UNITED STATES SECURITIES AND EXCHANGE
COMMISSION
 WASHINGTON,D.C.20549
 ________________
 FORM 10-K
  x         
      ANNUAL REPORT
      PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934
  FOR THE FISCAL YEAR ENDED DECEMBER 31,
2007
 OR
 o         
      TRANSITION REPORT PURSUANT TO SECTION 13
      OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF
      1934
 
 FOR THE TRANSITION PERIOD
      FROM                  
      TO
 COMMISSION FILE
NUMBER: 000-49697
 
  REPUBLIC AIRWAYS HOLDINGS
INC.
 (Exact name of registrant as specified
in its charter)
 DELAWARE
                (State or other jurisdiction
      of
                incorporation or
      organization)
              
              06-1449146
                (I.R.S. Employer Identification
      Number)
 8909 Purdue Road, Suite 300,Indianapolis,Indiana46268
 (Address of principal executive offices)(Zip
Code)
 (317) 484-6000
 (Registrant’s telephone number,
including area code)
 __________________
 Securities registered pursuant to
section 12(b) of the Act: None
 
 Securities registered pursuant to
section 12(g) of the Act:
 Common Stock, par value $.001 per
share
  Indicate by check mark whether the
registrant is a well-known seasoned issuer, as defined in Rule 405 of the
Securities Act. YesoNox
 Indicate by check mark if the registrant
is not required to file reports pursuant to Section 13 or 15(d) of the
Act.oYesxNo
 
 Indicate by check mark whether the
registrant (1) has filed all reports required to be filed by Section 13 or 15(d)
of the Securities Exchange Act of 1934 during the preceding 12 months (or for
such shorter period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90
days.  YesxNoo
 
 Indicate by check mark if disclosure of
delinquent filers pursuant to Item 405 of Regulation S-K is not contained
herein, and will not be contained, to the best of registrant’s knowledge, in the
definitive proxy statement incorporated by reference in Part III of this Form
10-K or any amendment to this Form 10-K.o
 
 Indicate by check mark
whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated filer, or a smaller reporting company. See definitions of
“large accelerated filer," "accelerated filer” and "smaller reporting company"
in Rule 12b-2 of the Exchange Act. (Check one):
  Large accelerated filerx
              Accelerated filero
              Non-accelerated filero
                (Do not check if a smaller reporting company)
              Smaller
      reporting company r
 
 Indicate by check mark whether the
registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act). YesoNox
 
 The aggregate market value of Common
Stock held by non-affiliates (based upon the closing sale price of the Common
Stock on the NASDAQ National Market System (now the NASDAQ Global Market System)
on June 30, 2007was approximately
$749,095,000.
 
 Indicate the
number of shares outstanding of theregistrant’sCommonStock as of the
latest practicable date: As ofFebruary
20,2008,
36,281,805shares of
common stockwere outstanding.
  
 DOCUMENTS
      INCORPORATED BY REFERENCEPortions of the registrant’s
      definitive Proxy Statement to be used in connection with its
      2008Annual Meeting of Stockholders
      areincorporated by reference into
      Part III of this report.
  
  TABLE OF CONTENTS
 
  
 Part
      IItem
      1.
              Business
              4Item
      1A.
              Risk
      Factors
              17Item
      1B.
              Unresolved
      Staff Comments
              25Item
      2.
              Properties
              26Item
      3.
              Legal
      Proceedings
              27Item
      4.
              Submission
      ofMatters
      to a Vote of Security
      Holders
              27Part
      IIItem
      5.
              Market
      for Registrant’s Common Stock and Related Stockholder Matters and Issuer
      Purchases
              28Of
      Equity SecuritiesItem
      6.
              Selected
      Financial Data
              31Item
      7.
              Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations
              34Item
      7A.
              Quantitative
      and Qualitative Disclosures About Market
      Risk
              48Item
      8.
              Financial
      Statements and Supplementary
      Data
              49Item
      9.
              Changes
      in and Disagreements with Accountants on Accounting and Financial
      Disclosure
              70Item
      9A.
              Controls
      and Procedures
              70Item
      9B.
              Other
      Information
              70Part
      IIIItem
      10.
              Directors
      and Executive Officers of the
      Registrant
              71Item
      11.
              Executive
      Compensation
              71Item
      12.
              Security
      Ownership of Certain Beneficial Owners and Management and Related
      Stockholder Matters
              71Item
      13.
              Certain
      Relationships and Related
      Transactions
              71Item
      14.
              Principal
      Accountant Fees and
      Services
              71Part
      IVItem
      15.
              Exhibits
      and Financial Statements
      Schedules
              72SignaturesEX-23.1
              Consent of Independent Registered
      Public Accounting FirmEX-31.1
              Certification of Chief
      Executive OfficerEX-31.2
              Certification of Chief
      Financial OfficerEX-32.1
              Certification of Chief
      Executive OfficerEX-32.2
              Certification of
      Chief Financial Officer
  
 
  -2-
  
 
  Forward-Looking
Statements
 
 
 
 In addition to historical information,
this Annual Report on Form 10-K contains forward-looking statements. Republic
Airways Holdings Inc. (the “Company”) may, from time to time, make written or
oral forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995. Such statements encompass our beliefs,
expectations, hopes or intentions regarding future events. Words such as “may,”
“will,” “should,” “expect,” “plan,” “intend,” “anticipate,” “believe,”
“estimate,” “predict,” “potential,” or “continue,” the negative of such terms or
other terminology to identify forward-looking statements. All forward-looking
statements included in this Annual Report on Form 10-K are made as of the date
hereof and are based on information available to us as of such date. We assume
no obligation to update any forward-looking statement. Our results could differ
materially from those anticipated in these forward-looking statements for many
reasons, including, among others, the “Risk Factors” set forth
herein.
 
 
  -3-
   PART
I
 ITEM 1.BUSINESS
 
 General
  Overview
  Republic Airways Holdings Inc. is aDelawareholding company organized in 1996 that
owns three regional airlines: Chautauqua Airlines, Inc., (“Chautauqua
Airlines”), our operator of 37 to 50 seat aircraft; Shuttle America Corporation
(“ShuttleAmerica”), our operator of 70-seat aircraft;
and Republic Airline Inc. (“Republic Airline”), our operator of aircraft with
more than 70 seats.  As of December 31, 2007,our subsidiaries
offered scheduled passenger service on approximately 1,250 flights daily to 119
cities in 39 states, Canada, Mexico, Jamaica and the Bahamas pursuant to
code-share agreements with AMR Corp., the parent of American Airlines, Inc.
(“American”), Continental Airlines, Inc. (“Continental”), Delta Air Lines, Inc.
(“Delta”), Frontier Airlines, Inc. (“Frontier”), US Airways, Inc. (“US Airways”)
and United Air Lines, Inc. (“United”), collectively referred to as our
(“Partners”). We began flying for Continental and Frontier in January and March
2007, respectively. Currently, we provide our Partners with regional jet
service, operating as AmericanConnection, Continental Express, Delta Connection,
Frontier Airlines, US Airways Express, or United Express, including service out
of their hubs and focus cities in Atlanta, Boston, Denver, Chicago, Cincinnati,
Cleveland, Columbus, Houston, Indianapolis, New York, Philadelphia, Pittsburgh,
St. Louis and Washington, D.C. (Dulles and National).
 
 Unless
the context indicates otherwise, the terms “the Company,” “we,” “us,” or “our,”
refer to Republic Airways Holdings Inc. and its subsidiaries.
  We have long-term, fixed-fee regional
jet code-share agreements with each of our Partners that are subject to our
maintaining specified performance levels. Pursuant to these fixed-fee
agreements, which provide for minimum aircraft utilization at fixed rates, we
are authorized to use our Partners' two-character flight designation codes to
identify our flights and fares in our Partners' computer reservation systems, to
paint our aircraft in the style of our Partners, to use their service marks and
to market ourselves as a carrier for our Partners. In addition, in connection
with a marketing agreement among Delta, Continental and Northwest Airlines,
certain of the routes that we fly using Delta's and Continental’s flight
designator codes are also flown under Northwest's designator code. Our fixed-fee
agreements eliminate our exposure to fluctuations in fuel prices, fare
competition and passenger volumes. Our development of relationships with
multiple major airlines has enabled us to reduce our dependence on any single
airline, allocate our overhead more efficiently among our Partners and reduce
the cost of our services to our Partners.
 
 During 2007 we increased ouroperational fleetby 48 aircraft for a total
operationalfleet as of December 31, 2007 of219 aircraft.  Our operational fleet is
comprised of 101ERJ-170/175, 70-86 seat aircraft, 94 ERJ-145 family, 37-50 seat aircraft, and 24
CRJ-200, 50 seat aircraft.During 2007 we added 44aircraft into service for Continental
bytransitioning20 ERJ-145 aircraft from our US Airways
operation andleasing
24CRJ-200 aircraft.  We added five ERJ-170
aircraft to Frontier by transitioning five ERJ-170 aircraft from our US Airways
operation.  We also added 25 ERJ-175 aircraft for US Airways and
removed the five ERJ-170 aircraft and 20 ERJ-145 aircraft from the US Airways
operation.In
addition, we removedone
ERJ-145 aircraft from our charter service and subleased the aircraft to an
airline inMexico.
 
 Currently, we have agreed to place into
service an additional 29 ERJ-175 aircraft for our Partners through March 2009.
These 29 aircraft are covered by firm orders that we have with an
aircraftmanufacturer.  We expect to place 16 of these 29 aircraft into service
with Delta during the second half of 2008 and the first quarter of 2009, which
will replace the 16 ERJ-170 aircraft currently in operation with
Delta.  Ten of the ERJ-170 aircraft removed from Delta will transition
to our United operation during the fourth quarter of 2008 and the first quarter
of 2009; five of the ERJ-170 aircraft removed from Delta will transition to our
Frontier operation during 2008; and one of the aircraft removed from Delta is
currently unallocated to our Partners.  We expect to place the
remaining 13 of the 29 ERJ-175 aircraft into service with US Airways during
2008.  Three of these aircraft will replace three ERJ-170 aircraft
that will transition to Frontier during 2008.The Company has options for 74 ERJ-170
aircraft, which may be converted to options for ERJ-175, ERJ-190 or ERJ-195
aircraft, which range in size from 78 seats to 110
seats.
 
 Under our amended Delta agreement, we
agreed to remove from service all 15 of our ERJ-135 at a rate of two aircraft
per month beginning in September 2008.  We expect to sell these
aircraft to Embraer or another party as the aircraft are removed from
service.  Under our Continental agreement, we expect all 24 CRJ-200
aircraft to be removed from service and returned to the
lessor.  Currently, we anticipate removing seven aircraft in the
fourth quarter of 2008, 10 aircraft in 2009 and seven aircraft in
2010.
  For the years ended December 31,
2007, 2006 and 2005
respectively, Delta accounted for approximately 33%, 35% and 34%, United
accounted for approximately 24%, 30% and 32%, US Airways accounted for
approximately 22%, 24% and 21% and American accounted for approximately 9%, 11%
and 13% of our regional airline services revenues. Continental and Frontier
accounted for approximately 10% and 2%, respectively, of our regional airline
services revenues for the year ended December 31, 2007.
  -4-
  Markets and
Routes
 
 Markets
  We believe that the development of hub
operations in St. Louis with American; in New York, Boston, Indianapolis,
Philadelphia, Pittsburgh and Washington, D.C. with US Airways; in Columbus,
Atlanta and Cincinnati with Delta; in Chicago and WashingtonD.C. with United, in Houston and
Cleveland with Continental and in Denver with Frontier has been a principal
factor in the growth of our flight operations and will facilitate implementation
of our growth and operating strategy. As of December 31, 2007, we offered
scheduled passenger service on approximately1,250 flights daily to 119
cities in 39 states, Canada, Mexico, Jamaica and the Bahamas. The following illustrates the routes
we currently fly for our Partners:
  -5-
  
 
 
 
   -6-
  
 
 
 
   -7-
  
 
 
 
   -8-
  Maintenance of Aircraft and
Training
  Using a combination of Federal Aviation
Administration (“FAA”) certified maintenance vendors and our
own personnel and facilities, we maintain our aircraft on a scheduled and
"as-needed" basis. We emphasize preventive maintenance and inspect our aircraft
engines and airframes as required. During 2007, we entered into long-term
maintenance agreements for engines,auxiliary power units (“APU”) and other airframe componentsfor our CRJ-200
aircraft, which will cover
the aircraft during the short-term lease period of two to three
years. Also, during 2007,
we entered into an agreement to maintain wheels and brakes on our ERJ-170/175
aircraft through February2017.  We have an
agreement to maintain the engines on our ERJ-145 family of aircraft through
October 2012, an agreement to maintain theAPUs on our ERJ-145 family of aircraft
throughJune
2013, agreements to
maintain the avionics on our ERJ-145 family of aircraft and ERJ-170 family of
aircraft through December 2014, an agreement to maintain wheels and brakes on
our ERJ-145 family of aircraft through June 2014 and an agreement to
maintain the engines on our ERJ-170 family of aircraft through December
2014.Under these agreements, we are charged
for covered services based on a fixed rate for each flight hour or flight cycle
accumulated by the engines or airframes in our service during each month. The
rates are subject to annual revisions, generally based on certain Bureau of
Labor Statistics' labor and material indices.
  We believe these agreements, coupled
with our ongoing maintenance program, reduce the likelihood of unexpected levels
of engine,APU, avionics and wheels and brakes
maintenance expense during their term.
  We perform our heavy and routine
maintenance projects at our facilities inIndianapolis,Columbus,Louisville,Pittsburgh andSt. Louis, and we perform routine maintenance
services from select line maintenance stations.
  All mechanics and avionics specialists
employed by us have appropriate training and experience and hold required
licenses issued by the FAA. We provide periodic in-house and outside training
for our maintenance and flight personnel and also take advantage of
manufacturers’ training programs that are offered when acquiring new
aircraft.
  We have an agreement with Flight Safety
International to provide for aircraft simulator training for our pilots. We have
no current plans to acquire our own simulator in the near term and believe that
Flight Safety or other third party vendors will be able to provide us with
adequate and cost effective flight simulator training to implement our growth
plans.
 
 Employees
  As of December 31, 2007, we employed
approximately4,670
full-time equivalent
employees. The following is a table of our principal collective bargaining
agreements and their respective amendable dates as of December 31,
2007:
  Employee
    Group
              Approximate
      Number
                of Full-Time
                Equivalent
      Employees
              RepresentingUnion
              Amendable
    DatePilots
              2,070
              International Brotherhood of
      Teamsters Airline Division Local 747
              October
  2007Flight
      Attendants
              1,410
              International Brotherhood of
      Teamsters Airline Division Local 210
              September
    2009Customer
      Service
              40
              International Brotherhood of
      Teamsters Airline Division Local 135
              November
    2012Dispatchers
              70
              Transport Workers Union ofAmericaLocal 540
              June
  2012
  As of December 31, 2007, we had
approximately 820 maintenancetechnicians and other maintenance
related personnel, who are not currently represented by any union, and
approximately260
administrationand support
personnel. Because of the high level of unionization among our employees we are
subject to risks of work interruption or stoppage and/or the incurrence of
additional expenses associated with union representation of our employees. We
have never experienced any work stoppages or other job actions and generally
consider our relationship with our employees to be good.
  -9-
 Executive Officers of the
Company
  The following table sets forth
information regarding our current executive officers, directors and key
employees as of December 31, 2007:
  Name
              Age
              PositionBryan K. Bedford
              46
              Chairman of the Board, President
      and Chief Executive OfficerRobert H. Cooper
              48
              Executive Vice President, Chief
      Financial Officer, Treasurer and SecretaryWayne C. Heller
              49
              Executive Vice President, Chief
      Operating OfficerLawrenceJ. Cohen
              52
              DirectorJoseph M. Jacobs
              54
              DirectorDouglas J. Lambert
              50
              DirectorMark E. Landesman
              47
              DirectorMark L. Plaumann
              52
              Director
 
 Bryan K. Bedford joined us in
July 1999 as our president and chief executive officer and a member of our
board of directors and became chairman of the board in August 2001. From
July 1995 through July 1999, Mr. Bedford was the president and
chief executive officer and a director of Mesaba Holdings, Inc., a
publicly-owned regional airline. He has over 19years of experience in the
regional airline industry, and was named regional airline executive of the year
in 1998 by Commuter and Regional Airline News and again in 2005 by Regional
Airline World magazine. Mr. Bedford is a licensed pilot and a certified
public accountant. He also served as the 1998 Chairman of the Regional Airline
Association (RAA), and remains on the Board of Directors of the
RAA.
  Robert H. Cooper joined us in
August 1999 as vice president and chief financial officer. In
February 2002, he became executive vice president, chief financial officer,
treasurer and secretary and assumed responsibility for all purchasing and
material control. He was previously employed with Mesaba Holdings, Inc.
from September 1995 through August 1999 as its vice president, chief
financial officer and treasurer. Mr. Cooper is a certified public
accountant. He has over 14years experience in the
regional airline industry. He has responsibility for financial accounting,
treasury, public reporting, investor relations, human resources, information
technology, purchasing and material control.
  Wayne C. Heller joined us in
August 1999 as Vice President—Flight Operations with responsibility for
flight crew supervision, system control, flight safety and flight quality
standards. In February 2002, he became Executive Vice President and Chief
Operating Officer of Chautauqua, and assumed responsibility for all aircraft
maintenance, records and engineering. From April 1996 until
August 1999 he was employed by Mesaba Airlines, Inc., as its Director
of System Operations Control. He is a licensed pilot and a licensed dispatcher
and has over 26years of regional airline
experience in operations.
  Lawrence J. Cohen has been a director
since June 2002. He is the owner and Chairman of Pembroke Companies, Inc., an
investment and management firm that he founded in 1991. The firm makes
investments in and provides strategic management services to real estate and
specialty finance related companies. From 1989 to 1991, Mr. Cohen worked at
Bear Stearns & Co. where he attained the position of Managing Director. From
1983 to 1989, Mr. Cohen served as first Vice President in the Real Estate
Group of Integrated Resources, Inc. From 1980 to 1983, Mr. Cohen was an
associate at the law firm of Proskauer Rose Goetz & Mendelsohn.
Mr. Cohen is a member of the bar in bothNew York andFlorida.
 
 Joseph M. Jacobs has been a
director since May 1998, and served as Vice-Chairman of the Board from
May 1998 to August 2001. He co-founded Wexford Capital LLC in 1994 and
serves as its President. From 1982 to 1994, Mr. Jacobs was employed by Bear
Stearns & Co., Inc. where he attained the position of Senior
Managing Director. From 1979 to 1982, he was employed as a commercial lending
officer at Citibank, N.A. Mr. Jacobs is a director of several
privately-held companies in which Wexford Capital has an
investment.
  Douglas J. Lambert has been a
director since August 2001. He is presently a Senior Director in the Debtor
Advisory and Crisis Management Group of Alvarez & Marsal Inc. From 1994
to 2003, Mr. Lambert was a Senior Vice President of Wexford Capital LLC.
From 1983 to 1994, Mr. Lambert held various financial positions with
Integrated Resources, Inc.'s Equipment Leasing Group, including Treasurer
and Chief Financial Officer. He is a certified public
accountant.
  Mark E. Landesman has been a
director since June 2002. Mr. Landesman is President of ML Management
Associates, Inc., an entertainment business management firm, which he founded in
1988. The firm is responsible for the financial affairs for numerous
entertainment industry clients. Mr. Landesman is a member of the Media
Entertainment Roundtable Committee and he is acertifiedpublicaccountant.
  -10-
 Mark L. Plaumann has been a director
since June 2002. He is presently a Managing-Member of Greyhawke Capital Advisors
LLC, which he co-founded in 1998. From 1995 to 1998, Mr. Plaumann was a Senior
Vice President of Wexford Capital LLC. From 1990 to 1995, Mr. Plaumann was
employed by Alvarez & Marsal, Inc. as a Managing Director. From 1985 to
1990, Mr. Plaumann worked for American Healthcare Management, Inc., where he
attained the position of President. From 1974 to 1985, Mr. Plaumann worked
in both the audit and consulting divisions of Ernst & Young, where he
attained the position of Senior Manager and he is a certified public
accountant.Mr. Plaumann is the Chair of our Audit
Committee, is an “audit committee financial expert” and is independent as
defined under applicable SEC and Nasdaq rules.
 
 On December 3, 2007 Jay L. Maymudes
resigned as a director and committee member of the Company.  There
were no disagreements with the Company.
  Code-Share
Agreements
 
 Through our subsidiaries, we have
entered into code-share agreements with US Airways, American, Delta, United,
Continental and Frontier that authorize us to use their two-character flight
designator codes (“US,” “AA,” “DL,” “UA,” “CO” and “F9”) to identify our flights
and fares in their computer reservation systems, to paint our aircraft with
their colors and/or logos, to use their service marks and to market and
advertise our status as US Airways Express, AmericanConnection, Delta
Connection, United Express, Continental Express and Frontier Airlines,
respectively. In connection with a marketing agreement among Delta, Continental
and Northwest Airlines, certain of the routes that we fly using Delta's and
Continental’s flight designator codes are also flown under Northwest's
designator code. Under the code-share agreements between our subsidiaries and
each of US Airways, American, Delta, United, Continental and Frontier, we are
compensated on a fixed-fee basis on all of our US Airways Express,
AmericanConnection, Delta Connection, United Express, Continental Express and
Frontier Airlines flights. In addition, under our code-share agreements, our
passengers participate in frequent flyer programs of the Partners, and the
Partners provide additional services such as reservations, ticket issuance,
ground support services, commuter slot rights and airport
facilities.
 
 US Airways Code-Share
Agreements
 
 We have entered into an Amended and
Restated Jet Services Agreement with US Airways, dated April 26, 2005. The
code-share agreement provides that we will operate these aircraft to provide US
Airways Express service between US Airways hubs and cities designated by US
Airways. On July 21, 2006, we amended this agreement and agreed to remove 20
ERJ-145 aircraft from US Airways operations and transition them into operation
under the Continental code-share agreement during 2007.  As of
December 31, 2007, all20
aircrafthave been
transitioned from US Airways to Continental. As of December 31, 2007, we
operated10 ERJ-145 aircraft under this
agreement.
 
 In September 2005, we entered into a code-share agreement
with US Airways to operate 28 ERJ-170 aircraft on terms substantially similar to
those of the ERJ-145 code-share agreement between us and US Airways. On July 24,
2006, we amended this agreement to operate an additional30 ERJ-175 aircraft. The ERJ-175 aircraft have
a term of twelve years for each aircraft. As of December 31, 2007,20of the ERJ-175 aircraft were in service
for US Airways; the remaining10will be placed into service in
2008.We further
amended this agreement inDecember 2006 toallow us
the option to replace up to eight ERJ-170 aircraft with eight ERJ-175 aircraft.
As of December 31, 2007, we replaced five of the eight, such that,23 ERJ-170 and 25 ERJ-175 aircraft were in
operation under this agreement.  By the end of 2008 we anticipate
having 20 ERJ-170 aircraft and 38 ERJ-175 aircraft in operation under this
agreement.
 
