  Uponany termination or upon expiration of the Agreement, Mr. Foley willcontinue to be bound by certain confidentiality, non-compete andnon-recruitment obligations contained in the Agreement.

 

TheAgreement provides for the continued employment of Mr. Foley through September 30,2008, and provides that Mr. Foley will be entitled to severance benefitsif the Company terminates his employment without cause, either during or afterthe term of the Agreement.  Theseseverance benefits include payments equal to two times Mr. Foley’s annualsalary, payable over a twelve-month period, health and dental benefits, thevesting of Mr. Foley’s retention bonus and stock options, and thecontinuance of flight privileges for twelve months.  The Agreement also provides for similarseverance benefits to Mr. Foley if he resigns his employment with theCompany within one year after a change in control of the Company that occursduring the term of the Agreement.

 

**Compensation of Directors**

 

Forthe fiscal year ended March 31, 2005, each non-employee director earned anannual retainer of $40,000 plus out-of-pocket expenses.  Directors’ fees are currently set at $10,000per quarter.  Mr. Carl R. Pohladreceived $300,000 as compensation for serving as Chairman of the Board duringthe fiscal year ended March 31, 2005. In August 2004, the Company revised its board compensationstructure to compensate directors for each meeting attended, in addition to theannual retainer.  Accordingly, with theexception of the Audit Committee, the Company pays each director a fee of$1,000 for each board or committee meeting attended in person and a fee of $500for each board or committee meeting attended via telephone.  The Company pays a fee of $2,500 to eachAudit Committee member for each Audit Committee meeting attended in person and$1,250 for each Audit Committee meeting attended via telephone.  The Company also pays the Audit Committeechair additional compensation of $5,000 per year, and each of the chairs of theCompensation, Safety and Nominating Committees additional compensation of$2,500 per year.  On August 18,2004, pursuant to the 2000 Stock Incentive Plan, the Company granted eachdirector options to purchase 15,000 shares of the Company’s common stock.  The options vest in one year.  For his service as the Chairman of the Board,and in addition to the grant he received as a director, the Company grantedCarl R. Pohlad an option to purchase an additional 15,000 shares of the Company’scommon stock.  All of the options grantedon August 18, 2004 have an exercise price of $8.28 per share.  Each non-employee director, and certain familymembers of such director, receives free or reduced travel on Mesaba andNorthwest Airlines flights.  The Companybelieves that the directors’ use of such air travel is de minimis.

 

**Compensation CommitteeInterlocks and Insider Participation**

 

Nomember of the Compensation Committee of the Board of Directors was an officer,former officer or employee of the Company or its subsidiaries during the fiscalyear ended March 31, 2005.  Noexecutive officer of the Company served as a member of the compensationcommittee or board of directors of another entity, one of whose executiveofficers served on the Company’s Compensation Committee or Board of Directorsduring the fiscal year ended March 31, 2005.

 

10

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**Company Stock Performance**

 

Thefollowing graph provides a five-year comparison of the total cumulative returnsfor the Company’s Common Stock, the CRSP Index for the Nasdaq Stock Market(U.S. companies), and the CRSP Index for air carriers traded on NYSE, AMEX andNasdaq.  The CRSP Indexes are prepared bythe Center for Research in Security Prices of the University of Chicago.  The total cumulative return for each periodis based on the investment of $100 on March 31, 2000, assuming compoundeddaily returns and the reinvestment of all dividends.

 

***COMPARISON OF FIVE-YEARCUMULATIVE TOTAL RETURNS***

** **

 

Comparison of Five — Year Cumulative Total Returns

Performance Graph for

MAIR Holdings, Inc.

 

Produced on 06/14/2005 including data to 03/31/2005

11

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**Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENTAND RELATED SHAREHOLDER MATTERS**

 

Thefollowing table provides information regarding ownership of the Company’sCommon Stock by (i) each person known to the Company to own beneficiallymore than 5% of its Common Stock, (ii) each director and nominee fordirector of the Company, (iii) each executive officer named in the SummaryCompensation Table, and (iv) all directors and executive officers as agroup.  Unless otherwise indicated, theinformation is as of June 1, 2005 and each person has sole voting andinvestment power as to the shares shown.

 

Forthe purposes of this proxy statement, beneficial ownership is determined inaccordance with rules of the SEC, and includes any shares as to which theperson has sole or shared investment power and any shares which the person hasthe right to acquire within 60 days of June 1, 2005, through the exerciseof stock options.  The stock optionsreferred to in the footnotes are employee and director options issued under theCompany’s plans.  These options becomepartially or wholly exercisable beginning one year after the date ofgrant.  Therefore, the reported optionshares relate to options granted on or before July 31, 2004.

 
| **Name and address  of beneficial owner**                                                    | ** ** | **Number of  shares** | ** ** | **Percentage  owned** | ** ** |
|----------------------------------------------------------------------------------------------|------------|-----------------------|------------|-----------------------|------------|
|                                                                                         |       |                  |       |                  |       |
| Northwest  Airlines Corporation2700 Lone Oak PkwyEagan, MN 55121                             |       | 9,809,035             | (1)        | 39.67                 | %          |
|                                                                                         |       |                  |       |                  |       |
| Carl  R. PohladPohlad Companies60 South Sixth Street, Suite 3800Minneapolis, MN 55402   |       | 2,056,715             | (2)        | 9.93                  | %          |
|                                                                                         |       |                  |       |                  |       |
| FMR  Corp.82 Devonshire StreetBoston, MA 02109                                               |       | 2,013,626             | (3)        | 9.79                  | %          |
|                                                                                         |       |                  |       |                  |       |
| Dimensional  Fund Advisers, Inc.  1299 Ocean Avenue, 11th FloorSanta Monica, CA 90401   |       | 1,403,269             | (4)        | 6.82                  | %          |
|                                                                                         |       |                  |       |                  |       |
| PAR  Capital Management, Inc.  One International Place, Suite 2401Boston, MA 02111 |       | 1,200,000             | (5)        | 5.83                  | %          |
|                                                                                         |       |                  |       |                  |       |
| Aegis  Financial Corporation1100 North Glebe Road, Suite 1040Arlington, VA 22201        |       | 1,194,611             | (6)        | 5.81                  | %          |
|                                                                                         |       |                  |       |                  |       |
| Paul  F. Foley                                                                               |       | 392,000               | (7)        | 1.87                  | %          |
|                                                                                         |       |                  |       |                  |       |
| Raymond  W. Zehr, Jr.                                                                   |       | 188,000               | (8)        | *                     |       |
|                                                                                         |       |                  |       |                  |       |
| Robert  E. Weil                                                                              |       | 107,500               | (9)        | *                     |       |

 

12

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| **Name and address  of beneficial owner**                     | ** ** | **Number of shares** | ** ** | **Percentage  owned** | ** ** |
|---------------------------------------------------------------|------------|----------------------|------------|-----------------------|------------|
|                                                          |       |                 |       |                  |       |
| Robert  C. Pohlad                                             |       | 88,000               | (8)        | *                     |       |
|                                                          |       |                 |       |                  |       |
| Donald  E. Benson                                             |       | 88,000               | (8)        | *                     |       |
|                                                          |       |                 |       |                  |       |
| John  G. Spanjers                                             |       | 78,269               | (9)        | *                     |       |
|                                                          |       |                 |       |                  |       |
| Pierson  M. Grieve                                            |       | 54,282               | (10)       | *                     |       |
|                                                          |       |                 |       |                  |       |
| Randy  W. Strobel                                             |       | 11,250               | (9)        | *                     |       |
|                                                          |       |                 |       |                  |       |
| William  T. Poerstel                                          |       | 5,000                | (9)        | *                     |       |
|                                                          |       |                 |       |                  |       |
| Mickey  P. Foret                                              |       | —               |       | —                |       |
|                                                          |       |                 |       |                  |       |
| Douglas  M. Steenland                                         |       | —               |       | —                |       |
|                                                          |       |                 |       |                  |       |
| All  directors and executive officers as a group (12 persons) |       | 3,069,016            | (11)       | 14.22                 | %          |

 

----

*  Less than 1%.