 In exchange for providing the designated
number of flights and performing our other obligations under the code-share
agreements, we receive compensation from US Airways three times each month in
consideration for the services provided under the code-share agreements. We
receive an additional amount per available seat mile flown and may also receive
incentives or pay penalties based upon our performance, including fleet launch
performance, on-time departure performance and completion percentage rates. In
addition certain of our operating costs are considered "pass through" costs
whereby US Airways has agreed to reimburse us the actual amount of costs we
incur for these items. Landing fees, passenger catering, passenger liability
insurance and aircraft property tax costs are pass through costs and included in
our regional airline services revenue. Beginning in May 2005, US Airways elected
to provide fuel directly for all of our US Airways operations. This change
eliminated fuel expense and the related fuel reimbursement (previously recorded
as revenue). Operating margins were not affected by this
change.
 
 As of December 31, 2007, we were
providing320
flightsper day as US
Airways Express betweenNew
York,Boston,Philadelphia,Pittsburgh,Indianapolis,Washington, D.C. and designated outlying
cities.
 
 The code-share agreement for the ERJ-145
aircraft terminates in March 2013.  The code-share agreement for the
ERJ-170 aircraft and the ERJ-175 aircraft terminates in September 2015 with
respect to the ERJ-170 aircraft and twelve years from the in-service date for
each ERJ-175 aircraft. US Airways may terminate the code-share agreements at any
time for cause upon not less than 90 days notice and subject to our right to
cure under the following conditions:
 
 • if we fail to perform or observe any
material covenant or condition or agreement to be performed or observed by us,
provided that if we breach any payment obligation, US Airways has the right to
terminate the agreement on 10 days’ prior written notice unless we cure such
breach prior to the expiration of 10 days;
 
 -11-
 • if our flight completion factor falls
below specified percentages during specified periods due to operational
deficiencies that are within our control;
 
 • if our on time departure performance
falls below specified percentages during specified periods;
 
 • if we admit liability or are found
liable for any safety infraction by the FAA that could reasonably be expected to
lead to the suspension or revocation of our operating certificate or if in US
Airways' reasonable opinion we are not complying in any material respect with
applicable safety and operational requirements;
 
 • if we fail to use commercially
reasonable efforts to comply with the applicable provisions of the “Jets for
Jobs” protocol;
 
 • if our FAA operating certificate is
suspended or revoked; or
 
 • in the event that we or an affiliate
of ours shall have commenced the provision of flight services under the code
share between US Airways and Republic Airline and such agreement is subsequently
terminated, among other things.
 
 In September, 2005, we purchased 113
commuter slots atRonaldReaganWashingtonNational(DCA)Airport and24 commuter slots at New York-LaGuardia
(LGA) Airport under our commuter slot option agreement with US Airways. We
assigned the right of use for these commuter slots to US Airways and these
commuter slots are being operated by US Airways and US Airways Express carriers
under a licensing agreement for which US Airways pays us rent. Prior to the
expiration of the agreement to license the commuter slots, US Airways has the
right to repurchase all, but not less than all, of theDCA commuterslots at a predetermined price. The
licensing agreement between us and US Airways for the LGA commuter slots expired
on December 31, 2006, but we maintain a security interest in the LGA slots if US
Airways fails to perform under the current licensing
agreement.
 
 The American Code-Share
Agreement
 
 As of December 31, 2007, we operated15 ERJ-140 aircraft for American under a
fixed-fee code-share agreement and provided 90 flightsper day betweenSt. Louis anddesignated outlying
cities.
 
 Under the code-share agreement, American
retains all passenger, certain cargo and other revenues associated with each
flight, and is responsible for all revenue-related expenses. We share revenue
with American for certain cargo shipments. Additionally, certain operating costs
are considered "pass through" costs and American has agreed to reimburse us the
actual amount of costs we incur for these items. Fuel, landing fees, hull and
liability insurance and aircraft property tax costs are pass through costs and
included in our regional airline services revenue. Aircraft lease payments
are also considered a pass through cost, but are limited to a specified limit
with respect to the first 20 aircraft put into service for American. American
pays us periodically throughout the month on an agreed schedule, subject to
American's right to offset amounts we owe them under the code-share agreement. A
reconciliation payment will be made by American to us if uncontrollable
cancellations exceed a specified level of scheduled block hours during any
calendar quarter.
 
 If American terminates the code-share
agreement for cause, American has a call option to require that we assign to
American all of its rights under the leases of aircraft, and to lease to
American the aircraft to the extent we own them, used at that time under the
code-share agreement. If American exercises its call option, we are required to
pay certain maintenance costs in transferring the aircraft to American's
maintenance program.
 
 If American terminates the code-share
agreement without cause, we have the right to put the leases of the aircraft, or
tosellthe aircraft to American to the extent
owned by us, used under the code-share agreement to American. American also has
a call option to require us to assign to American these leases. If we exercise
our put or American exercises its call right, both parties are obligated to
implement a schedule to terminate the code-share agreement in an orderly fashion
and transition the aircraft from us to American.
 
 The term of the American code-share
agreement continues until February 1, 2013. American may reduce the term by one
year each time that we fail to achieve an agreed performance level. American may
only exercise this right three times during the term of the code-share
agreement. The agreement may be subject to termination for cause prior to that
date under various circumstances including:
 
 • a change in the regulations governing
air carriers that materially affects the rights and/or obligations of either
party, subject to negotiation of amendments to the code-share agreement or third
party mediation;
 
 -12-
 • if we or American become insolvent or
fail to pay our debts as they become due, the other party may terminate the
agreement subject to five business days notice and rights of
assurance;
 
 • failure by us or American to perform
the material terms, covenants or conditions of the code-share agreement, which
includes the American standards of service, subject to 30 day notice and cure
rights;
 
 • if we or American fail to make a
payment when due, subject to five business days notice and cure
rights;
 
 • if either party suspends or is
required to suspend its operations due to any safety reason, the other party may
terminate the agreement on five days notice;
 
 • if American, in its reasonable
discretion, determines that we materially breached a representation or warranty
to them that creates a serious and imminent threat to the safe operation of
AmericanConnection services, American may immediately terminate the code-share
agreement;
 
 • if we fail to achieve specified levels
of operating performance in completion factor, on-time arrivals, customer
complaints and baggage, American may terminate the agreement, subject to
corrective action plan and adherence to such plan; or
 
 • if either party assigns, by operation
of law or otherwise, the code-share agreement without the written consent of the
other party, subject to five days notice and cure rights, or if we enter into
any merger, sale or acquisition of all or substantially all of our assets or a
majority of our outstanding voting interests with an air carrier other than an
entity that is under common control with us.
 
 American may terminate the code-share
agreement without cause upon 180 days notice, provided that such notice may not
be given prior to September 30, 2008. If American exercises this right, it is
required to reimburse us for certain costs and we and American have certain
"put" and "call" rights with respect to the aircraft we operate for
them.
 
 If American terminates the code-share
agreement for any reason prior to September 30, 2008, or we terminate the
code-share agreement prior to September 30, 2008, due to a breach of the
agreement by American, American has agreed to reimburse us for certain price
concessions that we granted American.
 
 The Delta Code-Share
Agreements
 
 In March 2007,we amendedourfixed-fee agreements with Delta. On
March 27, 2007 the United States Bankruptcy Court for the Southern District of
New York approved the amended agreements. Key terms of the amended agreements
include the removal of all 15 ERJ-135 aircraft beginning in September 2008 at a
rate of two aircraft per month, and effective May 1, 2007, an approximate 3%
permanent reduction of block hour fees charged onour remaining24 ERJ-145 andour 16ERJ-170 aircraft.
 
 On August
22, 2007, we amended our Jet Services Agreement with Delta to provide for the
replacement of 16 ERJ-170 regional aircraft operating as Delta Connection with
16 ERJ-175 regional jet aircraft.  The new aircraft are expected to be
placed into service during the second half of 2008 and the first quarter of
2009.
 
 As of December 31, 2007, we operated 15
ERJ-135 aircraft, 24 ERJ-145 aircraft, including two spares, and 16 ERJ-170aircraft for Delta under
fixed-fee code-share agreements. As of December 31, 2007, we provided 330
flightsper day as Delta
Connection betweenCincinnati,Columbus andAtlanta anddesignated outlying cities. In
connection with a marketing agreement among Delta, Continental and Northwest
Airlines, certain of the routes that we fly using Delta's and Continental’s
flight designator codes are also flown under Northwest's designator
code.
 
 The code-share agreements for the
ERJ-145 and ERJ-170 aircraft terminate in May 2016 and January 2019,
respectively. Delta may terminate the code-share agreements at any time, with or
without cause, if it provides us 180 days written notice, provided that such
notice shall not be given prior to November 2009for the ERJ-145 regional jet code-share
agreement andJuly2015 forthe ERJ-170 regional jet code-share
agreement.  If Delta does choose to eliminate any aircraft at that
time, it may not reduce the number of aircraft in service to less than 12 during
the 12-month period following the 180 day initial notice period unless it
completely terminates the code-share agreement. We refer to this as Delta's
partial termination right.
 
 If Delta exercises this right under
either agreement or if we terminate either agreement for cause, we have the
right to require Delta either to purchase, sublease or assume the lease of
aircraft leased by us with respect to any of the aircraft we previously operated
for Delta under that agreement. If we choose not to exercise this right, or if
Delta terminates either agreement for cause, Delta may require us to sell or
sublease to it or Delta may assume the lease of aircraft leased by us with
respect to any of the aircraft we previously operated for it under that
agreement.
  -13-
 Certain of our operating costs are
considered "pass through" costs, whereby Delta has agreed to reimburse us the
actual amount of costs we incur for these items. Fuel, engine maintenance
expenses, landing fees, passenger liability insurance, hull insurance, war risk
insurance, de-icing costs, and aircraft property taxes are some of the pass
through costs and included in our regional airline services revenue. Aircraft
rent/ownership expenses are also considered a pass through cost, but the
reimbursement is limited to specified amounts for certain
aircraft.
 
 The initial term of the ERJ-145
code-share agreement is until May 31, 2016. At the end of the term, Delta has
the right to extend the agreement for an additional five years on the same terms
and conditions. If either we or Chautauqua enter into a merger where we are not
the surviving entity or the ultimate beneficial ownership of the surviving
entity following a merger is not substantially similar (i.e., at least 75%
common ownership) to the ultimate beneficial ownership of us or Chautauqua prior
to the merger (which we refer to as a merger), or if a party acquires more than
49% of our voting power or outstanding common stock or that of Chautauqua (with
limited exceptions) (which we refer to as a change in control), Delta shall have
the right to extend the term of the code-share agreement for an additional ten
years beyond the applicable termination date of the
agreement.
 
 The agreement may be subject to early
termination under various circumstances including:
 
 • if either Delta or we file for
bankruptcy, reorganization or similar action (or if any such action is imminent)
or if either Delta or we make an assignment for the benefit of
creditors;
 
 • if either Delta or we commit a
material breach of the code-share agreement, subject to 30 days notice and cure
rights; or
 
 • upon the occurrence of an event of
force majeure that continues for a period of two or more consecutive months,
subject to 30 days prior written notice to the party affected by the force
majeure event.
 
 In addition, Delta may immediately
terminate the code-share agreement upon the occurrence of one or more of the
following events:
 
 • if there is a change in control of
us;
 
 • if there is a merger involving
us;
 
 • if Delta is unsatisfied with the
product quality we are providing 30 days after it has supplied us written notice
of its dissatisfaction and has proposed remedial measures;
 
 • if we fail to maintain a specified
completion rate with respect to the flights we operate for Delta during a
specified period; or
 
 • if our level of safety is not
reasonably satisfactory to Delta, subject to 30 days notice and cure
period.
 
 The United Code-Share
Agreements
 
 On August 22, 2007, weamendedour Jet Services Agreement with United
to provide for the operation often additionalERJ-170 aircraft as United Express. The
aircraft, which will
transition from Delta,are
expected to be placed into service during the fourth quarter of 2008 and the
first quarter of 2009.
 
 We have entered into fixed-fee
code-share agreements with United to operateseven ERJ-145 aircraft and 38 ERJ-170aircraft to provide United
Express Service in markets to be determined by United. As of December 31, 2007,
we operatedseven ERJ-145
aircraft and 28 ERJ-170
aircraft and provided200
flightsper day as United
Express between Chicago,WashingtonD.C.and designated outlying
cities.
 
 The fixed rates that we receive from
United under the code-share agreements are annually adjusted in accordance with
an agreed escalation formula. Additionally, certain of our operating costs are
considered "pass through" costs whereby United has agreed to reimburse us the
actual amount of costs we incur for these items. Fuel and oil, landing fees, war
risk insurance, liability insurance and aircraft property taxes are pass through
costs and included in our regional airline services revenue.Beginning in January 2007,
United elected to provide fuel directly in certain locations, which eliminates a
portion of our fuel expense and the related fuel reimbursement (previously
recorded as revenue).
 
 The ERJ-145 and ERJ-170 code-share
agreements terminate on June 30, 2014 and June 30, 2019, respectively. United
has the option of extending each agreement for five years or less; however, the
ERJ-145 code-share agreement may be terminated by Unitedor usupon 18 months prior written notice
provided that such notice shall not be deliveredby Unitedprior to December 31,2007, and  by us prior to
December 31, 2008. In
addition, the code-share agreements may be terminated under the following
conditions:
 
 -14-
 • if either party becomes insolvent, is
not regularly paying its bills when due without just cause, takes any step
leading to its cessation as a going concern, makes an assignment of
substantially all of its assets for the benefit of creditors or a similar
disposition of the assets of the business, or either ceases or suspends
operations; or
  • if either party fails to fulfill an
obligation under the code-share agreements for a period of thirty days after
written notice to cure.
  United also may terminate the code-share
agreements upon at least thirty days notice and subject to our right to cure
under the following conditions:
  • Our operations fall below certain
minimum operating thresholds for a period of three consecutive months or any six
month period in a rolling 12 month period regarding controllable flight
completion, mishandled bags and on-time performance; or
  • We knowingly maintain falsified books
or records or submit false reports of a material nature.
  United may immediately terminate the
respective code-share agreements if Chautauqua Airlines or Shuttle America
operates, except pursuant to preexisting agreements with US Airways and Delta,
any additional aircraft or turboprop aircraft pursuant to a marketing or
code-share relationship with any party other than United to provide hub service
at United’s hubs in Denver, Los Angeles, San Francisco, Chicago, Washington,
D.C. or Seattle. Chautauqua Airlines and Shuttle America also cannot engage or
attempt to engage, on its behalf or on behalf of a third party, in the business
of providing air transportation at any of United’s hubs or for any carrier that
has or attempts to have hub operations at any of United’s hubs, or operate any
additional aircraft or turbo props with any party other than United to provide
hub service at United’s hubs.
 
 United has a call option to assume our
ownership or leasehold interest in certain aircraft if we wrongfully terminate
the code-share agreements or if United terminates the agreements for our breach
for certain reasons.
 
 The Continental Code-Share
Agreement
 
 As of December 31, 2007, we operated 20
ERJ-145 aircraftand 24
CRJ-200 aircraft for Continental under a fixed-fee code-share agreement and
provided 270 flights per day between Houston,Cleveland anddesignated outlying
cities.
 
 In July 2006, we entered into a
fixed-fee code-share agreement with Continental to provide and operate44 aircraftas a Continental Express carrier.
During 2007 we transitioned20 ERJ-145 aircraft from our US Airways
operations and leased24
CRJ-200 aircraft to fulfill
the commitment. Continental was responsible for Chautauqua Airlines' reasonable
out-of-pocket costs of preparing each covered aircraft, other than the spare
aircraft, up to a maximum amount, prior to its being placed into service. TheCRJ-200aircraft are operated under the
agreement on termsgenerally equivalent to our CRJ-200
leasesthat vary from two
tothreeyears.The ERJ-145 aircraft have a term of
three to five years.Under certain conditions, Continental
may extend the term on the aircraft up to five additional
years.
 
 All fuel will be purchased directly by
Continental and will not be charged back to Chautauqua Airlines. Under the
agreement, Continental purchases all capacity at predetermined rates and
industry standard pass-through costs.
 
 In connection with a marketing agreement
among Delta, Continental and Northwest Airlines, certain of the routes that we
fly using Delta's and Continental’s flight designator codes are also flown under
Northwest's designator code.
 
 The term of the agreement is effective
as of January 8, 2007 and, unless earlier terminated or extended, will continue
until July 2012.
 
 The agreement may be subject to early
termination under various circumstances, including:
 
 • immediately, by Continental, upon the
occurrence of an event that constitutes cause, subject to prior written notice
to us; or
 
 • if either Continental or we commit a
material breach of the code-share agreement, subject to two business days notice
if we breach the agreement and five business days notice if Continental breaches
the agreement; or
 
 •if there is a change in control of
us.
 
 -15-
 The Frontier Code-Share
Agreement
 
 On January 11, 2007, we entered into a
fixed-fee code-share agreement with Frontier.
Under theterms of theagreement, we will provide
and operate17
ERJ-170 aircraft for
Frontier.  As of December 31, 2007 we operatednine ERJ-170 aircraft, the remaining eight
aircraft will be placed into service in 2008.We provided 40 flights per
day as Frontier betweenDenver anddesignated outlying
cities.
  Frontier will purchase all capacity at
predetermined rates and will directly pay or reimburse Republic Airline for
industry standard pass-through costs. The first aircraft was placed into service
in March 2007 and the last aircraft is expected to be placed into serviceinDecember 2008. The agreement has a term
of eleven years from the date of the last aircraft delivery. Frontier has the
option to extend the agreement for up to six additional years. All fuel will be
purchased directly by Frontier and will not be charged back to Republic Airline.
Republic Airline is responsible for all costs and expenses of preparing each
covered aircraft prior to its being placed into service.
 
 The term of the agreement became
effective as of March 2007, and, unless earlier terminated or extended, will
continue until December 2019.
 
 The agreement may be subject to early
termination under various circumstances including:
 
 • immediately, by Frontier, upon the
occurrence of an event that constitutes cause, subject to prior written notice
to us; or
 
 • if either Frontier or we commit a
material breach of the code-share agreement, subject to two business days notice
if we breach the agreement and five business days notice if Frontier breaches
the agreement; or
 
 •if there is a change in control of
us.
 
 Competition and Economic
Conditions
  The airline industry is highly
competitive. We not only compete with other regional airlines, some of which are
owned by or are operated as code-share partners of major airlines, but also face
competition from low-fare airlines and major airlines on some of our
routes.
  The principal competitive factors in the
airline industry are location, fare pricing, frequent flyer loyalty programs,
customer service, routes served, flight schedules, aircraft types and code-share
relationships. Certain of our competitors are larger and have significantly
greater financial and other resources than we do. Moreover, federal deregulation
of the industry allows competitors to rapidly enter our markets and to quickly
discount and restructure fares. The airline industry is particularly susceptible
to price discounting because airlines incur only nominal costs to provide
service to passengers occupying otherwise unsold seats.
  Generally, the airline industry is
highly sensitive to general economic conditions, in large part due to the
discretionary nature of a substantial percentage of both business and pleasure
travel. In the past, many airlines have reported decreased earnings or
substantial losses resulting from periods of economic recession, heavy fare
discounting, high fuel prices and other factors. Economic down turns combined
with competitive pressures have contributed to a number of bankruptcies and
liquidations among major and regional carriers. The effect of economic down
turns is somewhat mitigated by our fixed-fee code-share agreements with respect
to our flights. In addition, if our Partners remain financially strained by high
fuel prices, theymay
reducethe number of
flights we operate in order to reduce their operating costs.
 
 Government
Regulation
  All interstate air carriers are subject
to regulation by the Department of Transportation, referred to as the DOT, the
Federal Aviation Administration, or FAA, the TSA, or Transportation Security
Administration and certain other governmental agencies. Regulations promulgated
by the DOT primarily relate to economic aspects of air service, those of the TSA
to security and those of the FAA to operations and safety. The FAA requires
operating, airworthiness and other certifications; approval of personnel who may
engage in flight maintenance or operations activities; record keeping procedures
in accordance with FAA requirements; and FAA approval of flight training and
retraining programs. Generally, governmental agencies enforce their regulations
through, among other mechanisms, certifications, which are necessary for our
continued operations, and proceedings, which can result in civil or criminal
penalties or suspension or revocation of operating authority. The FAA can also
issue maintenance directives and other mandatory orders relating to, among other
things, grounding of aircraft, inspection of aircraft, installation of new
safety-related items and the mandatory removal, replacement or modification of
aircraft parts that have failed or may fail in the future.
 