 

(1)                                  Consists of 5,657,113 shares held by anindirect subsidiary, Northwest Aircraft, Inc., and warrants to purchase4,151,922 shares exercisable within 60 days held by an indirect subsidiary,Northwest Airlines, Inc.

(2)                                  Includes 143,000 shares which may bepurchased pursuant to stock options exercisable within 60 days.

(3)                                  According to a Form 13F filed by FMRCorp. on May 18, 2005.

(4)                                  According to a Form 13F filed byDimensional Fund Advisors, Inc. on May 9, 2005.

(5)                                  According to a Form 13F filed by PARCapital Management, Inc. on May 16, 2005.

(6)                                  According to a Form 13F filed byAegis Financial Corporation on May 12, 2005.

(7)                                  Includes 382,500 shares which may bepurchased pursuant to stock options exercisable within 60 days.

(8)                                  Includes 79,000 shares which may bepurchased pursuant to stock options exercisable within 60 days.

(9)                                  Consists of shares which may be purchasedpursuant to stock options exercisable within 60 days.

(10)                            Consists of 500 shares held indirectly ina trust of which Mr. Grieve is a beneficiary and trustee, 9,000 sharesheld indirectly in a trust of which Mr. Grieve’s spouse is a beneficiaryand trustee, and 44,782 shares which may be purchased pursuant to stock optionsexercisable within 60 days.

(11)                            Includes 1,009,301 shares which may be purchased pursuant to stockoptions exercisable within 60 days.

 

**Securities Authorized forIssuance Under Equity Compensation Plans**

 
| **Plan Category**                  | ** ** | **Number of Securities to  be issued upon exercise  of outstanding options,  warrants and rights (a)** | ** ** | **Weighted average  exercise price of  outstanding options,  warrants and rights  (b)** | ** ** | **Number of securities  remaining available for  future issuance under  equity compensation  plans (excluding  securities reflected in  column (a)) (c)** | ** ** |
|------------------------------------|------------|--------------------------------------------------------------------------------------------------------|------------|-----------------------------------------------------------------------------------------|------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------|------------|
| ** **                         | ** ** | ** **                                                                                             | ** ** | ** **                                                                              | ** ** | ** **                                                                                                                                                | ** ** |
| Plans approved by security holders |       | 1,898,551                                                                                              |       | $                                                                                       | 7.07       |                                                                                                                                                      | 800,251    |   |
|                                    |            |                                                                                                        |            |                                                                                         |            |                                                                                                                                                           |            |  |

 

13

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Theequity compensation plans approved by the Company’s shareholders are the 1994Stock Option Plan, the 1996 Director Stock Option Plan and the 2000 StockIncentive Plan.  The 2000 Stock IncentivePlan contains a provision that automatically increases the authorized sharesavailable for grant on September 1 of each year by the lesser of 300,000or 1% of the then outstanding common shares.

 

**Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS**

 

TheCompany has an employment agreement with its Chief Executive Officer, PaulFoley.  See Item 11 – “EmploymentContracts.”

 

NorthwestAirlines Corporation is a beneficial owner of more than 5% of the Company’soutstanding Common Stock.  See Item 12 – “SecurityOwnership of Certain Beneficial Owners and Management and Related ShareholderMatters.”  During the fiscal year ended March 31,2005, substantially all of the Company’s operating revenues were received fromNorthwest under two code sharing agreements described below.

 

**Airline Services Agreement**

** **

TheCompany, Mesaba and Northwest are parties to an Airline Services Agreement,dated as of July 1, 1997, as amended (the “Airlink Agreement”), underwhich Mesaba operates 63 Saab 340 jet-prop aircraft for Northwest.  Mesaba leases or subleases 49 of the Saab 340aircraft from Northwest. The Airlink Agreement provides exclusive rights todesignated service areas and support in acquiring new aircraft andequipment.  Mesaba’s flights appear inNorthwest’s timetables, and Mesaba receives ticketing and certain check-in,baggage and freight-handling services from Northwest at certain airports.  Additionally, Mesaba purchases fuel fromNorthwest under the Airlink Agreement. Mesaba also benefits from itsrelationship with Northwest through advertising and marketing programs.  In addition, Mesaba receives its computerizedreservations services from Northwest. Under the Airlink Agreement, Mesaba recognizes revenue for eachcompleted available seat mile.