 -16-
 We believe that we are operating in
material compliance with FAA regulations and hold all necessary operating and
airworthiness certificates and licenses. We incur substantial costs in
maintaining our current certifications and otherwise complying with the laws,
rules and regulations to which we are subject. Our flight operations,
maintenance programs, record keeping and training programs are conducted under
FAA approved procedures.
  The DOT allows local airport authorities
to implement procedures designed to abate special noise problems, provided such
procedures do not unreasonably interfere with interstate or foreign commerce or
the national transportation system. Certain airports, including major airports
atBoston,Washington, D.C.,Newark,Dallas,Philadelphia,Charlotte,Chicago,Los Angeles,San Diego,OrangeCounty(California) andSan Francisco, have established airport restrictions
to limit noise, including restrictions on aircraft types to be used and limits
on the number of hourly or daily operations or the time of such operations. In
some instances, these restrictions have caused curtailments in service or
increases in operating costs, and such restrictions could limit our ability to
commence or expand our operations at affected airports. Local authorities at
other airports are considering adopting similar noise
regulations.
  Pursuant to law and the regulations of
the DOT, we must be actually controlled byUnited States citizens. In this regard, our President and at
least two-thirds of our Board of Directors must beUnited States citizensand not more than 25% of our voting
stock may be owned or controlled by foreign nationals, although subject to DOT
approval the percent of foreign economic ownership may be as high as
49%.
  ITEM 1A. RISK
FACTORS
  The following risk factors, in addition
to the information discussed elsewhere herein, should be carefully considered in
evaluating us and our business:
  Risks Related To Our
Operations
 
 We are dependent on our code-share
relationships with our Partners.
  We depend on relationships created by
our regional jet fixed-fee code-share agreements with US Airways, American,
Delta, United, Continental and Frontier for all of our regional airline service
revenues. Any material modification to, or termination of, our code-share
agreements with any of these Partners could have a material adverse effect on
our financial condition, results of our operations and the price of our common
stock. Each of the code-share agreements contains a number of grounds for
termination by our Partners, including our failure to meet specified performance
levels. In addition, American may terminate its code-share agreement without
cause upon 180 days notice, provided such notice may not be given prior to
September 30, 2008. If American terminates its code-share agreement for
cause, it has the right to require us to assign to them our leases of
all ERJ-140 aircraft then operating under the code-share agreement or
to lease such aircraft to them to the extent we own them. If American terminates
our code-share agreement other than for cause, we have the right to require
American to assume our leases of all ERJ-140 aircraft then operating
under the code-share agreement, or to lease such jets from us to the extent we
own them. Delta may partially or completely terminate its code-share agreement
with respect to the ERJ-135/145 aircraft, with or without cause, on
180 days written notice at any time after November 2009, and may
partially or completely terminate its code-share agreement with respect to the
ERJ-170 aircraft, with or without cause, on 180 days written notice at any
time afterJuly2015.If Delta exercises this right under
either agreement or if we terminate either agreement for cause, we have the
right to require Delta either to purchase, sublease or assume the lease of
aircraft leased by us with respect to any of the aircraft we previously operated
for Delta under that agreement. If we choose not to exercise this right, or if
Delta terminates either agreement for cause, Delta may require us to sell or
sublease to it or Delta may assume the lease of aircraft leased by us with
respect to any of the aircraft we previously operated for it under that
agreement. United may terminate its code-share agreement with respect to the
ERJ-145 aircraft without cause on 18 months prior written notice, provided
that such notice may not be delivered prior to December 31, 2007. If we wrongfully terminate our
code-share agreement, breach certain provisions thereof or fall below certain
minimum operating thresholds for three consecutive months or any six month
period in a rolling 12 month period, United can assume our ownership or
leasehold interests in the aircraft we operate for them. Each of Continental and
Frontier may terminate their code-share agreements with cause or if we breach
certain provisions thereof including a breach of our guaranty granted to each of
them.
  In addition, because substantially all
of our operating revenues are currently generated under the code-share
agreements, if any one of them is terminated, our operating revenues and net
income will be materially adversely affected unless we are able to enter into
satisfactory substitute arrangements or, alternatively, fly under our own flight
designator code, including obtaining the airport facilities and gates necessary
to do so. We cannot assure you that we would be able to enter into substitute
code-share arrangements, that any such substitute arrangements would be as
favorable to us as the current code-share agreements or that we could
successfully fly under our own flight designator code.
  For the years ended December 31, 2007,
2006 and 2005respectively,
US Airways accounted for approximately 22%, 24% and 21%, Delta accounted for
approximately 33%, 35% and, 34%, American accounted for approximately 9%, 11%
and 13% and United accounted for approximately 24%, 30% and 32% of our regional
airline service revenues.  Continental and Frontier accounted for
approximately 10% and 2%, respectively, of our regional airline service revenues
forthe year ended December
31, 2007.
  -17-
 We may be unable to redeploy smaller
aircraft removed from service in response to our Partners' demand for larger
aircraft.
  Certain of our Partners have requested
that we replace ERJ-145 and smaller aircraft with larger aircraft. To the extent
that we agree to remove an ERJ-145 or smaller aircraft from service, we must
either sell or sublease the aircraft to another party or redeploy it in order to
cover our carrying expenses for that aircraft. Our inability to sell, sublease
and/or redeploy aircraft that have been removed from service could have a
material adverse effect on our financial condition, results of operations and
the price of our common stock.
  If the financial strength of any of our
Partners decreases, our financial strength is at risk.
  We are directly affected by the
financial and operating strength of our Partners. In the event of a decrease in
the financial or operational strength of any of our Partners, such partner may
be unable to make the payments due to us under its code-share agreement. In
addition, it may reduce utilization of our aircraft to the minimum levels
specified in the code-share agreements. US Airways, Delta and United have
recently emerged from bankruptcy. In addition, it is possible that any
code-share agreement with a code-share partner that files for reorganization
under Chapter 11 of the bankruptcy code may not be assumed in bankruptcy and
could be modified or terminated. Any such event could have an adverse effect on
our operations and the price of our common stock. As of February 1, 2008,
Standard & Poor's and Moody's, respectively, maintained ratings of B-
and B3 for US Airways, B and B2for AMR Corp., the parent of American,BandB2for Delta, B and B2 for UAL Corp., the
parent of United, and B and B2for Continental. Ratings for Frontier
Airlines Holdings, Inc., the parent of Frontier, are not available.
  Our Partners may expand their direct
operation of aircraft thus limiting the expansion of our relationships with
them.
  We depend on major airlines such as our
Partners to contract with us instead of purchasing and operating their own
aircraft. However, some major airlines own their own regional airlines and
operate their own aircraft instead of entering into contracts with us or other
regional carriers. For example, American and Delta have acquired many aircraft
which they fly under their affiliated carriers, American Eagle, with respect to
American, and Comair, with respect to Delta. In addition, US Airways is
operating aircraft through its PSA subsidiary. We have no guarantee that in the
future our Partners will choose to enter into contracts with us instead of
purchasing their own aircraft or entering into relationships with competing
regional airlines. They are not prohibited from doing so under our code-share
agreements. In addition, US Airways previously announced that, pursuant to an
agreement with its pilots, US Airways will not enter into agreements with its
regional affiliates to fly ERJ-190 and higher capacity aircraft and it is
possible that our other partners will make the same decision. A decision by US
Airways, American, Delta, United, Continental or Frontier to phase out our
contract based code-share relationships and instead acquire and operate their
own aircraft or to enter into similar agreements with one or more of our
competitors could have a material adverse effect on our financial condition,
results of operations and the price of our common stock.
 
 Any labor disruption or labor strikes by
our employees or those of our Partners would adversely affect our ability to
conduct our business.
  All of our pilots, customer service
employees, flight attendants and dispatchers are represented by unions.
Collectively, these employees represent approximately77%of our workforce as of December 31,
2007. Although we have never had a work interruption or stoppage and believe our
relations with our unionized employees are generally good, we are subject to
risks of work interruption or stoppage and/or may incur additional
administrative expenses associated with union representation of our employees.
If we are unable to reach agreement with any of our unionized work groups on the
amended terms of their collective bargaining agreements, we may be subject to
work interruptions and/or stoppages. Any sustained work stoppages could
adversely affect our ability to fulfill our obligations under our code-share
agreements and could have a material adverse effect on our financial condition,
results of operations and the price of our common stock.
  Under
the terms of our jet code-share agreement with US Airways, if we are unable to
provide scheduled flights as a result of a strike by our employees, it is only
required to pay us for certain fixed costs for specified periods. Under the
terms of the code-share agreements with American, Delta, United, Continental and
Frontier, none of them are required to pay us any amounts during the period our
employees are on strike and we are unable to provide scheduled flights. A
sustained strike by our employees would require us to bear costs otherwise paid
by our Partners.
  In addition, a labor disruption other
than a union authorized strike may cause us to be in material breach of our
code-share agreements, all of which require us to meet specified flight
completion levels during specified periods. Our Partners have the right to
terminate their code-share agreements if we fail to meet these completion
levels.
 
 
 -18-
 Our current growth plans may be
materially adversely affected by substantial risks, some of which are outside of
our control.
  We plan to acquire an additional29 ERJ-170/175 aircraft by the end of 2008,
all of which are subject to firm orders. At December 31, 2007, we had agreements
toplace all of the 29
aircraft into service with our Partners. We have financing commitments in place
for all of these firm orders. If we are incorrect in our assessment of the
profitability and feasibility of our growth plans, if circumstances change in a
way that was unforeseen by us or if we are unable to consummate financing for
these aircraft, we may not be able to grow as planned.
  Under our code-share agreements, we are
obligated to place in service an additional29 aircraftthrough March 2009, at an aggregate cost, excluding the
cost of acquiring the aircraft and related parts, to us of approximately$6.4 million. These costs, which are related to the
acquisition of these aircraft, include the acquisition of related additional
ground and maintenance facilities and support equipment, the employment of
approximately500
additionalemployees and
the integration of those aircraft, facilities and employees into our existing
operations.
  As of December 31, 2007, we had options
to purchase an aggregate of74 aircraftfrom Embraer. If we choose to exercise
options to purchase aircraft from Embraer prior to obtaining a commitment from
existing or futurepartners to place the aircraft in
service, we will be obligated to purchase the aircraft from Embraer and to bear
the cost of operation even if we cannot place the aircraft in service with a
code-share partner, which could have a material adverse effect on our financial
condition, results of operations and the price of our common
stock.
  Our ability to manage our growth
effectively and efficiently requires us to continue to accurately forecast our
equipment and human resources needs and to continue to expend funds to improve
our operating, financial and management controls, reporting systems, procurement
process and procedures. In addition, we must effectively expand, train and
manage our employee base, which could be costly. Our growth will place a
significant strain on our management and other corporate resources. If we are
unable to manage our anticipated growth effectively and efficiently, our
business could be harmed.
 
 Our growth plans may be adversely
affected by our code-share agreements with American and Delta. Chautauqua’s
American agreement requires us to provide regional airline services exclusively
for American at itsSt.
Louis huband within 50
statute miles of that hub. This agreement also prohibits us from providing
competing regional hub services atMemphis,Nashville andKansas City andmeans that, without American's consent,
we are prohibited from operating flights under our own flight designator code or
on behalf of any other air carrier providing "hub" services in or out of these
airports. Chautauqua's Delta agreement prohibits it from conducting code-share
flying into several major metropolitan airports, except under its existing
code-share agreements with American and US Airways. Republic Airline’s Delta
agreement prohibits it from conducting code share flying into several major
metropolitan airports, except under its existing code-share agreement with
United. Pursuant to the terms of Chautauqua's and Republic Airline’s code-share
agreement with Delta, we are prohibited from operating aircraft other than for
Delta except for (1) those we operates for our existing Partners,
(2) the additional aircraft it may operate under its existing agreements
and (3) aircraft subject to other limited exceptions. Furthermore, pursuant
to the terms of our code-share agreements with United, except for our current
code-share flying, Shuttle America and Chautauqua are prohibited from operating
50 seat or larger aircraft or turboprops from United’s current hub airports.
United’s hub airports areDenver,Washington Dulles,Los Angeles, Chicago O'Hare,Seattle andSan Francisco.
 
 Our
Partners may be restricted in increasing the level of business that they conduct
with us, thereby limiting our growth.
 
 In general, the pilots' unions of
certain major airlines have negotiated collective bargaining agreements that
restrict the number and/or size of regional aircraft that a particular carrier
may operate. A "scope" clause in US Airways' current collective bargaining
agreement with its pilots prevents US Airways from using more than 465 aircraft
not flown by its pilots in its operations. There are no quantity limitations in
the US Airways “scope” limitations for small aircraft. For purposes of this
“scope” restriction, a small regional jet is defined as any aircraft configured
with 78 or fewer seats. For purposes of this limitation, a large regional jet is
an aircraft configured with 79 to 90 passenger seats.USAirways can outsource up to an
additional 55 aircraft, including the ERJ-175 and CRJ-900, configured with more
than 78 seats but less than 90 seats, subject to certain limitations. We cannot
assure you that US Airways will contract with us to fly any additional aircraft.
Our pilots union limited their approval to 80 additional aircraft for US
Airways, which includes the 28 ERJ-170s obtained from US Airways, the 20
ERJ-175s added during 2007 and the incremental ten aircraft that will be placed
in service in 2008. A "scope" clause in American's current collective bargaining
agreement with its pilots limits it from operating aircraft having 51 or more
seats. A "scope" clause in Delta's current collective bargaining agreement with
its pilots restricts it from operating aircraft having more than 70 to 76 seats
and limits it from operating more than 175, or under certain circumstances, 200
aircraft having 70 to 76 seats. United’s "scope" limitations restrict it from
operating aircraft configured with more than 70 seats or any aircraft weighing
more than 83,000 pounds. Continental’s “scope” limitations restrict it from
operating aircraft configured with more than 51 seats.
  -19-
 American's "scope" limitations further
limit itspartners, in our case Chautauqua, from
operating aircraft with 51 or more seats even for partners other than American.
Delta's "scope" limitations restrict its partners from operating aircraft with
over 76 seats even if those aircraft are operated for an airline other than
Delta. Neither US Airways, United, Continental nor Frontier has similar "scope"
limits on the size of aircraft we can operate for our other
Partners.
  We cannot assure you that these "scope"
clauses will not become more restrictive in the future. Any additional limit on
the number of aircraft we can fly for our Partners could have a material adverse
effect on our expansion plans and the price of our common
stock.
  Our fleet expansion program will require
a significant increase in our leverage and the financing we require may not be
available on favorable terms or at all.
  The airline business is very capital
intensive and, as a result, many airline companies are highly leveraged. During
the years ended December 31, 2007 and 2006, our mandatory debt service payments
totaled$93.5million and $79.9 million
respectively, and our mandatory lease payments totaled$138.7 millionand $99.5 million, respectively. We
have significant lease obligations with respect to our aircraft, which
aggregated approximately$1.1 billionat December 31, 2007 and December 31,
2006. Our current growth strategy involves the acquisition by purchase or lease
of at least29more aircraft through March
2009.  Embraer's current aggregate list price for the29 Embraeraircraft that we expect to acquire from
Embraer is approximately$900 million. We expect to lease or otherwise
acquire on credit a substantial portion of these Embraer aircraft, which will
increase significantly our mandatory lease and debt service
payments.
  There can be no assurance that our
operations will generate sufficient cash flow to make such payments or that we
will be able to obtain financing to acquire the additional aircraft or make
other capital expenditures necessary for our expansion. If we default under our
loan or lease agreements, the lender/lessor has available extensive remedies,
including, without limitation, repossession of the respective aircraft and other
assets and, in the case of large creditors, the effective ability to exert
control over how we allocate a significant portion of our revenues. Even if we
are able to timely service our debt, the size of our long-term debt and lease
obligations could negatively affect our financial condition, results of
operations and the price of our common stock in many ways,
including:
 
 • increasing the cost, or limiting the
availability of, additional financing for working capital, acquisitions or other
purposes;
 
 • limiting the ways in which we can use
our cash flow, much of which may have to be used to satisfy debt and lease
obligations; and
 
 • adversely affecting our ability to
respond to changing business or economic conditions or continue our growth
strategy.
  If we need funds and cannot raise them
on acceptable terms, or at all, we may be unable to realize our current plans or
take advantage of unanticipated opportunities and could be required to slow or
stop our growth.
  We currently depend on Embraer to supply
us with the aircraft we require to expand.
  Currently, we are obligated under our
code-share agreements to place an additional29 Embraeraircraft in service through 2009. We
are dependent on Embraer as the manufacturer of all of these jets. Our risks in
relying primarily on a single manufacturer include:
  • the possibility that Embraer could
refuse, or may not be financially able, to perform its obligations under the
purchase agreement for the delivery of the aircraft;
 
 • a fire, strike or other event could
occur that affects Embraer's ability to completely or timely fulfill its
contractual obligations;
  • the failure or inability of Embraer to
provide sufficient parts or related support services on a timely
basis;
 
 • the interruption of fleet service as a
result of unscheduled or unanticipated maintenance requirements for these
aircraft;
 
 • the issuance of FAA directives
restricting or prohibiting the use of Embraer aircraft or requiring
time-consuming inspections and maintenance; and
 
 -20-
 • the adverse public perception of a
manufacturer as a result of an accident or other adverse
publicity.
  Any disruption or change in the delivery
schedule of these Embraer aircraft would affect our overall operations and our
ability to fulfill our obligations under our code-share
agreements.
  Further, ERJ-170 and ERJ-175 aircraft
began operating in the commercial airline market in February 2004 and July
2005, respectively. As relatively new products, these aircraft have been, and
may continue to be, subject to unforeseen manufacturing and/or reliability
issues.
  Our
operations could be materially adversely affected by the failure or inability of
Embraer or any key component manufacturers to provide sufficient parts or
related support services on a timely basis or by an interruption of fleet
service as a result of unscheduled or unanticipated maintenance requirements for
our aircraft.
  Reduced utilization levels of our
aircraft under the fixed-fee agreements would adversely impact our revenues and
earnings.
  Our agreements withour Partners requireeach of them to schedule our aircraft
to a minimum level of utilization. However, the aircraft have historically been
utilized more than the minimum requirement. Even though the fixed-fee rates may
adjust, either up or down, based on scheduled utilization levels or require a
fixed amount per day to compensate us for our fixed costs, if our aircraft are
at or below the minimum requirement (including taking into account the stage
length and frequency of our scheduled flights) we will likely lose both the
opportunity to recover a margin on the variable costs of flights that would have
been flown if our aircraft were more fully utilized and the opportunity to earn
incentive compensation on such flights. For example, as a result of Delta's
bankruptcy, Delta has utilized our smaller aircraft at less than historical
levels.
  Increases in our labor costs, which
constitute a substantial portion of our total operating costs, will directly
impact our earnings.
  Labor costs constitute a significant
percentage of our total operating costs, and we have experienced pressure to
increase wages and benefits for our employees. Under our code-share agreements,
our reimbursement rates contemplate labor costs that increase on a set schedule
generally tied to an increase in the consumer price index or the actual increase
in the contract. We are entirely responsible for our labor costs, and we may not
be entitled to receive increased payments for our flights if our labor costs
increase above the assumed costs included in the reimbursement rates. As a
result, a significant increase in our labor costs above the levels assumed in
our reimbursement rates could result in a material reduction in our earnings. We
have collective bargaining agreements with our pilots, customer service
employees, flight attendants and dispatchers. We cannot assure you that future
agreements with our employees' unions will be on terms in line with our
expectations or comparable to agreements entered into by our competitors, and
any future agreements may increase our labor costs and reduce both our income
and our competitiveness for future business opportunities.
 
 Our business could be harmed if we lose
the services of our key personnel.
  Our business depends upon the efforts of
our chief executive officer, Bryan Bedford, and our other key management and
operating personnel. American can terminate its code-share agreement if we
replace Mr. Bedford without its consent, which cannot be unreasonably
withheld. We may have difficulty replacing management or other key personnel who
leave and, therefore, the loss of the services of any of these individuals could
harm our business. We maintain a "key man" life insurance policy in the amount
of $10 million for Mr. Bedford, but this amount may not adequately
compensate us in the event we lose his services.
  We may experience difficulty finding,
training and retaining employees.
  Our business is labor intensive. We
intend to hire a large number of pilots, flight attendants, maintenance
technicians and other personnel associated with our expansion
plans.
  The airline industry has from time to
time experienced a shortage of qualified personnel, specifically pilots and
maintenance technicians. In addition, as is common with most of our competitors,
we have, from time to time, faced considerable turnover of our employees.
Although our employee turnover has decreased significantly since
September 11, 2001, our pilots, flight attendants and maintenance
technicians sometimes leave to work for larger airlines, which generally offer
higher salaries and more extensive benefit programs than regional airlines are
financially able to offer. Should the turnover of employees, particularly pilots
and maintenance technicians, sharply increase, the result will be significantly
higher training costs than otherwise would be necessary. We cannot assure you
that we will be able to recruit, train and retain the qualified employees that
we need to carry out our expansion plans or to replace departing employees. If
we are unable to hire and retain qualified employees at a reasonable cost, we
may be unable to complete our expansion plans, which could materially adversely
affect our financial condition, results of operations and the price of our
common stock.
  -21-
 We are at risk of losses stemming from
an accident involving any of our aircraft.
  While we have never had a crash causing
death or serious injury over our 34 year history, it is possible that one
or more of our aircraft may crash or be involved in an accident in the future,
causing death or serious injury to individual air travelers and our employees
and destroying the aircraft and the property of third
parties.
  In addition, if one of our aircraft were
to crash or be involved in an accident we would be exposed to significant tort
liability. Such liability could include liability arising from the claims of
passengers or their estates seeking to recover damages for death or injury.
There can be no assurance that the insurance we carry to cover such damages will
be adequate. Accidents could also result in unforeseen mechanical and
maintenance costs. In addition, any accident involving an aircraft that we
operate could create a public perception that our aircraft are not safe, which
could result in air travelers being reluctant to fly on our aircraft and a
decrease in revenues. Such a decrease could materially adversely affect our
financial condition, results of operations and the price of our common
stock.
  We may have conflicts of interest with
Wexford Capital and we may not be able to resolve these conflicts on an arm's
length basis.
  WexAir
RJET LLC, which is owned by several investment funds managed by Wexford Capital,
previously held a majority interest in our common stock. Currently, Wexford
Capital owns less than1% of our common stockbutone of our directors is a general
partner of Wexford Capital and its affiliates. Wexford Capital and its affiliates are
actively engaged in the airline business. Conflicts of interest may in the
future arise between Wexford Capital and its affiliates, on the one hand, and
us, on the other hand, in a number of areas relating to our business and our
past and ongoing relationships.
  Wexford Capital is under no obligation
to resolve any conflicts that might develop between it and its affiliates and us
in a manner that is favorable to us and we cannot guarantee that such conflicts
will not result in harmful consequences to our business or future prospects. In
addition, Wexford Capital and its affiliates are not obligated to advise us of
any investment or business opportunities of which they are aware, and they are
not contractually restricted or prohibited from competing with us. We have
specifically renounced in our certificate of incorporation any interest or
expectancy that Wexford Capital and its affiliates, including its directors and
officers, will offer to us any investment or business opportunity of which they
are aware.
 
 Risks Associated with the Airline
Industry
 
  The airline industry is highly
competitive.
  Within the airline industry, we not only
compete with other regional airlines, some of which are owned by or operated aspartners of major airlines, but we also
face competition from low-fare airlines and major airlines on many of our
routes, including carriers that fly point to point instead of to or through a
hub. Other low-fare carriers serve theIndianapolisInternationalAirport, which results in significant price
competition in theIndianapolis market, one of our major markets. Competition
in the easternUnited
States markets, which we
service from US Airways' hubs inNew York,Boston,Philadelphia andWashington,D.C.and from Delta's hub inCincinnati, andAtlanta, is particularly intense, due to the
large number of carriers in those markets.
 
 In addition, some of our competitors are
larger and have significantly greater financial and other resources than we do.
Moreover, federal deregulation of the industry allows competitors to rapidly
enter our markets and to quickly discount and restructure fares. The airline
industry is particularly susceptible to price discounting because airlines incur
only nominal costs to provide service to passengers occupying otherwise unsold
seats.
  In addition to traditional competition
among airlines, the industry faces competition from video teleconferencing and
other methods of electronic communication. New advances in technology may add a
new dimension of competition to the industry as business travelers seek
lower-cost substitutes for air travel.
  Continued high fuel costs would harm the
airline industry.
  Fuel costs constitute a substantial
portion of the total operating expenses of the airline industry. There have been
significant increases in fuel costs and continued high fuel costs such as those
which have been experienced since 2006 would harm the airline industry's
financial condition and results of operations. Historically, fuel costs have
been subject to wide price fluctuations based on geopolitical issues, supply and
demand and other factors. Fuel availability is also affected by demand for home
heating oil, gasoline and other petroleum products. Because of the effect of
these events on the price and availability of fuel, the cost and future
availability of fuel cannot be predicted with any degree of certainty. Further,
in the event of a fuel supply shortage or further increases in fuel prices, a
curtailment of scheduled service could result.
  -22-
 The
airline industry has been subject to a number of strikes which could affect our
business.
  The airline industry has been negatively
impacted by a number of labor strikes. Any new collective bargaining agreement
entered into by other regional carriers may result in higher industry wages and
increase pressure on us to increase the wages and benefits of our employees.
Furthermore, since each of our Partners is a significant source of our operating
revenues, any labor disruption or labor strike by the employees of any one of
our Partners could have a material adverse effect on our financial condition,
results of operations and the price of our common stock.
  Airlines are often affected by certain
factors beyond their control, including weather conditions which can affect
their operations.
  Generally, revenues for airlines depend
on the number of passengers carried, the fare paid by each passenger and service
factors, such as the timeliness of departure and arrival. During periods of fog,
ice, low temperatures, storms or other adverse weather conditions, flights may
be cancelled or significantly delayed. For example, in 2005, Hurricane Wilma
forced us to suspend some of our operations inFlorida fora number of days. Under our fixed-fee
code-share agreements, we are partially protected against cancellations due to
weather or air traffic control, although these factors may affect our ability to
receive incentive payments for flying more than the minimum number of flights
specified in our code-share agreements. Should we enter into pro-rate revenue
sharing agreements in the future we will not be protected against weather or air
traffic control cancellations and our operating revenues could suffer as a
result.
  The airline industry has recently gone
through a period of consolidation and transition; consequently, we have fewer
potential partners.
  Since 1978 and continuing to the
present, the airline industry has undergone substantial consolidation, and it
may in the future undergo additional consolidation. For example, in
April 2001, American acquired the majority of Trans World
Airlines, Inc.'s assets. Our relationship with American resulted from this
transaction. Other recent developments include the domestic code-share alliance
between United and US Airways, a similar new relationship among Delta,
Continental and Northwest and the merger of America West and US Airways. We, as
well as our Partners, routinely monitor changes in the competitive landscape and
engage in analysis and discussions regarding our strategic position, including
potential alliances and business combination transactions. Further consolidation
could limit the number of potential partners with whom we could enter into
code-share relationships.Although none of our contracts with our
Partners allow termination or are amendable in the event of consolidation,
any additional
consolidation or significant alliance activity within the airline industry could
materially adversely affect our relationship with our
Partners.
 
 The airline industry is heavily
regulated.
  Airlines are subject to extensive
regulatory and legal compliance requirements, both domestically and
internationally, that involve significant costs. In the last several years, the
FAA has issued a number of directives and other regulations relating to the
maintenance and operation of aircraft that have required us to make significant
expenditures. FAA requirements cover, among other things, retirement of older
aircraft, security measures, collision avoidance systems, airborne wind shear
avoidance systems, noise abatement, commuter aircraft safety and increased
inspection and maintenance procedures to be conducted on older
aircraft.
  We incur substantial costs in
maintaining our current certifications and otherwise complying with the laws,
rules and regulations to which we are subject. We cannot predict whether we will
be able to comply with all present and future laws, rules, regulations and
certification requirements or that the cost of continued compliance will not
significantly increase our costs of doing business.
  The FAA has the authority to issue
mandatory orders relating to, among other things, the grounding of aircraft,
inspection of aircraft, installation of new safety related items and removal,
replacement or modification of aircraft parts that have failed or may fail in
the future. A decision by the FAA to ground, or require time consuming
inspections of or maintenance on, all or any of our Embraer or Bombardier
aircraft, for any reason, could negatively impact our results of
operations.
  In addition to state and federal
regulation, airports and municipalities enact rules and regulations that affect
our operations. From time to time, various airports throughout the country have
considered limiting the use of smaller aircraft, such as Embraer or Bombardier
aircraft, at such airports. The imposition of any limits on the use of Embraer
or Bombardier aircraft at any airport at which we operate could interfere with
our obligations under our code-share agreements and severely interrupt our
business operations.
  Additional laws, regulations, taxes and
airport rates and charges have been proposed from time to time that could
significantly increase the cost of airline operations or reduce revenues. For
instance, "passenger bill of rights" legislation was introduced in Congress
that, if enacted, would have, among other things, required the payment of
compensation to passengers as a result of certain delays and limited the ability
of carriers to prohibit or restrict usage of certain tickets. This legislation
is not currently active but if it is reintroduced, these measures could have the
effect of raising ticket prices, reducing revenue and increasing costs. Several
state legislatures have also considered such
legislation.  Restrictions on the ownership and transfer of airline
routes and takeoff and landing slots have also been proposed. In addition, as a
result of the terrorist attacks inNew York andWashington,D.C.in September 2001, the FAA and the
Transportation Security Administration (TSA) have imposed stringent security
requirements on airlines. We cannot predict what other new regulations may be
imposed on airlines and we cannot assure you that laws or regulations enacted in
the future will not materially adversely affect our financial condition, results
of operations and the price of our common stock.
  -23-
 Risks Related To Our Common
Stock
  Our stock price is
volatile.
  Since
our common stock began trading on The NASDAQ National Market (now the NASDAQ
Global Select Market) on May 27, 2004, the market price of our common stock
has ranged from a low of$8.15 to a high of$23.88 pershare. The market price of our common
stock may continue to fluctuate substantially due to a variety of factors, many
of which are beyond our control, including:
  • announcements concerning our Partners,
competitors, the airline industry or the economy in general;
 
 • strategic actions by us, our Partners
or our competitors, such as acquisitions or restructurings;
 
 • media reports and publications about
the safety of our aircraft or the aircraft types we operate;
 
 • new regulatory pronouncements and
changes in regulatory guidelines;
 
 • general and industry specific economic
conditions, including the
price of oil;
 
 • changes in financial estimates or
recommendations by securities analysts;
 
 • sales of our common stock or other
actions by investors with significant shareholdings or our Partners;
and
 
 • general market
conditions.
 
 The stock markets in general have
experienced substantial volatility that has often been unrelated to the
operating performance of particular companies. These broad market fluctuations
may adversely affect the trading price of our common stock.
  In the past, stockholders have sometimes
instituted securities class action litigation against companies following
periods of volatility in the market price of their securities. Any similar
litigation against us could result in substantial costs, divert management's
attention and resources and harm our business.
  Future sales of our common stock by our
stockholders could depress the price of our common stock.
  Sales of a large number of shares
of our common stock or the availability of a large number of shares for sale
could adversely affect the market price of our common stock and could impair our
ability to raise funds in additional stock offerings.
  Our incorporation documents andDelaware lawhave provisions that could delay or
prevent a change in control of our company, which could negatively affect your
investment.
 
 Our certificate of incorporation and
bylaws andDelaware
lawcontain provisions that
could delay or prevent a change in control of our company that stockholders may
consider favorable. Certain of these provisions:
  • authorize the issuance of up to
5,000,000 shares of preferred stock that can be created and issued by our board
of directors without prior stockholder approval, commonly referred to as "blank
check" preferred stock, with rights senior to those of our common
stock;
 
 • limit the persons who can call special
stockholder meetings;
 
 • provide that a supermajority vote of
our stockholders is required to amend our certificate of incorporation or
bylaws; and
 
 -24-
 • establish advance notice requirements
to nominate directors for election to our board of directors or to propose
matters that can be acted on by stockholders at stockholder
meetings.
  These and other provisions in our
incorporation documents andDelaware lawcould allow our board of directors to
affect your rights as a stockholder by making it more difficult for stockholders
to replace board members. Because our board of directors is responsible for
appointing members of our management team, these provisions could in turn affect
any attempt to replace the current management team. In addition, these
provisions could deprive our stockholders of opportunities to realize a premium
on the shares of common stock owned by them.
 
 Our charter documents include provisions
limiting voting by foreign owners.
 
 Our certificate of incorporation
provides that shares of capital stock may not be voted by or at the direction of
persons who are not citizens of theUnited States ifthe number of such shares would exceed
applicable foreign ownership restrictions.U.S.law currently requires that no more than
25% of the voting stock of our company or any other domestic airline may be
owned directly or indirectly by persons who are not citizens of theUnited States.
 
 Additional
Information
 
 The Company files annual, quarterly and
current reports and other information with the Securities and Exchange
Commission (the "SEC" or the "Commission"). These materials can be inspected and
copied at the SEC's Public Reference Room at450 Fifth Street, N.W.,Washington,D.C.20549. Copies of these materials may also be
obtained by mail at prescribed rates from the SEC's Public Reference Room at the
above address. Information about the Public Reference Room can be obtained by
calling the SEC at 1-800-SEC-0330. The SEC also maintains an Internet site that
contains reports, proxy and information statements, and other information
regarding issuers that file electronically with the SEC. The address of the
SEC's Internet site is www.sec.gov.
  On our website,www.rjet.com/investor
relations.html, we provide
free of charge our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and
Current Reports on Form 8-K as soon as reasonably practicable after they have
been electronically filed or furnished to the Securities and Exchange
Commission. The code of ethics, adopted by our Board of Directors, which applies
to all our employees, can also be found on our website,www.rjet.com/investor
relations.html. Our audit
committee charter is also available on our website.
 
 ITEM 1B. UNRESOLVED STAFF
COMMENTS
 
 Not Applicable
  -25-
 ITEM 2. PROPERTIES
  Flight Equipment
  As of December 31, 2007, we operated 219
aircraft as described in the following table:
 
 Type
              
              Total
                Aircraft
              
              Owned
              
              Leased
              
              Average Age
                (in years)
              
              Firm
                Orders
              
              Option
                Aircraft
              
              Seats in
                Standard
                ConfigurationERJ-135LR
    (1)
              
              
              17
              
              
              15
              
              
              2
              
              
              4.5
              
              
              
              
              
              
              
              
              37ERJ-140LR
              
              
              15
              
              
              11
              
              
              4
              
              
              5.8
              
              
              
              
              
              
              
              
              44ERJ-145LR
    (2)
              
              
              62
              
              
              27
              
              
              35
              
              
              5.8
              
              
              
              
              
              
              
              
              50ERJ-170/175LR
              
              
              101
              
              
              78
              
              
              23
              
              
              2.2
              
              
              29
              
              
              74
              
              
              70-86CRJ-200
              
              
              24
              
              
              
              
              
              24
              
              
              6.6
              
              
              
              
              
              
              
              
              50Total
              
              
              219
              
              
              131
              
              
              88
              
              
              
              
              
              29
              
              
              74
 
 (1) Two of these aircraft are used
for charter service and as spares.
  (2) One of these aircraft is used for
charter service or as a spare.
 
 In addition to the aircraft listed
above, we subleasedsixERJ-145 aircraft to an
airline inMexico.
 
 We have firm orders to acquire29ERJ-175 aircraft.
  All of our leased aircraft are leased by
us pursuant to operating leases, with current lease expirations ranging from2009 to 2023. We have fixed-price purchase options
undermost ofthese leases after 9 to 14 years of the
lease term. Furthermore, we have options to renew most of the leases for an
additional three tofour
years, or purchase the
leased aircraft at the conclusion of their current lease terms at fair market
value.
 
 The following table outlines
thenumber and type of
aircraft being operated for each Partner and the total number of aircraft that
we are required to place in service for each Partner as of December 31,
2007:
  
 ERJ-175
              ERJ-170
              ERJ-145
              ERJ-140
              ERJ-135
              CRJ- 200In
                Operation
              Total
                Required
                Aircraft
              In
                Operation
              Total
                Required
                Aircraft
              In
                Operation
                (1)
              Total
                Required
      Aircraft
              In
                Operation
              Total
                Required
                Aircraft
              In
                Operation
                (1)
              Total
                Required
                Aircraft(4)
              In
                Operation
              Total
                Required
                Aircraft
              Total Required
                AircraftUSAirways
              25
              38
              23
              20
              10
              10
              
              
              
              
              
              
              68American
              
              
              
              
              
              
              15
              15
              
              
              
              
              15Delta (2)
              
              16
              16
              −
              24
              24
              
              
              15
              −
              
              
              40United (3)
              
              
              28
              38
              7
              7
              
              
              
              
              
              
              45Continental
              
              
              
              
              20
              20
              
              
              
              
              24
              24
              44Frontier
              
              
              9
              17
              
              
              
              
              
              
              
              
              17Total
              25
              54
              76
              75
              61
              61
              15
              15
              15
              −
              24
              24
              229
 
  (1) Excludes two ERJ-135 aircraft and
one ERJ-145 aircraft that are not operated for any of our Partners. We use these
aircraft for charter service and spares.
 
 (2) In August 2007, we amended
our Jet Services Agreement with Delta to provide for the replacement of sixteen,
ERJ-170 aircraft operating as Delta Connection with sixteen ERJ-175
aircraft.  The new aircraft are expected to be placed into service
during the second half of 2008 and the first quarter of 2009.
 
 (3) In August 2007, we amended our Jet
Services Agreement with United to provide for the operation often additionalERJ-170 aircraft as United Express. The
aircraft are expected to be placed into service during the fourth quarter of
2008 and the first quarter of 2009.
 
 (4) Under our amended Delta agreement,
we agreed to remove from service all 15 of our ERJ-135 at a rate of two aircraft
per month beginning in September 2008.  We expect to sell these
aircraft to Embraer or another party as the aircraft are removed from
service.
 
 -26-
 Ground Operations andProperties
 
 As of December 31, 2007, our facilities
are summarized in the following table:
 
 Facility
              Square Feet
              LocationCorporate
      Office
              45,000
              Indianapolis,INMaintenance
      Hangar
              110,500
              Indianapolis,INMaintenance
      Hangar/Office
              144,000
              Columbus,OHMaintenance
      Hangar
              70,000
              Louisville,KYMaintenance
      Hangar/Office
              86,000
              Pittsburgh,PAMaintenance
      Hangar/Office
              35,940
              St. Louis,MO
 
 In August 2007, we entered into a lease
agreement for a 20,440 square foot flight and in-flight training center located
inPlainfield,Indiana.  The facility is expected to
open in February 2008.
  Our employees perform substantially all
routine airframe and engine maintenance and periodic inspection of equipment. We
provide all US Airways Express airport gate and ground handling at the
Indianapolis International airport. Our Partners or third parties provide ground
support services in118 of
the 119 cities we serve and provide ticket handling services in all
119 citieswe
serve.
  We lease all of our facilities subject
to either long-term leases or on a month to month basis.
 
 Consistent with our planned growth in
2008 we are planning to add additional maintenance facilities and expand
certain other facilities. We believe that our current facilities, along with our
planned additional facilities, are adequate for the current and foreseeable
needs of our business.
 
 ITEM 3. LEGAL
PROCEEDINGS
  We are subject to certain legal and
administrative actions, which we consider routine to our business activities.
Management believes that the ultimate outcome of any pending legal matters will
not have a material adverse effect on our financial position, liquidity or
results of operations.
  ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF
SECURITY HOLDERS
 
 Not applicable.
 
 
 -27-
 PART
II
  ITEM 5. MARKET FOR REGISTRANT’S COMMON
EQUITY, RELATED STOCKHOLDER MATTERS AND
ISSUER PURCHASES OF EQUITY SECURITIES
  Market Price
  Our common stock began trading on The
NASDAQ National Market (now the NASDAQ Global Select Market) on May 27,
2004 and is traded under the symbol "RJET." Prior to that date, there was no
public market for our common stock. The following table sets forth the high and
low sales prices of our common stock for the periods
indicated.
  Year Ended December 31,
      2006
              
              High
              
              
              LowFirst
    Quarter
              
              $
              15.75
              
              
              $
              13.57Second
    Quarter
              
              
              17.33
              
              
              
              13.73Third
    Quarter
              
              
              17.67
              
              
              
              14.75Fourth
    Quarter
              
              
              18.49
              
              
              
              15.30Year Ended December 31,
      2007First
    Quarter
              
              $
              23.13
              
              
              $
              16.70Second
    Quarter
              
              
              23.88
              
              
              
              19.80Third
    Quarter
              
              
              22.46
              
              
              
              17.46Fourth
    Quarter
              
              
              22.75
              
              
              
              18.32
  As of February 1, 2008 there were36stockholders of record of our common
stock. We have never paid cash dividends on our common stock. The payment of
future dividends is within the discretion of our board of directors and will
depend upon our future earnings, our capital requirements, bank financing,
financial condition and other relevant factors. The credit facility with Bank of
America Business Capital does not limit the Company’s ability to pay dividends
unless the Company is in default thereunder.
  -28-
  Performance Graph
   
   The above graph
compares the performance of the Company from May 27, 2004 through December
31, 2007,
against the performance of (i) the Composite Index
for Nasdaq Stock Market (U.S. Companies) and (ii) an index of companies engaged
in air transportation (SIC 4512 and 4513), including regional airlines, whose
stocks trade on the Nasdaq, for the same period.
  Below is a summary of the equity
compensation plans as of December 31, 2007:
  A
              
              
              B
              
              CPlan Category
              Number of securities to be issued
      upon exercise of outstanding options, warrants and
      rights.
              
              
              Weighted-average exercise price of
      outstanding options,warrants and
      rights.
              
              Number of securities remaining
      available for future issuance under equity compensation plans (excluding
      securities reflected in column A).Equity compensation plans approved
      by security holdersOptions outstanding under the 2002
      Equity Incentive Plan
              1,390,818
              
              $
              15.17
              
              47,215Options outstanding under the
      2007Equity Incentive
      Plan
              1,320,000
              
              
              19.15
              
              3,680,000Equity compensation plans not
      approved by security holders
              —
              
              
              —
              
              —Total
              2,710,818
              
              $
              17.11
              
              3,727,215
 
 -29-
 Unregistered Sales of Equity
Securities
 
 There have been no recent sales of
unregistered securities.
 
 The following table set forth required
information regarding repurchases of common stock made during the three month
period ended December 31, 2007:
 
 
 Issuer
      Purchases of Equity Securities(a)
              (b)
              (c
      )
              (d)Total
      Number of Shares Purchased
              Average
      Price Paid per Share
              Total
                Number
      of Shares Purchased as Part of Publicly Announced Plans or
      Programs
              Maximum
      Dollar Value of Shares that May Yet be Purchased Under the Plans or
      ProgramsPeriodOctober
      1, 2007 through October 31, 2007  (1)
              1,641,200
              $20.92
              1,641,200
              $1,353,000November
      1, 2007 through November 30, 2007 (1)
              65,959
              $20.50
              65,959
              −December
      1, 2007 through December 31, 2007 (2)
              72,735
              $19.42
              72,735
              $98,588,000Total
              1,779,894
              
              1,779,894
 
 (1) On
August 28, 2007, we announced that our Board of Directors had authorized the
purchase of up to $100 million of our common stock. The shares were purchased on
the open market or through privately-negotiated transactions from
time-to-time.  The authorization closed in November 2007.
 
 (2) On
December 14, 2007, we announced that our Board of Directors had authorized the
purchase of up to $100 million of our common stock. The shares will be purchased
on the open market or through privately-negotiated transactions from
time-to-time during the twelve month period following the authorization. Under
the authorization, the timing and amount of purchase would be based upon market
conditions, securities law limitations and other factors. The stock buy-back
program does not obligate us to acquire any specific number of shares in any
period, and may be modified, suspended, extended or discontinued at any time
without prior notice.
  -30-
 ITEM
6. SELECTED FINANCIAL DATA
  The following selected financial
data and operating statistics should be read in conjunction with Management's
Discussion and Analysisof Financial Condition and Results of
Operations, and the consolidated financial statements and related notes included
in Item 8 of the Form 10-K.
 Years Ended December
      31,2007
                
                
                2006
                
                
                2005
                
                
                2004
                
                
                2003(in thousands, except share, per
      share and airline operating data)Statement of Operations
      Data:Operating
      revenues:Regional airline
      services
                
                $
                1,274,607
                
                
                $
                1,118,226
                
                
                $
                883,906
                
                
                $
                637,389
                
                
                $
                480,025Charter and ground
      handling
                
                
                5,867
                
                
                
                8,932
                
                
                
                11,611
                
                
                
                8,682
                
                
                
                5,899Other
                
                
                12,203
                
                
                
                15,920
                
                
                
                9,504
                
                
                
                253
                
                
                
                6,356Total operating revenues
                
                
                1,292,677
                
                
                
                1,143,078
                
                
                
                905,021
                
                
                
                646,324
                
                
                
                492,280Operating
      expenses:Wages and benefits
                
                
                226,521
                
                
                
                175,483
                
                
                
                143,826
                
                
                
                112,305
                
                
                
                86,949Aircraft fuel(1)
                
                
                296,573
                
                
                
                325,500
                
                
                
                278,923
                
                
                
                174,208
                
                
                
                106,840Passenger fees and
      commissions
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                2,939
                
                
                
                6,254Landing fees
                
                
                53,684
                
                
                
                41,993
                
                
                
                30,376
                
                
                
                24,201
                
                
                
                19,098Aircraft and engine rent
                
                
                124,961
                
                
                
                94,773
                
                
                
                77,725
                
                
                
                74,514
                
                
                
                67,350Maintenance and repair
                
                
                130,237
                
                
                
                105,198
                
                
                
                76,481
                
                
                
                70,290
                
                
                
                53,475Insurance and taxes
                
                
                19,039
                
                
                
                17,652
                
                
                
                16,117
                
                
                
                13,186
                
                
                
                12,859Depreciation and
      amortization
                
                
                106,594
                
                
                
                92,228
                
                
                
                64,877
                
                
                
                34,412
                
                
                
                23,873Impairment loss and accrued
      aircraft return costs
                  (credits)(2)
                
                
                —
                
                
                
                (2,050
                )
                
                
                (4,218
                )
                
                
                1,441
                
                
                
                2,756Other
                
                
                104,790
                
                
                
                79,708
                
                
                
                62,195
                
                
                
                47,483
                
                
                
                30,115Total operating
      expenses
                
                
                1,062,399
                
                
                
                930,485
                
                
                
                746,302
                
                
                
                554,979
                
                
                
                409,569Operating
      income
                
                
                230,278
                
                
                
                212,593
                
                
                
                158,719
                
                
                
                91,345
                
                
                
                82,711Other income
      (expense):Interest
      expense
                
                
                (107,323
                )
                
                
                (91,128
                )
                
                
                (63,546
                )
                
                
                (28,464
                )
                
                
                (22,789
                )Interest and other
      income
                
                
                11,013
                
                
                