 

Asconsideration for entering into the Airlink Agreement, the Company issued awarrant to Northwest on October 17, 1997, for the purchase of 1,320,000shares of the Company’s Common Stock at an initial exercise price of $9.42 pershare, the closing price of the stock on the date the warrant was issued.  The warrant was fully exercisable uponissuance and expires on July 1, 2007.

 

TheAirlink Agreement extends through June 30, 2007, subject to termination byeither party on 365 days’ notice. The Airlink Agreement may be terminatedimmediately by Mesaba or Northwest in the event that the other party is thesubject of a bankruptcy or similar proceeding or is divested of a substantialpart of its assets.  Additionally, thenon-defaulting party may terminate the Airlink Agreement in the event of abreach of a non-monetary provision that remains uncured for a period of morethan 30 days after receipt of written notification of such default, or thebreach of a monetary provision that remains uncured for a period of more thanten days after receipt of written notification of such default.  Northwest may also terminate the Airlink Agreementin the event of certain lease and other performance defaults; change in controlevents; revocation or failure to obtain DOT certification; failure to elect achief executive officer of the Company and Mesaba reasonably acceptable toNorthwest; or if more than 50% of the aircraft subject to the agreement are notoperated for more than seven consecutive days or 25% of such aircraft are notoperated for more than 21 consecutive days, other than as a result of the FAAgrounding a specific aircraft type for all carriers.

 

**Regional Jet ServicesAgreement**

 

TheCompany, Mesaba and Northwest entered into a Regional Jet Services Agreement,dated October 25, 1996, as amended (the “Jet Agreement”), under whichMesaba operates 35 Avro RJ85 regional jets for Northwest.  The aircraft, which are configured in a 69-seat,two class cabin, are leased or

 

14

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subleasedby Mesaba from Northwest.  The aircraftare operated as Northwest Jet Airlink from the Minneapolis/St. Paul, Detroitand Memphis hubs according to routes and schedules determined by Northwest, andall flights are designated as Northwest flights using Northwest’s designatorcode.  Under the Jet Agreement, Mesabarecognizes revenue for each block hour flown.

 

Underthe Jet Agreement, Mesaba is responsible for providing all flight and cabincrews, dispatch control, aircraft maintenance and repair services and hull andpassenger liability insurance.  Northwestprovides passenger and gate check-in, aircraft loading and unloading,ticketing, ramp services and fuel and fueling services, or will compensateMesaba for providing such services.

 

Asconsideration for entering into the Jet Agreement, the Company issued a warrantto Northwest on October 25, 1996, for the purchase of 922,500 shares ofthe Company’s Common Stock at an initial exercise price of $7.25 pershare, the closing price of the stock on the date the warrant was issued.  The warrant became fully exercisable in May 1998.  In connection with the amendments to the JetAgreement, the Company issued additional warrants to Northwest on April 1,1998 and June 2, 1998, for the purchase of 474,192 shares and 1,435,230shares, respectively, of the Company’s Common Stock at an initial exerciseprice of $21.25 per share.  The April 1,1998 warrant became fully exercisable in October 1998.  The June 2, 1998 warrant became fullyexercisable in May 2000.  All threewarrants expire on October 25, 2006.

 

TheJet Agreement extends through April 2007 unless terminated earlier inaccordance with its provisions.  EitherMesaba or Northwest may immediately terminate the Jet Agreement in the eventthat the other party is the subject of a bankruptcy or similar proceeding or isdivested of a substantial part of its assets. Additionally, the non-defaulting party may terminate the Jet Agreementin the event of a breach of a non-monetary provision that remains uncured for aperiod of more than 30 days after receipt of written notification of suchdefault, or the breach of a monetary provision that remains uncured for aperiod of more than ten days after receipt of written notification of suchdefault.  Northwest may also terminatethe Jet Agreement in the event of certain lease and other performance defaults;change in control events; revocation or failure to obtain DOT certification;failure to elect a chief executive officer of the Company and Mesaba reasonablyacceptable to Northwest; if more than 25% of the aircraft subject to theagreement are not operated for more than seven consecutive days, other than asa result of the FAA grounding all Avro RJ85 regional jets for all carriers; orif there is a strike, cessation or interruption of work involving Mesaba’spilots, flight attendants or mechanics providing jet service.