                9,944
                
                
                
                5,002
                
                
                
                518
                
                
                
                195Total other income
      (expense)
                
                
                (96,310
                )
                
                
                (81,184
                )
                
                
                (58,544
                )
                
                
                (27,946
                )
                
                
                (22,594
                )Income before income
      taxes
                
                
                133,968
                
                
                
                131,409
                
                
                
                100,175
                
                
                
                63,399
                
                
                
                60,117Income tax
      expense
                
                
                51,210
                
                
                
                51,899
                
                
                
                39,521
                
                
                
                24,547
                
                
                
                23,979Net income
                
                
                82,758
                
                
                
                79,510
                
                
                
                60,654
                
                
                
                38,852
                
                
                
                36,138Preferred stock
      dividends(3)
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                (170
                )Net income available for common
      stockholders
                
                $
                82,758
                
                
                $
                79,510
                
                
                $
                60,654
                
                
                $
                38,852
                
                
                $
                35,968Net income available for common
      stockholders
                  per
      share:Basic
                
                $
                2.05
                
                
                $
                1.89
                
                
                $
                1.69
                
                
                $
                1.66
                
                
                $
                1.80Diluted
                
                $
                2.02
                
                
                $
                1.82
                
                
                $
                1.66
                
                
                $
                1.62
                
                
                $
                1.73Weighted average common shares
      outstanding:Basic
                
                
                40,350,256
                
                
                
                42,149,668
                
                
                
                35,854,249
                
                
                
                23,349,613
                
                
                
                20,000,000Diluted
                
                
                41,045,644
                
                
                
                43,615,946
                
                
                
                36,548,340
                
                
                
                23,906,762
                
                
                
                20,841,415Other Financial
      Data:Net cash
    from:Operating
      activities
                
                $
                280,490
                
                
                $
                229,147
                
                
                $
                170,879
                
                
                $
                116,827
                
                
                $
                91,627Investing
      activities
                
                $
                (76,468
                )
                
                $
                (114,510
                )
                
                $
                (175,152
                )
                
                $
                (102,424
                )
                
                $
                (30,683
                )Financing
      activities
                
                $
                (235,546
                )
                
                $
                (81,114
                )
                
                $
                120,058
                
                
                $
                9,282
                
                
                $
                (45,093
                )Airline Operating
      Data:Passengers carried
      (000’s)
                
                
                16,287
                
                
                
                12,666
                
                
                
                9,137
                
                
                
                6,842
                
                
                
                5,121Revenue passenger
      miles  (000’s) (4)
                
                
                8,581,836
                
                
                
                6,650,399
                
                
                
                4,516,518
                
                
                
                3,062,940
                
                
                
                2,319,261Available seat miles (000’s)
      (5)
                
                
                11,511,795
                
                
                
                9,154,719
                
                
                
                6,559,966
                
                
                
                4,618,042
                
                
                
                3,665,876Passenger
      load factor (6)
                
                
                74.5
                %
                
                
                72.6
                %
                
                
                68.8
                %
                
                
                66.3
                %
                
                
                63.3
                %Revenue per available seat
      mile(7)
                
                $
                0.112
                
                
                $
                0.125
                
                
                $
                0.138
                
                
                $
                0.140
                
                
                $
                0.134Cost per available seat
      mile(8)
                
                $
                0.102
                
                
                $
                0.112
                
                
                $
                0.124
                
                
                $
                0.126
                
                
                $
                0.118EBITDA (9)
                
                $
                347,885
                
                
                $
                314,765
                
                
                $
                228,597
                
                
                $
                126,275
                
                
                $
                106,779Average passenger trip length
      (miles)
                
                
                522
                
                
                
                515
                
                
                
                494
                
                
                
                448
                
                
                
                453Number of aircraft in operations
      (end of period):Regional Jets:Owned
                
                
                131
                
                
                
                109
                
                
                
                90
                
                
                
                62
                
                
                
                38Leased
                
                
                88
                
                
                
                62
                
                
                
                52
                
                
                
                49
                
                
                
                45Saab Turboprops(10):Owned
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                4
                
                
                
                —Leased
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                13
                
                
                
                21Total
    aircraft
                
                
                219
                
                
                
                171
                
                
                
                142
                
                
                
                128
                
                
                
                104
  -31-
 
 As of December 31,2007
              
              
              2006
              
              
              2005
              
              
              2004
              
              
              2003Consolidated Balance Sheet
      Data:
              
              
              
              
              
              
              
              (in
    thousands)Cash and cash
      equivalents
              
              $
              164,004
              
              
              $
              195,528
              
              
              $
              162,005
              
              
              $
              46,220
              
              
              $
              22,535Aircraft and other
      equipment—net
              
              
              2,308,726
              
              
              
              1,889,717
              
              
              
              1,662,236
              
              
              
              984,512
              
              
              
              549,009Total
assets
              
              
              2,773,078
              
              
              
              2,358,441
              
              
              
              2,035,947
              
              
              
              1,171,820
              
              
              
              669,783Long-term debt, including current
      maturities
              
              
              1,913,580
              
              
              
              1,568,803
              
              
              
              1,413,440
              
              
              
              850,869
              
              
              
              486,146Total stockholders'
      equity
              
              
              426,086
              
              
              
              508,829
              
              
              
              424,698
              
              
              
              174,651
              
              
              
              72,406
 
 (1)Beginning in May 2005, we do not record
fuel expense and the related revenue for US Airways operations because US
Airways pays for fuel directly.  Beginning in January 2007, for
certain United locations, we do not record fuel expense and the related revenue
because United pays for fuel directly. Continental and Frontier also pay fuel
directly and their operations began in January and March 2007,
respectively.
 
 (2)We recorded impairment losses and
accrued aircraft return costs of $2.8 and $1.4 million in 2003 and 2004
respectively, related to Saab turboprop aircraft. In 2005, we reversed a $4.2
million reserve after a final agreement to return all the Saab turboprop
aircraft to lessors was executed and all liabilities were settled. In 2006, we
recorded a $2.1 million gain relating to the disposition of Saab aircraft and
spare parts.
  (3) Preferred stock dividends
represent dividends on 16.295828 shares of Series A redeemable preferred
stock at a par value of $.01 per share issued by Chautauqua to an affiliate of
our majority stockholder. The preferred stockholder was entitled to receive
cumulative dividends equal to 10% per annum of the stated value of the preferred
stock. The preferred stock, including accrued and unpaid dividends, was
purchased and retired during 2003.
  (4)Passengers carried
multipliedby miles
flown.
  (5) Passenger seats available
multiplied by miles flown.
  (6) Revenue passenger miles divided
by available seat miles.
  (7) Total airline operating revenues
divided by available seat miles.
  (8) Total operating and interest
expenses divided by available seat miles. Total operating and interest expenses
is not a calculation based on accounting principles generally accepted in the
United States of America and should not be considered as an alternative to total
operating expenses. Cost per available seat mile utilizing this measurement is
included as it is a measurement recognized by the investing
public.
  (9) EBITDA represents earnings before interest
expense, income taxes, depreciation and amortization. EBITDA is not a calculation based on
accounting principlesgenerally acceptedin the United States of Americaand should not be
considered as an alternative to net income or operating income as indicators of
our financial performance or to cash flow as a measure of liquidity. In
addition, our calculations may not be comparable to other similarly titled
measures of other companies. EBITDA is included as a supplemental
disclosure because it may provide useful information regarding our ability to
service debt and lease payments and to fund capital expenditures. Our ability to
service debt and lease payments and to fund capital expenditures in the future,
however, may be affected by other operating or legal requirements or
uncertainties. Currently, aircraft and engine ownership costs, which include
aircraft and engine rent, depreciation, and interest expense, are our most
significant cash expenditure. In addition, EBITDA is a well recognized performance
measurement in the airline industry and, consequently, we have provided this
information.
 
  -32-
  The following represents a
reconciliation of EBITDA to net cash from operating activities
for the periods indicated:
  Years Ended December
      31,2007
              
              
              2006
              
              
              2005
              
              
              2004
              
              
              2003(in
    thousands)EBITDA
              
              $
              347,885
              
              
              $
              314,765
              
              
              $
              228,597
              
              
              $
              126,275
              
              
              $
              106,779Interest
      expense
              
              
              (107,323
              )
              
              
              (91,128
              )
              
              
              (63,546
              )
              
              
              (28,464
              )
              
              
              (22,789
              )Debt issue costs and other
      amortization
              
              
              6,764
              
              
              
              4,551
              
              
              
              2,776
              
              
              
              1,928
              
              
              
              1,968Warrant
      amortization
              
              
              102
              
              
              
              565
              
              
              
              372
              
              
              
              800
              
              
              
              359Loss (gain) on aircraft and other
      equipment disposals
              
              
              255
              
              
              
              (118
              )
              
              
              (276
              )
              
              
              1,151
              
              
              
              1,079Impairment loss and accrued
      aircraft return costs (credits)
              
              
              —
              
              
              
              (2,050
              )
              
              
              (4,218
              )
              
              
              1,441
              
              
              
              2,756Amortization of deferred
      credits
              
              
              (1,761
              )
              
              
              (1,438
              )
              
              
              (1,346
              )
              
              
              (1,285
              )
              
              
              (1,249
              )Stock compensation
      expense
              
              
              3,119
              
              
              
              1,297
              
              
              
              125
              
              
              
              214
              
              
              
              214Current income tax
      expense
              
              
              (120
              )
              
              
              (495
              )
              
              
              (1,915
              )
              
              
              (520
              )
              
              
              (237
              )Changes in certain assets and
      liabilities:Receivables
              
              
              (7,944
              )
              
              
              (2,939
              )
              
              
              (10,323
              )
              
              
              10,480
              
              
              
              (7,124
              )Inventories
              
              
              (11,419
              )
              
              
              (11,448
              )
              
              
              1,276
              
              
              
              (2,683
              )
              
              
              (2
              )Prepaid expenses and other current
      assets
              
              
              1,554
              
              
              
              1,474
              
              
              
              (4,907
              )
              
              
              (1,022
              )
              
              
              1,057Accounts
      payable
              
              
              11,299
              
              
              
              10,546
              
              
              
              1,152
              
              
              
              1,963
              
              
              
              (4,405
              )Accrued
      liabilities
              
              
              4,022
              
              
              
              16,826
              
              
              
              28,980
              
              
              
              11,370
              
              
              
              14,937Deferred revenue (Delta
      pre-petition claim)
              
              
              44,590
              
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              —Other
assets
              
              
              (10,533
              )
              
              
              (11,261
              )
              
              
              (5,868
              )
              
              
              (4,821
              )
              
              
              (1,716
              )Net cash from operating
      activities
              
              $
              280,490
              
              
              $
              229,147
              
              
              $
              170,879
              
              
              $
              116,827
              
              
              $
              91,627
 
 (10) Excludes two Saab 340 aircraft
held for sale at December 31, 2003, one as of December 31, 2004, five as of
December 31, 2005.
 
 -33-
 ITEM 7. 
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATION
 
 Overview
 
 Republic Airways Holdings Inc. is aDelawareholding company organized in 1996 that
owns three regional airlines: Chautauqua Airlines, Inc., (“Chautauqua
Airlines”), our operator of 37 to 50 seat aircraft; Shuttle America Corporation
(“ShuttleAmerica”), our operator of 70-seat aircraft;
and Republic Airline Inc. (“Republic Airline”), our operator of aircraft with
more than 70 seats.  As of December 31, 2007,our subsidiaries
offered scheduled passenger service on approximately 1,250 flights daily to 119
cities in 39 states, Canada, Mexico, Jamaica and the Bahamas pursuant to
code-share agreements with AMR Corp., the parent of American Airlines, Inc.
(“American”), Continental Airlines, Inc. (“Continental”), Delta Air Lines, Inc.
(“Delta”), Frontier Airlines, Inc. (“Frontier”), US Airways, Inc. (“US Airways”)
and United Air Lines, Inc. (“United”), collectively referred to as our
(“Partners”). We began flying for Continental and Frontier in January and March
2007, respectively. Currently, we provide our Partners with regional jet
service, operating as AmericanConnection, Continental Express, Delta Connection,
Frontier Airlines, US Airways Express, or United Express, including service out
of their hubs and focus cities in Atlanta, Boston, Denver, Chicago, Cincinnati,
Cleveland, Columbus, Houston, Indianapolis, New York, Philadelphia, Pittsburgh,
St. Louis and Washington, D.C. (Dulles and National).
 
 Unless
the context indicates otherwise, the terms “the Company,” “we,” “us,” or “our,”
refer to Republic Airways Holdings Inc. and its subsidiaries.
  We have long-term, fixed-fee regional
jet code-share agreements with each of our Partners that are subject to our
maintaining specified performance levels. Pursuant to these fixed-fee
agreements, which provide for minimum aircraft utilization at fixed rates, we
are authorized to use our Partners' two-character flight designation codes to
identify our flights and fares in our Partners' computer reservation systems, to
paint our aircraft in the style of our Partners, to use their service marks and
to market ourselves as a carrier for our Partners. In addition, in connection
with a marketing agreement among Delta, Continental and Northwest Airlines,
certain of the routes that we fly using Delta's and Continental’s flight
designator codes are also flown under Northwest's designator code. Our fixed-fee
agreements eliminate our exposure to fluctuations in fuel prices, fare
competition and passenger volumes. Our development of relationships with
multiple major airlines has enabled us to reduce our dependence on any single
airline, allocate our overhead more efficiently among our Partners and reduce
the cost of our services to our Partners.
 
 During 2007 we increased our operational
fleet by 48 aircraft for a total operational fleetas of December 31, 2007 of219 aircraft.  Our operational
fleet is comprised of 101 ERJ-170/175, 70-86 seat aircraft, 94 ERJ-145 family,
37-50 seat aircraft, and 24 CRJ-200, 50 seat aircraft.During 2007 we added 44aircraft into service for Continental by
transitioning20
ERJ-145 aircraft from our
US Airways operation and leasing 24CRJ-200 aircraft.  We added
five ERJ-170 aircraft to Frontier by transitioning five ERJ-170 aircraft from
our US Airways operation.  We also added 25 ERJ-175 aircraft for US
Airways and removed the five ERJ-170 aircraft and 20 ERJ-145 aircraft from the
US Airways operation.  We also removed one ERJ-145 aircraft from our
charter service and subleased the aircraft to an airline inMexico.
 
 Currently, we have agreed to place into
service an additional 29 ERJ-175 aircraft for our Partners through March 2009.
These 29 aircraft are covered by firm orders that we have with
Embraer.  We expect to place 16 of these 29 aircraft into service with
Delta during the second half of 2008 and the first quarter of 2009, which will
replace the 16 ERJ-170 aircraft currently in operation with
Delta.  Ten of the ERJ-170 aircraft removed from Delta will transition
to our United operation during the fourth quarter of 2008 and the first quarter
of 2009; five of the ERJ-170 aircraft removed from Delta will transition to our
Frontier operation during 2008; and one of the aircraft removed from Delta is
currently unallocated to our Partners.  We expect to place the
remaining 13 of the 29 ERJ-175 aircraft into service with US Airways during
2008.  Three of these aircraft will replace three ERJ-170 aircraft
that will transition to Frontier during 2008.  The Company has options
for 74 ERJ-170 aircraft, which may be converted to options for ERJ-175, ERJ-190
or ERJ-195 aircraft, which range in size from 78 seats to 110
seats.
 
 Under our amended Delta agreement, we
agreed to remove from service all 15 of our ERJ-135 at a rate of two aircraft
per month beginning in September 2008.  We expect to sell these
aircraft to Embraer or another party as the aircraft are removed from
service.  Under our Continental agreement, we expect all 24 CRJ-200
aircraft to be removed from service and returned to the
lessor.  Currently, we anticipate removing seven aircraft in the
fourth quarter of 2008, 10 aircraft in 2009 and seven aircraft in
2010.
  For the years ended December 31,
2007, 2006 and 2005
respectively, Delta accounted for approximately 33%, 35% and 34%, United
accounted for approximately 24%, 30% and 32%, US Airways accounted for
approximately 22%, 24% and 21% and American accounted for approximately 9%, 11%
and 13% of our regional airline services revenues. Continental and Frontier
accounted for approximately 10% and 2%, respectively, of our regional airline
services revenues for the year ended December 31, 2007.
 
 -34-
 
 Fleet Transition and
Growth
  The following table sets forth the
number and type of aircraft in service and operated by us at the dates
indicated:
  December
31,2007
              
              2006
              
              2005Total
              
              Owned
              
              Leased
              
              Total
              
              Owned
              
              Leased
              
              Total
              
              Owned
              
              LeasedAircraft:Embraer ERJ-135 LR
      (1)
              
              
              17
              
              15
              
              
              2
              
              17
              
              
              15
              
              2
              
              
              17
              
              15
              
              
              2Embraer ERJ-140 LR
              
              
              15
              
              11
              
              
              4
              
              15
              
              
              11
              
              4
              
              
              15
              
              11
              
              
              4Embraer ERJ-145
      LR (2)
              
              
              62
              
              27
              
              
              35
              
              63
              
              
              27
              
              36
              
              
              63
              
              22
              
              
              41Embraer ERJ-170 LR (3)
              
              
              76
              
              56
              
              
              20
              
              76
              
              
              56
              
              20
              
              
              47
              
              42
              
              
              5Embraer ERJ-175
      LR
              
              
              25
              
              22
              
              
              3
              
              —
              
              
              —
              
              —
              
              
              —
              
              —
              
              
              —Bombarier CRJ-200
              
              
              24
              
              —
              
              
              24
              
              —
              
              
              —
              
              —
              
              
              —
              
              —
              
              
              —Total
              
              
              219
              
              131
              
              
              88
              
              171
              
              
              109
              
              62
              
              
              142
              
              90
              
              
              52
  (1) Two of these aircraft are used
for charter operations and as spares at December 31, 2006,
2005.
 
 (2) Two of these aircraftwereused for charter operations and as
spares at December 31, 2006.  One of these aircraft were
used for charter operations and as spares at December 31, 2007 and2005.
 
 (3) Four of these aircraftwere unassignedat December 31, 2006.
 
 In addition to the aircraft listed
above, we subleasedsixERJ-145 aircraft to an
airline inMexico.
 
 During 1999, we began operating Embraer
aircraft on behalf of US Airways under a fixed-fee arrangement. There were 58,
58 and40 Embraer aircraft operating on behalf
of US Airways at December 31, 2007, 2006 and 2005, respectively. During
2000, we began operations on behalf of TWA under a fixed-fee arrangement; TWA
was subsequently acquired by American. There were15 Embraeraircraft operating under the agreement
with American at December 31, 2007, 2006 and 2005. At December 31,
2007, 2006 and 2005, respectively, we had 55, 55 and48 aircraft in operation under our
agreements with Delta. We began operations for United in June 2004, and at
December 31, 2007, 2006 and 2005 respectively, we had 35 Embraer aircraft in
operation under the agreement with United.  In January 2007 we began
operations for Continental, and at December 31, 2007 we had20 Embraer and 24 Bombardier regional jet aircraft in operation
with Continental. In March 2007 we began operations for Frontier, and at
December 31, 2007 we had nineaircraft in operation with
Frontier.
 
 Revenue
  Under our fixed-fee arrangements withour Partners, we receive fixed-fees, as well as reimbursement of specified
costs on a gross basis with additional possible incentives from our Partners for
superior performance. For the years ended December 31, 2007, 2006 and 2005all ofour regional airline services revenue
was earned under our fixed-fee arrangements.The numberof aircraft we operate andaircraft utilization are the most
significant drivers of our revenue, as opposed to the number of passengers
we carry orthe fare the
passengers pay.
  Operating Expenses
 
 A brief description of the items
included in our operating expenses line items follows.
 
 Wages and Benefits
  This expense includes not only wages and
salaries, but also expenses associated with various employee benefit plans,
employee incentives and payroll taxes. These expenses will fluctuate based
primarily on our level of operationschanges in wage rates for contract and
non-contract employees andchanges in costs of our benefit plans.
  Aircraft Fuel
  Fuel expense includes the cost of
aircraft fuel, including fuel taxes and into-plane fees.Beginning in May 2005, we do not record
fuel expense and the related revenue for US Airways operations because US
Airways pays for fuel directly.  Beginning in January 2007, for
certain United locations, we do not record fuel expense and the related revenue
because United pays for fuel directly. Continental and Frontier pay fuel
directly and their operations began in January and March 2007,
respectively.
  -35-
 Landing Fees
  This expense consists of fees charged by
airports for each aircraft landing.Under our current fixed-fee agreements,
we are reimbursed for the actual costs of landing fees.
  Aircraft and Engine
Rent
  This expense consists of the costs of
leasing aircraft and spare engines. The leased aircraft and spare engines are
operated under long-term operating leases with third parties. The lease payments
associated with future aircraft deliveries are subject to market conditions for
interest rates and contractual price increases for the aircraft. Aircraft rent
is reduced by the amortization of integration funding credits received from the
aircraft manufacturer for parts and training. The credits are amortized on a
straight-line basis over the term of the respective lease of the
aircraft.
  Maintenance and
Repair
  Maintenance and repair expenses include
all parts, materials, tooling and spares required to maintain our aircraft. We
have entered into long-term maintenance "power-by-the-hour" service contracts
with third-party maintenance providers under which we are charged fixed rates
for each flight hour accumulated byallof our engines and some of the major
airframe components. The effect of such contracts is to reduce the volatility of
aircraft maintenance expense over the term of the contract.
  Insurance and Taxes
  This expense includes the costs of
passenger liability insurance, aircraft hull insurance, war risk insurance and
all other insurance policies, other than employee welfare insurance.
Additionally, this expense includes personal and real property taxes, including
aircraft property taxes. Under our current fixed-fee agreements, we are
reimbursed for the actual costs of passenger liability insurance, war risk
insurance, aircraft hull insurance and property taxes, subject to certain
restrictions. Under our US Airways and United fixed-fee agreements, we are
reimbursed for the actual costs of such items other than aircraft hull
insurance, which is reimbursed at agreed upon rates.
  Depreciation and
Amortization
  This expense includes the
depreciation of all fixed assets, including aircraft, and the amortization of
the commuter slots that we own.  Goodwill and intangibles with an
indefinite life are required to be evaluated for impairment on an annual basis.
If we determine the goodwill and intangibles are impaired, we are required to
write-off the amount of goodwill and intangibles that are impaired.  As of
December 31, 2007 and 2006, goodwill and intangibles was$62.0 millionand $62.4 million respectively, net of
amortization.
 
 Other
  This expense includes the costs of crew
training, crew travel, airport, passenger and ground handling related expenses,
all other lease expenses, professional fees and all other
administrative, facilities and operational overhead expenses not included in
other line items above.
 