 

**Letter of Intent withNorthwest**

 

OnApril 20, 2005, the Company and its subsidiary, Mesaba, executed anon-binding letter of intent with Northwest to allow Mesaba to operate 15Bombardier CRJ-200 regional jets under the Northwest Airlink banner, withexclusive rights to the next 20 CRJ-200 or CRJ-440 aircraftNorthwest may order.  Mesaba expects to lease the aircraft from Northwestand expects the first aircraft to enter service before the end of 2005. Mesaba expects to enter into a new 10-year airline services agreement withNorthwest covering the operation of the CRJs, Saabs and RJ85s that will replacethe existing Airlink Agreement and the Jet Agreement, which are set to expirein 2007 (the “Omnibus Agreement”).  As part of the letter of intent,Mesaba agreed to incur the costs necessary to bring the new CRJ fleet intoservice.

 

Uponexecution of the definitive Omnibus Agreement, the Company expects to amend thecurrently outstanding warrants held by Northwest to reduce the number of sharesof the Company’s common stock issuable upon exercise from 4,151,922 sharesexercisable at prices from $7.25 to $21.25 per share to an aggregate of4,112,500 shares exercisable at a price of $8.74 per share.  The warrantsare expected to expire ten years from the date of the Omnibus Agreement. Sixty percent of the shares are expected to become exercisable upon thedelivery of the 15th CRJ aircraft to Mesaba, and an additional 4% ofthe shares are expected to become exercisable with each subsequent delivery ofthe next ten CRJ aircraft.  Pursuant to the letter of intent, the Companyalso agreed to enter into a registration rights

 

15

----

 

agreementto register the shares of stock currently held by Northwest and the shares ofstock that will be issuable to Northwest upon exercise of the warrants.

 

Asof the date of this filing, the Company and Mesaba are continuing negotiations onthe definitive Omnibus Agreement. Because the letter of intent is non-binding, the Company cannot provideassurance that the parties will ultimately execute a final agreement.  Since signing the letter of intent, Mesabahas incurred start-up costs related to adding the CRJ aircraft into its fleet,and if the parties do not execute a definitive agreement, Mesaba would be unableto earn revenue from the CRJ fleet to offset these start-up expenses.  Additionally, Northwest Airlines is in athirty-day cooling off period with its mechanics, and the mechanics couldstrike as soon as August 19, 2005.  Further,in the event Northwest Airlines continues to incur losses, it may file forbankruptcy.  In such event, all of theCompany’s contracts with Northwest Airlines will be at risk, as NorthwestAirlines will have the option to accept or reject each contract.  Northwest Airlines could also attempt to renegotiatethe Company’s contracts through bankruptcy. For a detailed discussion of the risks associated with the Company’sairline services agreements with Northwest Airlines, please see “Certain RiskFactors Relating to the Company and the Airline Industry” in Part I of theCompany’s Annual Report on Form 10-K, filed with the Securities andExchange Commission on June 14, 2005.

 

**Item 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES**

 

**Audit** Fees

 

Thefollowing is a summary of aggregate fees billed to the Company by Deloitte &Touche LLP during fiscal years 2004 and 2005.

 

*Audit Fees. *The aggregate fees billed forprofessional services rendered by Deloitte & Touche LLP for the auditof the Company’s annual financial statements for the fiscal years ended March 31,2005 and 2004 and for the reviews of the Company’s quarterly financialstatements, and review of other documents filed with the SEC for those fiscalyears were $616,000 and $113,000, respectively.

 

*Audit-Related Fees.*  For the fiscal years ended March 31,2005 and 2004, Deloitte & Touche LLP billed the Company $103,000 and$20,000, respectively, for assurance and related services in connection withthe performance of the audit or review of the Company’s financial statements,in addition to the audit fees disclosed above.