 -36-
 Certain Statistical
Information
 Years Ended December
      31,Operating Expenses per ASM in
      cents2007
              
              
              2006
              
              
              2005Wages and benefits
              
              
              1.97
              
              
              
              1.92
              
              
              
              2.19Aircraft fuel
      (1)
              
              
              2.58
              
              
              
              3.55
              
              
              
              4.25Landing fees
              
              
              0.47
              
              
              
              0.46
              
              
              
              0.46Aircraft and engine rent
              
              
              1.08
              
              
              
              1.03
              
              
              
              1.18Maintenance and repair
              
              
              1.13
              
              
              
              1.15
              
              
              
              1.17Insurance and taxes
              
              
              0.16
              
              
              
              0.19
              
              
              
              0.25Depreciation and
      amortization
              
              
              0.93
              
              
              
              1.01
              
              
              
              0.99Impairment loss and accrued
      aircraft return costs (2)
              
              
              —
              
              
              
              (0.02
              )
              
              
              (0.06
              )Other
              
              
              0.91
              
              
              
              0.87
              
              
              
              0.95Total operating expenses
              
              
              9.23
              
              
              
              10.16
              
              
              
              11.38Plus interest expense
              
              
              0.93
              
              
              
              1.00
              
              
              
              0.97Total operating and interest
      expenses
              
              
              10.16
              
              
              
              11.16
              
              
              
              12.35Total operating and interest
      expenses excluding aircraft fuel
              
              
              7.58
              
              
              
              7.61
              
              
              
              8.10
 
 (1)Beginning in May 2005, we do not record
fuel expense and the related revenue for US Airways operations because US
Airways pays for fuel directly.  Beginning in January 2007, for
certain United locations, we do not record fuel expense and the related revenue
because United pays for fuel directly. Continental and Frontier pay fuel
directly and their operations began in January and March 2007,
respectively.
  (2) In 2005, we reversed a $4.2
million reserve after an agreement to return all the Saab turboprop aircraft to
lessors was executed and all liabilities were settled. In 2006, we recorded a
$2.1 million gain relating to the disposition of Saab aircraft and spare
parts.
  Years Ended December
      31,2007
              
              Increase/
                (Decrease)
                2007-2006
              
              2006
              
              Increase/
                (Decrease)
                2006-2005
              
              2005Passengerscarried(000’s)
              
              
              16,287
              
              
              28.6
              %
              
              12,666
              
              
              38.6
              %
              
              9,137Revenue passenger
      miles (000’s) (1)
              
              
              8,581,836
              
              
              29.0
              %
              
              6,650,399
              
              
              47.2
              %
              
              4,516,518Available seat
      miles (000’s) (2)
              
              
              11,511,795
              
              
              25.7
              %
              
              9,154,719
              
              
              39.6
              %
              
              6,559,966Passenger load
      factor (3)
              
              
              74.5
              %
              
              1.9
              pp
              
              72.6
              %
              
              3.8
              pp
              
              68.8
              %Cost per available seat mile
      (4)
              
              
              10.16
              
              
              (9.0
              %)
              
              11.16
              
              
              (9.6
              %)
              
              12.35Average price per gallon of fuel
      (5)
              
              
              $2.40
              
              
              11.1
              %
              
              $2.16
              
              
              9.1
              %
              
              $1.98Fuel gallons consumed
      (6)
              
              
              123,438,728
              
              
              (17.4
              %)
              
              149,383,949
              
              
              5.8
              %
              
              141,159,425Block hours
      (7)
              
              
              679,718
              
              
              22.1
              %
              
              556,635
              
              
              20.0
              %
              
              464,041Averagepassenger trip
      length(miles)
              
              
              522
              
              
              1.4
              %
              
              515
              
              
              5.7
              %
              
              487Average daily utilization of each
      aircraft (hours) (8)
              
              
              10.32
              
              
              (0.3
              %)
              
              10.35
              
              
              (1.4
              %)
              
              10.50Aircraft inoperationsat end of
      period
              
              
              219
              
              
              28.1
              %
              
              171
              
              
              20.4
              %
              
              142
 
 (1)Passengers carried multiplied bymilesflown.
 
 (2)Passenger seats available multiplied bymilesflown.
 
 (3) Revenue passenger miles divided
by available seat miles.
  (4) Total operating and interest
expenses divided by available seat miles.
 
 (5) Cost of aircraft fuel,
including fuel taxes and into-plane fees.
 
 (6)Beginning in May 2005, we do not record
fuel expense and the related revenue for US Airways operations because US
Airways pays for fuel directly.  Beginning in January 2007, for
certain United locations, we do not record fuel expense and the related revenue
because United pays for fuel directly. Continental and Frontier pay fuel
directly and their operations began in January and March 2007,
respectively.
  (7) Hours from takeoff to landing,
including taxi time.
  (8) Average number of hours per day
that an aircraft flown in revenue service is operated (from gate departure to
gate arrival).
 
  -38-
  Results of
Operations
 
 2007 Compared to
2006
 
 The following table sets forth
information regarding the Company’s expense components for the years ended
December 31, 2007 and December 31, 2006. Individual expense components are also
expressed in cents per ASM.
 
 
 Years ended December
      31,2007
              
              
              2006Amount
              
              
              Cents
                per ASM
              
              
              Amount
              
              
              Cents
                per ASM(in
    thousands)
              
              
              
              
              
              (in
    thousands)OPERATING
      EXPENSES:Wages and
      benefits
              
              $
              226,521
              
              
              
              1.97
              
              
              $
              175,483
              
              
              
              1.92Aircraft
    fuel
              
              
              296,573
              
              
              
              2.58
              
              
              
              325,500
              
              
              
              3.55Landing
fees
              
              
              53,684
              
              
              
              0.47
              
              
              
              41,993
              
              
              
              0.46Aircraft and engine
      rent
              
              
              124,961
              
              
              
              1.08
              
              
              
              94,773
              
              
              
              1.03Maintenance and
      repair
              
              
              130,237
              
              
              
              1.13
              
              
              
              105,198
              
              
              
              1.15Insurance and
      taxes
              
              
              19,039
              
              
              
              0.16
              
              
              
              17,652
              
              
              
              0.19Depreciation and
      amortization
              
              
              106,594
              
              
              
              0.93
              
              
              
              92,228
              
              
              
              1.01Impairment loss and accrued
      aircraft return costs (1)
              
              
              —
              
              
              
              —
              
              
              
              (2,050)
              
              
              
              (0.02)Other
              
              
              104,790
              
              
              
              0.91
              
              
              
              79,708
              
              
              
              0.87Total operating
      expenses
              
              
              1,062,399
              
              
              
              9.25
              
              
              
              930,485
              
              
              
              10.16Interest
      expense
              
              
              107,323
              
              
              
              0.93
              
              
              
              91,128
              
              
              
              1.00Total operating expenses and
      interest expense
              
              $
              1,169,722
              
              
              
              10.16
              
              
              $
              1,021,613
              
              
              
              11.16Total operating expenses and
      interest expense less fuel
              
              $
              873,149
              
              
              
              7.58
              
              
              $
              696,113
              
              
              
              7.61
 
 (1)  In 2006, we recorded a $2.1
million gain relating to the disposition of Saab aircraft and spare
parts.
 
 Operating revenue in 2007 increased by
13.1%, or $149.6 million, to $1.29 billion compared to $1.14 billion
in 2006.Excluding reimbursement for fuel expense, which is a
pass-through cost to our Partners, regional airline service revenues increased
23.4% for 2007.  The
increase was due primarily to fixed-fee revenue earned fromthe addition
of 49 regional jet aircraft that were placed into service throughout 2007 and
one regional jet aircraft removed from charter service and subleased to an
airline in Mexico during 2007.
Other operating revenue decreased $3.7 million due to a decrease in payments
from US Airways for the use of aircraft take-off and landing slots at LaGuardia
airport, which expired at the end of 2006.
  Total operating and interest expenses,
excluding fuel increased by 25.4%, or $177.0 million, to $873.1 million for
2007 compared to $696.1 million during 2006 due to the increase in flight
operations. The cost per available seat mile on total operating and interest
expenses, excluding fuel charges, decreased to 7.58¢ in 2007 compared to 7.61¢
in 2006. Factors relating to the change in operating expenses are discussed
below.
  Wages and benefits increased by 29.1%,
or $51.0 million, to $226.5 million for 2007 compared to $175.5
million for 2006 due primarily to a $34.1 million increase in flight crew and
maintenance operations wage expenses to support the increase in regional jet
operations, a $12.7 million increase in related payrolltaxes and increased employment levels
andan increase in stock
compensation expense recognition of $1.8 million, to $3.1 million in 2007. The
cost per available seat mile increased to 1.97¢ for 2007 compared to 1.92¢ in
2006.
  Aircraft fuel expense decreased 8.9%, or
$28.9 million, to $296.6 million for 2007 compared to $325.5 million
for 2006 due to a 17%decrease in gallons consumed due to
United paying for fuel directly for certain locations beginning in January 2007,partiallyoffset by a 11% increase in the average fuel price per
gallon from $2.16 in2006
to $2.40 in 2007.  The unit cost decreased to 2.58¢ in 2007 compared to
3.55¢ in 2006.
  -39-
 Landing fees increased by 27.8%, or
$11.7 million, to $53.7 million in 2007 compared to $42.0 million
in 2006. The increase is due mainly to a 16% increase in departures, a 3% increase in the average landing
weight anda 7% increase in
the average fee charged by airports. Our fixed-fee agreements provide for a
direct reimbursement of landing fees. The unit cost was 0.47¢ in 2007 compared
to 0.46¢ in 2006.
 
 Aircraft and engine rent increased by
31.9%, or $30.2 million, to $125.0 million in 2007 compared to
$94.8 million in 2006 due to a $22.2 million increase in aircraft rents of
CRJ-200 aircraft, which are on short-term leases and an $11.1 million increase
in aircraft rents of 70-seat aircraft, and is partially offset by the effect ofthe purchase of five
previously leased 50-seat
aircraft in the third quarter of 2006.  The unit cost increased to
1.08¢ for 2007 compared to 1.03¢ for
2006.
 
 Maintenance and repair expenses
increased by 23.8%, or $25.0 million, to $130.2 million in 2007 compared to
$105.2 million for 2006 due mainly to the addition of 49 aircraft in 2007,
which resulted in a $16.6 million increase in long-term maintenance agreement
expenses.  Additionally, repair expenses on parts not under warranty
ornotincluded under long term contracts
increased $5.6 million.  Scheduled heavy maintenance events also
increased by $1.2 million.  The unit cost was down slightly to 1.13¢
in 2007 compared to 1.15¢ in 2006.
  Insurance and taxes increased 7.9%, or
$1.4 million, to $19.0 million in 2007 compared to $17.7 million
in 2006. Property taxes increased $1.7 million and the increase in operations
was more than offset by a decline in the average insurance rates year over. Our
fixed-fee agreements generally provide for a direct reimbursement of insurance
and property taxes.  The unit cost decreased to 0.16¢ in 2007 compared to 0.19¢ in
2006.
  Depreciation and amortization increased
15.6%, or $14.4 million, to $106.6 million in 2007 compared to
$92.2 million in 2006 due mainly to $15.2 million of additional
depreciation on regional jet aircraft due to the purchase of 11 aircraft in 2007
and the full year effect of 16 regional jet aircraft purchased in 2006.
Additionally, amortization for takeoff and landing slots decreased $3.3 million
from 2006 due to slots at LaGuardia airport expiring at the end of 2006. The
unit cost decreased to 0.93¢ in 2007 compared to 1.01¢ in
2006.
  Impairment loss and accrued return costs
was a ($2.1) million benefit in 2006, which represented the gain on the
disposition of Saab aircraft and spare parts.
 
 Other expenses increased 31.5%, or $25.1
million, to $104.8 million in 2007 from $79.7 million in 2006, due primarily to
$15.8 million of increases in flight crew training and travel expenses and $7.6
million of increases in passenger catering costs and other operational expenses
to support the increased regional jet operations andincreased pilot attrition. The unit cost increased to 0.91¢ in
2007 compared to 0.87¢ in 2006.
  Interest expense increased 17.8% or
$16.2 million, to $107.3 million in 2007 from $91.1 million in 2006
primarily due to interest on debt related to the financing of 11 aircraft during
2007 and the full year effect of 16 regional jet aircraft financed in 2006. The
weighted average interest rate remained constant at 6.2%. The unit cost
decreased to 0.93¢ in 2007 compared to 1.00¢ in 2006.
  We incurred income tax expense of $51.2
million during 2007, compared to $51.9 million in 2006. The effective tax rates
for 2007 and 2006 were 38.2% and 39.5%, respectively, which were higher than the
statutory rate due to state income taxes and non-deductible meals and
entertainment expense, primarily for our flight crews.  In
addition,during the fourth quarter of 2007 the
Company reduced its estimated blended state tax rate based on its current
operations.
 
  -40-
  2006 Compared to
2005
 
 The following table sets forth
information regarding the Company’s expense components for the years ended
December 31, 2006 and December 31, 2005. Individual expense components are also
expressed in cents per ASM.
 
 
 Years ended December
      31,2006
              
              
              2005Amount
              
              
              Cents
                per ASM
              
              
              Amount
              
              
              Cents
                per ASM(in
    thousands)
              
              
              
              
              
              (in
    thousands)OPERATING
      EXPENSES:Wages and
      benefits
              
              $
              175,483
              
              
              
              1.92
              
              
              $
              143,826
              
              
              
              2.19Aircraft
    fuel
              
              
              325,500
              
              
              
              3.55
              
              
              
              278,923
              
              
              
              4.25Landing
fees
              
              
              41,993
              
              
              
              0.46
              
              
              
              30,376
              
              
              
              0.46Aircraft and engine
      rent
              
              
              94,773
              
              
              
              1.03
              
              
              
              77,725
              
              
              
              1.18Maintenance and
      repair
              
              
              105,198
              
              
              
              1.15
              
              
              
              76,481
              
              
              
              1.17Insurance and
      taxes
              
              
              17,652
              
              
              
              0.19
              
              
              
              16,117
              
              
              
              0.25Depreciation and
      amortization
              
              
              92,228
              
              
              
              1.01
              
              
              
              64,877
              
              
              
              0.99Impairment loss and accrued
      aircraft return costs (1)
              
              
              (2,050)
              
              
              
              (0.02)
              
              
              
              (4,218)
              
              
              
              (0.06)Other
              
              
              79,708
              
              
              
              0.87
              
              
              
              62,195
              
              
              
              0.95Total operating
      expenses
              
              
              930,485
              
              
              
              10.16
              
              
              
              746,302
              
              
              
              11.38Interest
      expense
              
              
              91,128
              
              
              
              1.00
              
              
              
              63,503
              
              
              
              0.97Total operating expenses and
      interest expense
              
              $
              1,021,613
              
              
              
              11.16
              
              
              $
              809,805
              
              
              
              12.35Total operating expenses and
      interest expense less fuel
              
              $
              696,113
              
              
              
              7.61
              
              
              $
              530,882
              
              
              
              8.10
 
 (1)  In 2005, we reversed a $4.2
million reserve after an agreement to return all the Saab turboprop aircraft to
lessors was executed and all liabilities were settled. In 2006, we recorded a
$2.1 million gain relating to the disposition of Saab aircraft and spare
parts.
 
 Operating revenue in 2006 increased by
26.3%, or $238.1 million, to $1.1 billion compared to $905.0 million
in 2005. The increase was due primarily to fixed-fee revenue earned from
twenty-nine 70-seat aircraft added to revenue service in 2006. Eighteen aircraft
were added for US Airways, seven were added for Delta, and four were placed on
short-term assignment in late 2006 with current Partners and will begin service
for Frontier in the spring of 2007. Other operating revenue increased $6.4
million due to a full year of sublease revenue on aircraft and payments from US
Airways for the use of aircraft take-off and landing slots in 2006 which we
began recording in September 2005.
  Total operating expenses increased by
24.7%, or $184.2 million, to $930.5 million in 2006 compared to $746.3 million
in 2005 due to the increase in flight operations. Total operating and interest
expenses increased by 26.2%, or $211.9 million, to $1,021.6 million for
2006 compared to $809.8 million during 2005 due to the increase in flight
operations. The cost per available seat mile on total operating and interest
expenses, excluding fuel charges, decreased to 7.6¢ in 2006 compared to 8.1¢ in
2005. Factors relating to the change in operating expenses are discussed
below.
  Wages and benefits increased by 22.0%,
or $31.7 million, to $175.5 million for 2006 compared to $143.8 due
primarily to a $25.3 million increase in flight crew and maintenance operations
wage expenses to support the increase in 70-seat regional jet operations and a
$8.7 million increase in related employee benefit costs resulting from the
additional wage expense and stock compensation expense recognition of $1.3
million in 2006. These increases were partially offset by a $4.4 million
decrease in the wage expense for Customer Service employees due to the
elimination of ground handling operations for American inSt. Louis inMarch 2006. The cost per available seat
mile decreased to 1.9¢ for 2006 compared to 2.2¢ in
2005.
  Aircraft fuel expense increased 16.7%,
or $46.6 million, to $325.5 million for 2006 compared to
$278.9 million for 2005 due to a 10% increase in the average fuel price per
gallon and a 6% increase in gallons consumed. Beginning in May 2005, we no
longer record fuel expense and the related revenue for US Airways operations
because US Airways pays for fuel directly. The average price per gallon was$2.16in 2006 and $1.98 in 2005.  The unit cost decreased to 3.6¢
in 2006 compared to 4.3¢ in 2005 due to the increase in the 70-seat US Airways
operations, for which no fuel expense is recorded.
  -41-
 Landing fees increased by 38.2%, or
$11.6 million, to $42.0 million in 2006 compared to $30.4 million
in 2005. The increase is due to a 16% increase in departures and a 17% increase
in the average landing weight resulting from the increase in 70-seat operations
in 2006. Our fixed-fee agreements provide for a direct reimbursement of landing
fees. The unit cost remained unchanged at 0.5¢.
  Aircraft and engine rent increased by
21.9%, or $17.0 million, to $94.8 million in 2006 compared to
$77.7 million in 2005 due to a $22.4 million increase in aircraft rents of
70-seat aircraft resulting from the additional leases of fifteen 70-seat
aircraft in 2006, and is partially offset by the effect of buying out five
50-seat aircraft in the third quarter of 2006 and removing the final seven
turboprop aircraft from lease in the fourth quarter of 2005. The unit cost
decreased to 1.0¢ for 2006 compared to 1.2¢ for 2005.
 
 Maintenance and repair expenses
increased by 37.6%, or $28.7 million, to $105.2 million in 2006 compared to
$76.5 million for 2005 due mainly to a $29.6 million increase in 70-seat
regional jet maintenance expenses resulting from the increase in 70-seat
operations in 2006. Additionally, maintenance expenses on our smaller jets
(37-50 seats) increased $5.4 million over 2005 due mainly to contractual rate
increases on certain of our engines under a long-term maintenance agreement,
which are reimbursed as pass-through expenses. The increase in regional jet
expenses was partially offset by a decrease of $6.4 million from 2005 turboprop
maintenance expenses as a result of the removal of the turboprops. The unit cost
remained unchanged at 1.2¢.
  Insurance and taxes increased 9.5%, or
$1.5 million, to $17.7 million in 2006 compared to $16.1 million
in 2005. The increase in operations was mostly offset by a decline in the
average insurance rates year over year and a $0.4 million decrease in aircraft
property taxes. The unit cost decreased to 0.2¢ for 2006 compared to 0.3¢ in
2005.
  Depreciation and amortization increased
42.2%, or $27.4 million, to $92.2 million in 2006 compared to
$64.9 million in 2005 due mainly to $24.1 million of additional
depreciation on regional jet aircraft due to the purchase of 16 aircraft in 2006
and the full year effect of 31 regional jet aircraft purchased in 2005.
Additionally, amortization for takeoff and landing slots increased $2.8 million
from 2005. The unit cost remained unchanged at 1.0¢.
  Impairment loss and accrued return costs
was a ($2.1) million benefit in 2006 compared to ($4.2) million benefit in 2005.
The ($2.1) million in 2006 represent the gain on the disposition of Saab
aircraft and spare parts. The ($4.2) million in 2005 was the reversal of the
remaining balance of a reserve for the return of our Saab fleet of aircraft
after an agreement to return all the Saab turboprop aircraft to lessors was
executed and all liabilities were settled.
 
 Other expenses increased 28.2%, or $17.5
million, to $79.7 million in 2006 from $62.2 million in 2005, due primarily to
$22.5 million of increases in flight crew training and travel expenses,
passenger catering costs, and administrative expenses to support the increased
70-seat regional jet operations, offset by a decrease of $6.3 million in
payments made to American in 2005 related to operating 70-seat aircraft at
Chautauqua. The unit cost remained unchanged at 0.9¢.
  Interest expense increased 43.4% or
$27.6 million, to $91.1 million in 2006 from $63.5 million in 2005
primarily due to interest on debt related to the financing of 16 aircraft during
2006 and the full year effect of 31 regional jet aircraft financed in 2005. The
weighted average interest rate increased to 6.1% in 2006 from 5.6% in 2005. The
unit cost remained unchanged at 1.0¢.
  We incurred income tax expense of $51.9
million during 2006, compared to $39.5 million in 2005. The effective tax rates
for 2006 and 2005 were 39.5% and 39.5%, respectively, which were higher than the
statutory rate due to state income taxes and non-deductible meals and
entertainment expense, primarily for our flight crews.
 
 Liquidity and Capital
Resources
  As of December 31, 2007, we had$164.0 millionin cash and$2.5 millionavailable under our revolving credit
facility. At December 31, 2007, we had a working capital deficiency of
$(23.0) million.
 
 In March 2007, the Company’s revolving
credit facility withBank
of America Business Capital was amended extending the term to March 31, 2009 and
providing a revolving credit facility of $15.0 million.  The revolving
credit facility allows the Company to borrow up to 30% of the lower of net book
value or appraised orderly liquidation value of spare rotable parts and up to
15% of the lower of net book value or appraised orderly liquidation value of
spare non-rotable parts for our regional jet fleet. The revolving credit
facility is collateralized by all of the Company’s assets, excluding the owned
aircraft and engines. The revolving credit facility terminated future equipment
loans and reduced the spare parts borrowing base. The amendment added a
liquidity covenant to the existing specified fixed charge coverage ratio and a
debt to earnings leverage ratio covenants. The Company pays an annual commitment
fee on the unused portion of the revolving credit facility in an amount equal to
0.375% of the unused amounts. The credit facility limits the Company’s ability
to incur indebtedness or create or incur liens on its assets. The Company was in
compliance with the covenant at December 31, 2007.
  -42-
 At December 31, 2007, the Company had$12.5million of outstanding letters of
credit.
 