 

*Tax Fees.*  For the fiscal years ended March 31,2005 and 2004, Deloitte & Touche LLP billed the Company $406,000 and$579,000, respectively, for professional services rendered in connection withtax compliance services.  For fiscalyears ended March 31, 2005 and 2004, Deloitte & Touche LLP billedthe Company $29,000 and $19,000, respectively, for tax planning and adviceservices.

 

*All Other Fees.*  Deloitte & Touche LLP did not renderany other services to the Company, other than the services described above, forthe fiscal years ended March 31, 2005 and 2004.

 

**Pre-Approval Policies andIndependence**

 

TheAudit Committee has a policy of approving the engagement of the independentregistered public accounting firm to perform all audit and non-audit serviceson behalf of the Company.  The AuditCommittee did not rely on the waiver from the pre-approval requirementavailable under paragraph (c)(7)(i)(C) of Rule 2-01 ofRegulation S-X with respect to any of the services provided by the independentauditor.

 

16

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**SIGNATURES**

 

Pursuant to the requirements of section 13 or 15(d) of theSecurities Exchange Act of 1934, the registrant has duly caused this report tobe signed on its behalf by the undersigned, thereunto duly authorized.

 
|                      |   | MAIR HOLDINGS, INC. |
|---------------------------|--------|--------------------------|
|                      |   |                     |
|                      |   | By:                      | /s/ PAUL F. FOLEY |   |
|                      |   |                     | Paul F. Foley |
|                      |   |                     | President and Chief Executive  Officer |
| Dated: July 29, 2005 |   |                     |

 

Pursuant to the requirements of the Securities Exchange Act of 1934,this report has been signed below by the following persons on behalf of theregistrant and in the capacities and on the dates indicated.

 
| /s/ PAUL F. FOLEY         |   | President and Chief Executive Officer       |               |
|---------------------------|--------|---------------------------------------------|--------------------|
| Paul F. Foley             |   | (Principal Executive Officer) and Director  | July 29, 2005 |
|                      |   |                                        |               |
| /s/ ROBERT E. WEIL        |   | Vice President, Chief Financial Officer and |               |
| Robert E. Weil            |   | Treasurer (Principal Financial Officer)     | July 29, 2005 |
|                      |   |                                        |               |
| /s/ DONALD E. BENSON      |   |                                        |               |
| Donald E. Benson          |   | Director                                    | July 29, 2005 |
|                      |   |                                        |               |
| /s/ MICKEY P. FORET       |   |                                        |               |
| Mickey P. Foret           |   | Director                                    | July 29, 2005 |
|                      |   |                                        |               |
| /s/ PIERSON M. GRIEVE     |   |                                        |               |
| Pierson M. Grieve         |   | Director                                    | July 29, 2005 |
|                      |   |                                        |               |
| /s/ CARL R. POHLAD        |   |                                        |               |
| Carl R. Pohlad            |   | Director                                    | July 29, 2005 |
|                      |   |                                        |               |
| /s/ ROBERT C. POHLAD      |   |                                        |               |
| Robert C. Pohlad          |   | Director                                    | July 29, 2005 |
|                      |   |                                        |               |
| /s/ DOUGLAS M. STEENLAND  |   |                                        |               |
| Douglas M. Steenland      |   | Director                                    | July 29, 2005 |
|                      |   |                                        |               |
| /s/ RAYMOND W. ZEHR, JR.  |   |                                        |               |
| Raymond W. Zehr, Jr. |   | Director                                    | July 29, 2005 |

 

17

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**EXHIBIT INDEX**

 
| **Exhibit  Number** | ** ** | **Document Description**                                                                                               |
|---------------------|------------|------------------------------------------------------------------------------------------------------------------------|
|                |       |                                                                                                                   |
| 31.1                |       | Chief Executive Officer Certification Pursuant to Section 302 of  the Sarbanes-Oxley Act of 2002. Filed herewith. |
| 31.2                |       | Chief Financial Officer Certification Pursuant to Section 302 of  the Sarbanes-Oxley Act of 2002. Filed herewith. |
| 32.1                |       | Certification Pursuant to Section 906 of the Sarbanes-Oxley Act  of 2002. Filed herewith.                         |

 

18

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