 During 2007, the Company acquired 22
aircraft through debt financing totaling $438.3 million. The debt was obtained
from banks and the aircraft manufacturer for 12 to 15 year termsat interest rates ranging from6.22% to 7.28%.
 
 As of December 31, 2007, we leased nine
spare regional jet engines from General Electric Capital Aviation Services,
five spare regional jet engines from RRPF Engine Leasing (US) LLC and eight
regional jet engines from Miyabi Engine Leasing.
  Net cash from operating activities was
$170.9 million, $229.1 and $280.5 million for the years ended December 31,
2005, 2006 and 2007, respectively. The increase from operating activities is
primarily due to the continued growth of our business. For 2007, net cash from
operating activities is primarily net income of $82.7 million, depreciation and
amortization of $106.6 million, the change in deferred income taxes of
$51.1 million, the Delta pre-petition claim of $44.6 million partially
offset byincreases of $11.4 million in inventories.
For 2006, net cash from operating activities is primarily net income of $79.5
million, depreciation and amortization of $92.2 million, the change in deferred
income taxes of $51.4 million, the increase in accrued liabilities of
$16.8 million partially offset by increases of $11.4 million in
inventories. For 2005, net cash from operating activities is primarily net
income of $60.7 million, depreciation and amortization of $68.0 million, the
change in deferred income taxes of $37.6 million and the increase in
accrued liabilities of $29.0 million.
  Net cashfrom investingactivities was $(175.2) million,
$(114.5) million and $(76.5) million for the years ended December 31, 2005,
2006 and 2007, respectively. In 2007, we purchased 22 regional jet aircraft. Net
aircraft deposits decreased $7.3 million in 2007. Net aircraft deposits
increased$43.4million in 2006. In 2005, we purchased
35 aircraft and paid $51.6 million for commuter slots.
  Net cash from financing activities was
$120.1 million, $(81.1) million and $(235.5) million for the years ended
December 31, 2005, 2006 and 2007, respectively. In 2007 we made debt
payments of $93.5 million andrepurchased $142.4 millionof our common stock.  In 2006
we made debt payments of $79.9 million.In 2005 we completed two follow on
public stock offering providing $186.8 million and made debt payments of $53.4
million.
  During
2007, we purchased 7,066,894 shares of our common stock on the market or through
privately negotiated transactions at a weighted average purchase price of $20.15
for total consideration of $142.4 million. We purchased 4,555,000 of these
shares through four privately negotiated transactions with our former majority
shareholder, WexAir RJET LLC, for total consideration of $132.1
million.
 In
December 2007, our Board of Directors authorized the purchase of up to $100
million of our common stock. The shares will be purchased on the open market or
through privately negotiated transactions from time-to-time during the twelve
month period following the authorization. Under the authorization, the timing
and amount of purchase would be based on market conditions, securities law
limitations and other factors. The stock buy-back program does not obligate us
to acquire any specific number of shares in any period, and may be modified,
suspended, extended or discontinued at any time without prior notice. At
December 31, 2007, the amount under this authorization was $98.6
million
  We
currently anticipate that our available cash resources, cash generated from
operations and anticipated third party funding arrangements will be sufficient
to meet our anticipated working capital and capital expenditure requirements for
at least the next 12 months.
  Aircraft Leases and Other Off-Balance
Sheet Arrangements
  We have significant obligations for
aircraft and engines that are classified as operating leases and, therefore, are
not reflected as liabilities on our balance sheet. Aircraft leases expire
between2009 and
2023. As of December 31,
2007, our total mandatory payments under operating leases for aircraft
aggregated approximately$1.1billion and total minimum annual
aircraft rental payments for the next 12 months under all non-cancelable
operating leases is approximately $138.7million. Other non-cancelable
operating leases consist of engines, terminal space, operating facilities,
office space and office equipment. The leases expire through2026. As of December 31, 2007, our total
mandatory payments under other non-cancelable operating leases aggregated
approximately $133.1 million. Total minimum annual
other rental payments for the next 12 months are approximately $12.2
million.
  Purchase Commitments
  As of December 31, 2007, the Company had
firm orders to purchase29ERJ-170/175 aircraft. The
current total list price of the 29 aircraft is$899million. During the year ended December
31, 2007, the Company made aircraft deposits in accordance with the aircraft
commitments of $51.4 million. The Company also has a commitment to
acquirenine
spareaircraft engines with
a current list price of approximately$40.5million. These commitments are subject
to customary closing conditions.
 
 In January 2007, the Company and
Frontier entered into an agreement, whereby, Republic will operate for Frontier
17 ERJ-170 aircraft.Nine
ofthe 17 aircraft are
currently in service and the remaining eight aircraft will be transitioned from
our current Partners.
 
 We expect to fund future capital
commitments through internally generated funds, third-party aircraft financings,
and debt and other financings.
 
 -43-
 We currently anticipate that our
available cash resources, cash generated from operations and anticipated
third-party financing arrangements will be sufficient to meet our anticipated
working capital and capital expenditure requirements for at least the next
12 months. We may need to raise additional funds, however, to fund more
rapid expansion, principally the acquisition of additional aircraft, or meet
unanticipated working capital requirements. It is possible that future funding
may not be available to us on favorable terms, or at all.
  Our contractual obligations and
commitments at December 31, 2007, include the following (in
thousands):
  Payments Due By
      PeriodLess than
                1 year
              
              
              1-3 years
              
              
              4-5 years
              
              
              Over
                5 years
              
              
              TotalLong-term debt (including
      interest)
              
              $
              243,235
              
              
              $
              679,818
              
              
              $
              453,212
              
              
              $
              1,365,661
              
              
              $
              2,741,926Operating
      leases
              
              
              150,901
              
              
              
              362,439
              
              
              
              213,613
              
              
              
              533,173
              
              
              
              1,260,126Tax liability for uncertain tax
      positions
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              4,409
              
              
              
              4,409Aircraft under firm
      orders:Debt or Lease Financed Aircraft
      under firm orders (29)
              
              
              899,000
              
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              899,000Engines under firm orders
      (9)
              
              
              40,500
              
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              40,500Total contractual cash
      obligations
              
              $
              1,333,636
              
              
              $
              1,042,257
              
              
              $
              666,825
              
              
              $
              1,903,243
              
              
              $
              4,945,961
  The Company has long-term maintenance
agreements with an avionics equipment manufacturer and maintenance provider that
has a guaranteed minimum annual flight hour requirement. The minimum guaranteed
amount based on the Company's current operations is$4.9 millionper year through December 2014 for
the ERJ-145 family of aircraft and$8.2 millionper year through December 2014 for the
ERJ-170family ofaircraft. The Company did
not record a liability for this guarantee because the Company does not believe
that any aircraft will be utilized below the minimum flight hour requirement
during the term of the agreement.
 
 The Company has long-term maintenance
agreements withaviation
equipment manufacturersto
maintain the auxiliary power unitsfor the ERJ-145 family of aircraft and
the CRJ-200 regional aircraft throughJune 2013 andDecember 2012, respectively. The
agreement has a penalty payment provision if more than twenty percent of the
Company's aircraft are removed from service based on the annual flight activity
prior to the date of removal. The Company did not record a liability for this
penalty provision because the Company does not believe that more than twenty
percent of their aircraft will be removed from service during the term of the
agreement.
 
 The Company has long-term maintenance
agreements based uponflight activity with engine
manufacturers throughFebruary 2010 for the
CRJ-200 aircraft, October2012 for the ERJ-145 familyof aircraftand through December 2014 for the
ERJ-170 family of aircraft.
 
 The Company has long-term maintenance
agreements forwheels and
brakes throughJune 2014 for the ERJ-145 family of aircraft and throughFebruary2017 for theERJ-170 family of aircraft. The agreement has an early termination
penalty, if the Company removes seller's equipment from certain aircraft, sells
or leases certain aircraft to a third party or terminates the services prior to
expiration of the agreement. The Company did not record a liability for this
penalty provision, because the Company does not believe the contract will be
terminated prior to the expiration date.
 
 The Company has a long-term agreement to
provide,manage and repair
certain airframe components and spare parts onthe CRJ-200 aircraft through December
2009.
 
 Total payments under these long-term
maintenance agreements were $76.8 million, $56.1 million and$53.6 millionfor the years ended December 31,
2007, 2006 and2005,
respectively.
  Our commercial commitments at December
31, 2007 include letters of credit totaling$12.5 millionexpiring within one
year.
  Cash payments for interest were
approximately$105.8
millionin 2007. Tax
payments in 2007 were not significant and we are not expecting significant
payments in 2008.
 
 -44-
 Critical Accounting
Policies
  The discussion and analysis of our
financial condition and results of operations are based upon the consolidated
financial statements, which have been prepared in accordance with accounting
principles generally accepted in theUnited States. The preparation of these financial
statements requires us to make estimates and judgments that affect the reported
amount of assets and liabilities, revenues and expenses, and related disclosure
of contingent assets and liabilities at the date of our financial statements.
Actual results may differ from these estimates under different assumptions and
conditions.
  Critical accounting policies are defined
as those that are reflective of significant judgments and uncertainties, and are
sufficiently sensitive to result in materially different results under different
assumptions and conditions. We believe that our critical accounting policies are
limited to those described below. For a detailed discussion on the application
of these and other accounting policies, see Note 2 in the notes to the
consolidated financial statements.
  ·Revenue
Recognition. Under our fixed-fee
arrangements with American,Delta,USAirways, United,
Continental and Frontier, the Company receives a fixed-fee, as well as
reimbursement of specified costs on a gross basis with additional possible
incentives from our Partners for superior service. Revenues are recognized in
the period the service is provided, and we perform an estimate of the profit
component based upon the information available at the end of the accounting
period. The reimbursement of specified costs, known as “pass-through costs”, may
include aircraft ownership cost, passenger liability and hull insurance,
aircraft property taxes, fuel, landing fees and catering. All revenue recognized
under these contracts is presented at the gross amount billed for reimbursement
pursuant to Emerging Issues Tax Force Issue (“EITF”) No. 99-19Reporting
Revenue Gross as a Principal versus Net as an Agent.
  Under the Company’s code-share
agreements, the Company is reimbursed an amount per aircraft designed to
compensate the Company for certain aircraft ownership costs. In accordance with
EITF No. 01-08,Determining Whether
an Arrangement Contains a Lease, the Company has concluded that a
component of its revenue under the agreement discussed above is rental income,
inasmuch as the agreement identifies the “right of use” of a specific type and
number of aircraft over a stated period of time. The amount deemed to be rental
income during fiscal 2007, 2006 and 2005 was$310.3 million, $258.6 million and
$189.8 million, respectively, and has been included in regional airline
services revenue on the Company’s consolidated statements of
income.
 
 ·Aircraft
Leases.
The Company has aircraft that are leased from third parties. In order to
determine the proper classification of a lease as either an operating lease or a
capital lease, the Company must make certain estimates at the inception of the
lease relating to the economic useful life and the fair value of an asset as
well as select an appropriate discount rate to be used in discounting future
lease payments. These estimates are utilized by management in making
computations as required by existing accounting standards that determine whether
the lease is classified as an operating lease or a capital lease. All of the
Company’s aircraft leases have been classified as operating leases, which
results in rental payments being charged to expense over the term of the related
leases. Additionally, operating leases are not reflected in the Company’s
consolidated balance sheet and accordingly, neither a lease asset nor an
obligation for future lease payments is reflected in the Company’s consolidated
balance sheet. The Company is responsible for all other maintenance costs of its
aircraft and must meet specified return conditions upon lease expiration for
both the airframes and engines. The Company is unable to estimate the liability
for these return conditions as of December 31, 2007, because the leases expire
beginning in 2009. The Company will record a liability for these return
conditions once the liability is probable and reasonably
estimable.
  ·Impairments
to Long-Lived Assets. We record impairment
losses on long-lived assets used in operations when events and circumstances
indicate that the assets might be impaired and the undiscounted cash flows
estimated to be generated by those assets are less than the carrying amount of
those items. Our cash flow estimates are based on historical results adjusted to
reflect our best estimate of future market and operating conditions. Our
estimates of fair value represent our best estimate based on industry trends and
reference to market rates and transactions. We review, at least annually, the
estimated useful lives and salvage values for our owned aircraft and spare
parts.
 
 ·Aircraft
Maintenance and Repair. We follow a method of
expensing aircraft maintenance and repair costs asincurred. However, maintenance
and repairs for engines and airframe components under power-by-the-hour
contracts, such as engines, avionics,APUs, wheels and brakes,
are expensed as the aircraft are operated based upon actual hours or cycles
flown.
 
 ·IssuedWarrants. Warrants issued to
non-employees are accounted for under SFAS No. 123(R),Share-Based
Payments,and EITF 96-18,Accounting
for Equity Instruments That Are Issued to Other Than Employees for Acquiring, or
in Conjunction with Selling, Goods or Services, at fair value on the
measurement date. Fair value for warrants issued to Delta, for which a
measurement date has occurred, have been determined based upon the estimated
fair value of the equity instrument issued rather than the consideration
received because we believe it is more reliably measured. Various option pricing
models are available; however, we have used a model that allows continuous
compounding of dividends which begins three years after the grant date and the
dilutive effects of our initial public offering and the follow-on offerings in
2005. Option pricing models require estimates of dividend yield, a risk free
rate commensurate with the warrant term, stock volatility and the expected life
of the warrant. Each of these variables has been determined based upon relevant
industry market data, our strategic business plan and consultation with
appropriate professionals experienced in valuing similar equity
instruments.
 
 -45-
  ·Deferred
gain - Delta Pre-Petition Claim and SurrenderedWarrants.  As a result of the
Delta amendment, in March 2007, we recorded a deferred credit of $44,590, which
represented the net realizable value of the pre-petition claim on the approval
date by the Bankruptcy Court. In addition, we recorded a deferred gain on the
surrender of the warrants from Delta of $42,735, which was net of the write-off
of the previously reported unamortized deferred warrant charge of $6,369. The
deferred credits for the proceeds of the pre-petition claim and the gain on the
surrender of the warrants totaling $87,325 will be amortized as an adjustment to
revenue over the weighted average aircraft in service during the term of
the agreements with Delta.
  ·Income
Taxes. The
Company has generated significant net operating losses (“NOLs”) for federal
income tax purposes primarily from accelerated depreciation on owned aircraft.
In July 2005, Wexford Capital LLC’s ownership percentage of the Company was
reduced to less than 50% as a result of a follow-on offering of our common
stock. As a result of this decrease in ownership, the utilization of NOLs
generated prior to July 2005 are subject to an annual limitation under Internal
Revenue Code Section 382 (“IRC 382”). The annual limitation is based upon the
enterprise value of the Company on the IRC 382 ownership change date multiplied
by the applicable long-term tax exempt rate. If the utilization of pre July 2005
NOLs becomes uncertain in future years, we will be required to record a
valuation allowance for the NOLs not expected to be
utilized.
 
 ·Intangible
Commuter Slots. The Company acquired
commuter slots during 2005 at the New York-LaGuardia and Ronald Reagan
Washington National airports from US Airways.  The licensing agreement with
the Company and US Airways for the LaGuardia commuter slots expired on December
31, 2006, but we maintain a security interest in the LaGuardia slots if US
Airways fails to perform under the current licensing agreement. The estimated
useful lives of these commuter slots were determined based upon the period
of time cash flows are expected to be generated by the commuter slots and by
researching the estimated useful lives of commuter slots or similar intangibles
by other airlines. In addition, an estimated residual value was determined using
estimates of the expected fair value of the commuter slots at the end of the
expected useful life. The residual value will be assessed annually for
impairment. The estimated useful lives are also reviewed
annually.
 
 ·Reportable
Segments.
The Company’s only reportable segment is scheduled transportation of passengers
and air freight under code-share agreements. In addition, the Company has
charter service, aircraft leasing and commuter slot licensing fee revenues.
These activities aggregated represent less than 10% of consolidated revenues,
operating income and assets. If these activities become more significant in
future years, additional reportable segments would need to be
disclosed.
 
 -46-
 Quarterly Information
(unaudited)
  The following table sets forth summary
quarterly financial information for the years ended December 31, 2006 and2007.
  Quarters
    EndedMarch 31
              
              
              June 30
              
              
              September
30
              
              
              December 31(dollars in thousands, except net
      income per share)2007Operating
      revenues
              
              $
              290,443
              
              
              $
              320,313
              
              
              $
              330,082
              
              
              $
              351,839Operating
      income
              
              
              54,829
              
              
              
              54,546
              
              
              
              57,427
              
              
              
              63,476Net
      income
              
              
              19,280
              
              
              
              19,041
              
              
              
              20,170
              
              
              
              24,267Net income per
      share:Basic
              
              $
              0.45
              
              
              $
              0.46
              
              
              $
              0.50
              
              
              $
              0.66Diluted
              
              $
              0.44
              
              
              $
              0.46
              
              
              $
              0.49
              
              
              $
              0.65Weighted average number of shares
      outstanding:Basic
              
              
              42,616,419
              
              
              
              41,319,327
              
              
              
              40,582,516
              
              
              
              36,932,777Diluted
              
              
              44,306,067
              
              
              
              41,707,625
              
              
              
              40,868,412
              
              
              
              37,246,2652006Operating
      revenues
              
              $
              257,344
              
              
              $
              284,313
              
              
              $
              306,132
              
              
              $
              295,289Operating
      income
              
              
              47,917
              
              
              
              52,560
              
              
              
              56,554
              
              
              
              55,562Net
      income
              
              
              16,900
              
              
              
              20,255
              
              
              
              21,932
              
              
              
              20,423Net income per
      share:Basic
              
              $
              0.40
              
              
              $
              0.48
              
              
              $
              0.52
              
              
              $
              0.48Diluted
              
              $
              0.39
              
              
              $
              0.47
              
              
              $
              0.50
              
              
              $
              0.46Weighted average number of shares
      outstanding:Basic
              
              
              41,836,296
              
              
              
              41,941,377
              
              
              
              42,205,300
              
              
              
              42,606,404Diluted
              
              
              42,943,911
              
              
              
              43,277,470
              
              
              
              43,539,180
              
              
              
              43,948,625
  New Accounting
Standards
  In July 2006, the Financial Accounting
Standards Board (FASB) issued FASB Interpretation No. 48,Accounting for
Uncertainty in Income Taxes—an Interpretation of FASB Statement No. 109(FIN 48), which
clarifies the accounting for uncertainty in tax positions. This Interpretation
requires that we recognize in our financial statements, the impact of a tax
position, if that position is more likely than not of being sustained on audit,
based on the technical merits of the position.The Company adopted the provisions of
FIN 48 on January 1, 2007.  The total amount of unrecognized tax
benefits as of the date of the adoption was $3.5 millionof which the Company had
previously recorded $1.2 millionforincome tax contingencies prior to the
adoption date.  Accordingly, the Company recognized a $2.4 million
increasein the liability
for the unrecognized tax benefits which was accounted for as a reduction to
retained earnings and an increase to deferred tax liability.  During
the year ended December 31, 2007, the Company recognized approximately $0.9
million additional tax expense for unrecognized tax
benefits.
 
 In
September 2006, FASB issued SFAS No. 157, Fair Value Measurements(SFAS 157). SFAS 157 defines fair value, establishes a framework for
measuring fair value, and expands disclosures about the use of fair value
measurements in accordance with generally accepted accounting
principles.  SFAS 157 is effective for fiscal years beginning after
November 15, 2007. The Company has considered SFAS 157 and concluded that it
will not have a material impact on it consolidated financial
statements.
 
 In
February 2007, the FASB issued SFAS No. 159, The Fair Value Option for
Financial Assets and Financial Liabilities(SFAS 159). SFAS 159 is effective for fiscal years beginning after
November 15, 2007. SFAS 159 allows the Company to choose, at specified election
dates, to measure eligible financial assets and financial liabilities at fair
value that are not otherwise required to be measured at fair value. If a company
elects the fair value option for an eligible item, changes to that item's fair
value in subsequent reporting periods must be recognized in current earnings.
SFAS 159 also establishes presentation and disclosure requirements designed to
draw comparison between entities that elect different measurement attributes for
similar assets and liabilities.  Upon review of the Company’s
financial assets and financial liabilities the Company has concluded there are
no eligible financial assets or financial liabilities applicable to SFAS
159.  Subsequent to the effective date of SFAS 159, fiscal years
beginning after November 15, 2007, the Company will continue to review its
financial assets and financial liabilities and the applicability of SFAS
159.
 
 -47-
 In
December 2007, the FASB issued SFAS No. 141 (revised 2007), Business Combinations(SFAS 141R).
SFAS 141R establishes principles and requirements for how an acquirer
recognizes and measures in its financial statements the identifiable assets
acquired, the liabilities assumed, any non-controlling interest in the acquiree
and the goodwill acquired. SFAS 141R also establishes disclosure
requirements to enable the evaluation of the nature and financial effects of the
business combination. SFAS 141R is effective for fiscal years beginning
after December 15, 2008.
 
 In
December 2007, the FASB issued SFAS No. 160, Non-controlling Interests in Consolidated Financial
Statements—an amendment of Accounting Research Bulletin No. 51(SFAS 160). SFAS 160 establishes accounting and reporting
standards for ownership interests in subsidiaries held by parties other than the
parent, the amount of consolidated net income attributable to the parent and to
the non-controlling interest, changes in a parent's ownership interest, and the
valuation of retained non-controlling equity investments when a subsidiary is
deconsolidated. SFAS 160 also establishes disclosure requirements that
clearly identify and distinguish between the interests of the parent and the
interests of the non-controlling owners. SFAS 160 is effective for fiscal
years beginning after December 15, 2008.
 
 
 ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
  We have been and are subject to market
risks, including commodity price risk (such as, to a limited extent, aircraft
fuel prices) and interest rate risk.
  Interest Rates
 Our earnings can be affected by changes
in interest rates due to the amounts of variable rate debt and the amount of
cash and securities held. The interest rate applicable to variable rate debt may
rise and increase the amount of interest expense. At December 31, 2007 and
December 31, 2006 all of our long-term debt was fixed rate debt. We anticipate
that additional debt will be at fixed rates. However, we
believe we could fund any interest rate increases on additional variable rate
long-term debt with the increased amounts of interest
income.
  We currently intend to finance the
acquisition of aircraft through the manufacturer, third-party leases or
long-term borrowings. Changes in interest rates may impact the actual cost to us
to acquire these aircraft. To the extent we place these aircraft in service
under our code-share agreements our reimbursement rates may not be adjusted
higher or lower to reflect any changes in our aircraft rental
rates.
  Beginning in April 2004, in
anticipation of financing the purchase of regional jet aircraft on firm order
with the manufacturer, we entered into fourteen treasury lock agreements with
notional amounts totaling $373.5 million and a weighted average interest
rate of 4.47% with expiration dates through June 2005. Management
designated the treasury lock agreements as cash flow hedges of forecasted
transactions. The treasury lock agreements were settled at each respective
settlement date, which were the purchase dates of the respective aircraft. We
settled all of the agreements during 2004 and 2005 and the net amount paid was
$7.5 million. Amounts paid or received on the settlement date are
reclassified to interest expense over the term of the respective aircraft debt.
During 2007 and2006, we reclassified$0.8 million and$0.3 million to interest expense,
respectively. The Company expects to reclassify$0.7 million tointerest expense for the year ended
December 31, 2008.
 
  -48-
  
 ITEM 8. FINANCIAL STATEMENTS AND
SUPPLEMENTARY DATA
 
 REPUBLIC
      AIRWAYS HOLDINGS INC. AND SUBSIDIARIESINDEX TO AUDITED CONSOLIDATED FINANCIAL
      STATEMENTSReport
      of Independent Registered Public Accounting
Firm
              50Consolidated
      Balance Sheets as of December 31, 2007 and 2006
              51Consolidated
      Statements of Income for the years ended December 31, 2007, 2006 and
      2005
              52Consolidated
      Statements of Stockholders’ Equity and Comprehensive Income for the years
      ended December 31, 2007, 2006 and 2005
              53Consolidated
      Statements of Cash Flows for the years ended December 31, 2007,
      2006 and 2005
              54Notes
      to Consolidated Financial Statements
              55
 
 
 
  -49-
  
  REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
    To the
Board of Directors and Stockholders of
 Republic
Airways Holdings Inc.
 Indianapolis,
Indiana
  We have
audited the accompanying consolidated balance sheets of Republic Airways
Holdings Inc. and subsidiaries (the “Company”) as of December 31, 2007 and
2006, and the related consolidated statements of income, stockholders’ equity
and comprehensive income, and cash flows for each of the three years in the
period ended December 31, 2007. We also have audited the Company’s internal
control over financial reporting as of December 31, 2007, based on criteria
established in Internal
Control—Integrated Frameworkissued by the Committee of Sponsoring
Organizations of the Treadway Commission. The Company’s management is
responsible for these consolidated financial statements, for maintaining
effective internal control over financial reporting, and for its assessment of
the effectiveness of internal control over financial reporting, included in the
accompanying Management’s Annual Report on Internal Control Over Financial
Reporting included in Item 9A.  Our responsibility is to express an
opinion on these consolidated financial statements and an opinion on the
Company’s internal control over financial reporting based on our
audits.
  We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement and whether effective internal
control over financial reporting was maintained in all material respects. Our
audits of the financial statements included examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. Our audit of internal
control over financial reporting included obtaining an understanding of internal
control over financial reporting, assessing the risk that a material weakness
exists, and testing and evaluating the design and operating effectiveness of
internal control based on the assessed risk. Our audits also included performing
such other procedures as we considered necessary in the
circumstances.  We believe that our audits provide a reasonable basis
for our opinions.
  A
company’s internal control over financial reporting is a process designed by, or
under the supervision of, the company’s principal executive and principal
financial officers, or persons performing similar functions, and effected by the
company’s board of directors, management, and other personnel to provide
reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with
generally accepted accounting principles. A company’s internal control over
financial reporting includes those policies and procedures that (1) pertain
to the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the company;
(2) provide reasonable assurance that transactions are recorded as
necessary to permit preparation of financial statements in accordance with
generally accepted accounting principles, and that receipts and expenditures of
the company are being made only in accordance with authorizations of management
and directors of the company; and (3) provide reasonable assurance
regarding prevention or timely detection of unauthorized acquisition, use, or
disposition of the company’s assets that could have a material effect on the
financial statements.
  Because
of the inherent limitations of internal control over financial reporting,
including the possibility of collusion or improper management override of
controls, material misstatements due to error or fraud may not be prevented or
detected on a timely basis. Also, projections of any evaluation of the
effectiveness of the internal control over financial reporting to future periods
are subject to the risk that the controls may become inadequate because of
changes in conditions, or that the degree of compliance with the policies or
procedures may deteriorate.
  In our
opinion, the consolidated financial statements referred to above present fairly,
in all material respects, the financial position of the Company as of
December 31, 2007 and 2006, and the results of their operations and their
cash flows for each of the three years in the period ended December 31,
2007, in conformity with accounting principles generally accepted in the United
States of America. Also, in our opinion, the Company maintained, in all material
respects, effective internal control over financial reporting as of
December 31, 2007, based on the criteria established in Internal Control—Integrated
Frameworkissued by the Committee of Sponsoring Organizations of the
Treadway Commission.
  As
discussed in Note 1 to the consolidated financial statements, substantially all
revenues are derived from code-share agreements with US Airways, Inc., Delta Air
Lines, Inc., AMR Corp., the parent of American Airlines, Inc., United Air Lines,
Inc., Continental Airlines, Inc., and Frontier Airlines, Inc.
  As
discussed in Note 2 to the consolidated financial statements, on January 1,
2006, the Company adopted Statement of Financial Accounting Standards, No. 123
(Revised 2004), Share-Based
Payment, using the modified prospective transition method.
  As
discussed in Note 11 to the consolidated financial statements, on January 1,
2007, the Company adopted the provisions of FASB Interpretation No. 48, Accounting for Uncertainty in Income
Taxes – an Interpretation of FASB Statement No. 109.
  
  /s/ DELOITTE & TOUCHE LLP
 Indianapolis,Indiana
 February 19, 2008
 
 
  -50-
  REPUBLIC AIRWAYS HOLDINGS INC. AND
SUBSIDIARIES
 CONSOLIDATED BALANCE
SHEETS
 AS OF DECEMBER 31, 2007 AND
2006
 (In thousands, except share and per
share amounts)
 
 2007
              
              
              2006ASSETSCurrent
    Assets:Cash and cash
      equivalents
              
              $
              164,004
              
              
              $
              195,528Receivables—net of allowance for
      doubtful accounts of$897and $340,
      respectively
              
              
              27,585
              
              
              
              19,639Inventories—net
              
              
              43,424
              
              
              
              31,821Prepaid expenses and other current
      assets
              
              
              9,928
              
              
              
              11,411Restricted
    cash
              
              
              1,226
              
              
              
              1,238Deferred income
      taxes
              
              
              7,510
              
              
              
              3,467Total current assets
              
              
              253,677
              
              
              
              263,104Aircraft and other
      equipment—net
              
              
              2,308,726
              
              
              
              1,889,717Intangible and other
      assets
              
              
              197,340
              
              
              
              192,285Goodwill
              
              
              13,335
              
              
              
              13,335Total
              
              $
              2,773,078
              
              
              $
              2,358,441LIABILITIES AND
      STOCKHOLDERS' EQUITYCurrent
      Liabilities:Current portion of long-term
      debt
              
              $
              131,700
              
              
              $
              86,688Accounts
      payable
              
              
              35,201
              
              
              
              23,899Accrued
      liabilities
              
              
              109,792
              
              
              
              92,458Total current liabilities
              
              
              276,693
              
              
              
              203,045Long-term debt—less current
      portion
              
              
              1,781,880
              
              
              
              1,482,115Deferred credits and other non
      current liabilities
              
              
              104,115
              
              
              
              23,566Deferred income
      taxes
              
              
              184,304
              
              
              
              140,886Total
      liabilities
              
              
              2,346,992
              
              
              
              1,849,612Commitments and
      contingenciesStockholders'
      Equity:Preferred stock, $.001 par value;
      5,000,000 shares authorized; no shares issued or
      outstandingCommon stock,$.001 par value; one vote per
      share; 150,000,000 shares authorized; 43,474,466 and 42,708,743
      shares issued and 36,407,572 and 42,708,743 shares outstanding,
      respectively
              
              
              43
              
              
              
              43Additional paid-in
      capital
              
              
              293,127
              
              
              
              281,826Warrants
              
              
              —
              
              
              
              8,574Treasury stock, at cost, 7,066,894
      shares
              
              
              (142,411
              )
              
              
              —Accumulated other comprehensive
      loss
              
              
              (3,009
              )
              
              
              (3,877
              )Accumulated
      earnings
              
              
              278,336
              
              
              
              222,263Total stockholders' equity
              
              
              426,086
              
              
              
              508,829Total
              
              $
              2,773,078
              
              
              $
              2,358,441
 
 See accompanying notes to consolidated
financial statements.
 
   -51-
  REPUBLIC AIRWAYS HOLDINGS INC. AND
SUBSIDIARIES
 CONSOLIDATED STATEMENTS
OF INCOME
 FOR THE YEARS ENDED DECEMBER 31, 2007,
2006 AND 2005
 (In thousands, except per share
amounts)
  2007
              
              
              2006
              
              
              2005OPERATING
      REVENUES:Regional airline
      services
              
              $
              1,274,607
              
              
              $
              1,118,226
              
              
              $
              883,906Charter and ground
      handling
              
              
              5,867
              
              
              
              8,932
              
              
              
              11,611Other
              
              
              12,203
              
              
              
              15,920
              
              
              
              9,504Total operating revenues
              
              
              1,292,677
              
              
              
              1,143,078
              
              
              
              905,021OPERATING
      EXPENSES:Wages and
      benefits
              
              
              226,521
              
              
              
              175,483
              
              
              
              143,826Aircraft
    fuel
              
              
              296,573
              
              
              
              325,500
              
              
              
              278,923Landing
fees
              
              
              53,684
              
              
              
              41,993
              
              
              
              30,376Aircraft and engine
      rent
              
              
              124,961
              
              
              
              94,773
              
              
              
              77,725Maintenance and
      repair
              
              
              130,237
              
              
              
              105,198
              
              
              
              76,481Insurance and
      taxes
              
              
              19,039
              
              
              
              17,652
              
              
              
              16,117Depreciation and
      amortization
              
              
              106,594
              
              
              
              92,228
              
              
              
              64,877Impairment loss and accrued
      aircraft return costs (credits)
              
              
              —
              
              
              
              (2,050
              )
              
              
              (4,218
              )Other
              
              
              104,790
              
              
              
              79,708
              
              
              
              62,195Total operating
      expenses
              
              
              1,062,399
              
              
              
              930,485
              
              
              
              746,302OPERATING
      INCOME
              
              
              230,278
              
              
              
              212,593
              
              
              
              158,719OTHER INCOME
      (EXPENSE):Interest
      expense:Non-related party
              
              
              (107,323
              )
              
              
              (91,128
              )
              
              
              (63,503
              )Related party
              
              
              —
              
              
              
              —
              
              
              
              (43
              )Interest and other
      income
              
              
              11,013
              
              
              
              9,944
              
              
              
              5,002Total other income (expense)
              
              
              (96,310
              )
              
              
              (81,184
              )
              
              
              (58,544
              )INCOME BEFORE INCOME
      TAXES
              
              
              133,968
              
              
              
              131,409
              
              
              
              100,175INCOME TAX
      EXPENSE
              
              
              51,210
              
              
              
              51,899
              
              
              
              39,521Net income
              
              $
              82,758
              
              
              $
              79,510
              
              
              $
              60,654Basic net income per common
      share
              
              $
              2.05
              
              
              $
              1.89
              
              
              $
              1.69Diluted net income per common
      share
              
              $
              2.02
              
              
              $
              1.82
              
              
              $
              1.66
 
 See accompanying notes to consolidated
financial statements.
 
 
  
  -52-
  REPUBLIC AIRWAYS HOLDINGS INC. AND
SUBSIDIARIES
 CONSOLIDATED
STATEMENTS OF STOCKHOLDERS' EQUITY AND COMPREHENSIVE
INCOME
 FOR THE YEARS ENDED DECEMBER 31, 2007,
2006 AND 2005
 (In thousands)
 
 
 Other
                Comprehensive
                Income
    (Loss)
              
              Common
                Stock
              
              Additional
                Paid-In
                Capital
              
              Warrants
              
              Treasury
                Stock
              
              Accumulated
                Other
                Comprehensive
                Loss
              
              Accumulated
                Earnings
              
              TotalBalance at January 1,
      2005
              
              
              $
              26
              
              $
              87,120
              
              $
              8,574
              
              
              
              $
              (4,168
              )
              $
              83,099
              
              $
              174,651Stock compensation
      expense
              
              
              
              
              
              
              125
              
              
              
              
              
              
              
              
              
              
              
              
              
              125Common stock offerings,
      net
              
              
              
              16
              
              
              186,749
              
              
              
              
              
              
              
              
              
              
              
              
              
              186,765Exercise of employee stock
      options, including excess tax benefit
              
              
              
              
              
              
              3,111
              
              
              
              
              
              
              
              
              
              
              
              
              
              3,111Capital
      contribution
              
              
              
              
              
              
              400
              
              
              
              
              
              
              
              
              
              
              
              
              
              400Distribution to WexAir LLC for
      ShuttleAmericamerger
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (1,000
              )
              
              (1,000
              )Net income
              $
              60,654
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              60,654
              
              
              60,654Unrealized losses on derivative
      instruments, net of tax
              
              (8
              )
              
              
              
              
              
              
              
              
              
              
              
              
              (8
              )
              
              
              
              
              (8
              )Comprehensive
      income
              $
              60,646Balance at December 31,
      2005
              
              
              
              
              42
              
              
              277,505
              
              
              8,574
              
              
              
              
              (4,176
              )
              
              142,753
              
              
              424,698Stock compensation
      expense
              
              
              
              
              
              
              
              1,297
              
              
              
              
              
              
              
              
              
              
              
              
              
              1,297Exercise of employee stock
      options
              
              
              
              
              1
              
              
              3,024
              
              
              
              
              
              
              
              
              
              
              
              
              
              3,025Net income
              $
              79,510
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              79,510
              
              
              79,510Reclassification adjustment for
      net realized losses on derivative instruments, included in net income, net
      of tax
              
              299
              
              
              
              
              
              
              
              
              
              
              
              
              
              299
              
              
              
              
              
              299Comprehensive
      income
              $
              79,809Balance at December 31,
      2006
              
              
              
              
              43
              
              
              281,826
              
              
              8,574
              
              
              
              
              (3,877
              )
              
              222,263
              
              
              508,829Stock compensation
      expense
              
              
              
              
              
              
              
              3,119
              
              
              
              
              
              
              
              
              
              
              
              
              
              3,119Exercise of employee stock
      options
              
              
              
              
              
              
              
              8,182
              
              
              
              
              
              
              
              
              
              
              
              
              
              8,182Net income
              $
              82,758
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              82,758
              
              
              82,758Treasury stock
      repurchases
              
              
              
              
              
              
              
              
              
              
              
              
              
              $
              (142,411
              )
              
              
              
              
              
              
              
              (142,411
              )Reclassification adjustment for
      net realized losses on derivative instruments, included in net income, net
      of tax
              
              868
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              868
              
              
              
              
              
              868Cummulative effect of change in
      accounting principle (FIN 48)
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (2,367
              )
              
              (2,367
              )Delta warrantssurrender, net of
tax
              
              
              
              
              
              
              
              
              
              
              (8,574
              )
              
              
              
              
              
              
              
              
              (24,318
              )
              
              (32,892
              )Comprehensive
      income
              $
              83,626Balance at December 31,
      2007
              
              
              
              $
              43
              
              $
              293,127
              
              $
              —
              
              
              $
              (142,411
              )
              $
              (3,009
              )
              $
              278,336
              
              $
              426,086
 
 See accompanying notes to consolidated
financial statements.
 
  -53-
  REPUBLIC AIRWAYS HOLDINGS INC. AND
SUBSIDIARIES
 CONSOLIDATED STATEMENTS OF
CASH FLOWS
 FOR THE YEARS ENDED DECEMBER 31, 2007,
2006 AND 2005
 (In thousands)
 
 2007
              
              
              2006
              
              
              2005OPERATING ACTIVITIES:Net income
              
              $
              82,758
              
              
              $
              79,510
              
              
              $
              60,654Adjustments to reconcile net
      income to net cash from operating activities:Depreciation and
      amortization
              
              
              106,594
              
              
              
              92,228
              
              
              
              64,877Debt issue costs and other
      amortization
              
              
              6,764
              
              
              
              4,551
              
              
              
              2,776Warrant
      amortization
              
              
              102
              
              
              
              565
              
              
              
              372Loss (gain) on aircraft and other
      equipment disposals
              
              
              255
              
              
              
              (118
              )
              
              
              (276
              )Impairment loss and accrued
      aircraft return costs (credits)
              
              
              —
              
              
              
              (2,050
              )
              
              
              (4,218
              )Amortization of deferred
      credits
              
              
              (1,761
              )
              
              
              (1,438
              )
              
              
              (1,346
              )Stock compensation
      expense
              
              
              3,119
              
              
              
              1,297
              
              
              
              125Deferred income
      taxes
              
              
              51,090
              
              
              
              51,404
              
              
              
              37,606Changes in certain assets and
      liabilities:Receivables
              
              
              (7,944
              )
              
              
              (2,939
              )
              
              
              (10,323
              )Inventories
              
              
              (11,419
              )
              
              
              (11,448
              )
              
              
              1,276Prepaid expenses and other current
      assets
              
              
              1,554
              
              
              
              1,474
              
              
              
              (4,907
              )Accounts
      payable
              
              
              11,299
              
              
              
              10,546
              
              
              
              1,152Accrued and other
      liabilities
              
              
              4,022
              
              
              
              16,826
              
              
              
              28,980Deferred revenue (Delta pre-petition
      claim)
              
              
              44,590
              
              
              
              —
              
              
              
              —Other
assets
              
              
              (10,533
              )
              
              
              (11,261
              )
              
              
              (5,869
              )Net cash from operating
      activities
              
              
              280,490
              
              
              
              229,147
              
              
              
              170,879INVESTING ACTIVITIES:Purchase of aircraft and other
      equipment
              
              
              (99,545
              )
              
              
              (89,255
              )
              
              
              (126,928
              )Purchase of commuter
      slots
              
              
              —
              
              
              
              —
              
              
              
              (51,640
              )Proceeds from sale of aircraft
      equipment
              
              
              15,798
              
              
              
              18,180
              
              
              
              2,479Aircraft deposits and
      other
              
              
              (51,414
              )
              
              
              (67,563
              )
              
              
              (37,206
              )Aircraft deposits
      returned
              
              
              58,681
              
              
              
              24,148
              
              
              
              38,158Change in restricted
      cash
              
              
              12
              
              
              
              (20
              )
              
              
              (15
              )Net cash from investing
      activities
              
              
              (76,468
              )
              
              
              (114,510
              )
              
              
              (175,152
              )FINANCING ACTIVITIES:Payments on short/long-term
      debt
              
              
              (93,475
              )
              
              
              (79,900
              )
              
              
              (53,363
              )Repayment of subordinated notes
      payable to affiliate (Wexford)
              
              
              —
              
              
              
              —
              
              
              
              (1,250
              )Proceeds from capital contribution
      (Wexford)
              
              
              —
              
              
              
              —
              
              
              
              400Proceeds from subordinated notes
      payable from affiliate (Wexford)
              
              
              —
              
              
              
              —
              
              
              
              250Proceeds from common stock
      offerings, net
              
              
              —
              
              
              
              —
              
              
              
              186,765Payments on settlement of treasury
      locks
              
              
              —
              
              
              
              —
              
              
              
              (4,694
              )Proceeds on settlement of treasury
      locks
              
              
              —
              
              
              
              —
              
              
              
              192Proceeds from exercise of stock
      options
              
              
              8,182
              
              
              
              3,025
              
              
              
              1,189Debt issue
      costs
              
              
              (7,842
              )
              
              
              (4,239
              )
              
              
              (9,431
              )Payments on purchase of
      treasurystock
              
              
              (142,411
              )
              
              
              —
              
              
              
              —Net cash from financing
      activities
              
              
              (235,546
              )
              
              
              (81,114
              )
              
              
              120,058Net changes in cash and cash
      equivalents
              
              
              (31,524
              )
              
              
              33,523
              
              
              
              115,785CASH AND CASH EQUIVALENTS AT
      BEGINNING OF YEAR
              
              
              195,528
              
              
              
              162,005
              
              
              
              46,220CASH AND CASH EQUIVALENTS AT END
      OF YEAR
              
              $
              164,004
              
              
              $
              195,528
              
              
              $
              162,005
 
 See accompanying notes to
consolidated financial statements.
 
 
  -54-
  REPUBLIC AIRWAYS HOLDINGS INC. AND
SUBSIDIARIES
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 FOR THE YEARS ENDED DECEMBER 31, 2007,
2006 and 2005
 (Dollars in thousands, except share and
per share amounts)
   1. ORGANIZATION &
BUSINESS
  The accompanying consolidated financial
statements have been prepared in conformity with accounting principles generally
accepted in the United States of America and include the accounts of Republic
Airways Holdings Inc., a Delaware Corporation, and its wholly-owned operating
subsidiaries (collectively “Republic” or the “Company”), Chautauqua Airlines,
Inc. (“Chautauqua”), an Indiana Corporation and certified air carrier; Shuttle
America Corporation (“Shuttle America”), an Indiana Corporation and certified
air carrier; and  Republic Airline Inc. (“Republic Airline”) an Indiana
Corporation and certified air carrier.
 
 Effective May 6, 2005, the Company
entered into a stock purchase agreement (the “Agreement”) with ShuttleAmerica andShuttle Acquisition LLC (“Shuttle
LLC”), pursuant to which the Company acquired all of the issued and outstanding
common stock of ShuttleAmerica fromShuttle LLC. Consideration paid was a
promissory note in the aggregate principal amount of $1,000 payable by Republic
to Shuttle LLC and the assumption of certain debt of ShuttleAmerica totalingapproximately $679. Because Republic
and ShuttleAmerica
werecommonly controlled by
Wexford Capital LLC (“Wexford”), the acquisition was accounted for in a manner
similar to a pooling of interests.
  The Company operates as an air carrier
providing scheduled passenger and air freight service as US Airways Express,
AmericanConnection, Delta Connection,United Express, Continental Express and Frontier
Airlines undercode-share
agreements with US Airways, Inc. ("US Airways"), AMR Corporation
("American"), Delta Air Lines, Inc. ("Delta"), United Air Lines, Inc.
(“United”),Continental Airlines, Inc. (“Continental”) and Frontier
Airlines, Inc. (“Frontier”),respectively. The Company has code-share agreements with US Airways
offering passenger and air freight service from US Airways' hub and focus
airports in Philadelphia and Pittsburgh, Pennsylvania, Indianapolis, Indiana,
Boston, Massachusetts, New York, New York (LaGuardia) and Washington, D.C. Under
the code-share agreement with American, the Company offers passenger and air
freight service from American's hub airport inSt. Louis,Missouri. The code-share agreements with Delta
offer passenger and air freight service from Delta's hub and focus airports inAtlanta,Georgia,Columbus,OhioandCincinnati,Ohio. Under the code-share agreements with
United, the Company offers passenger and air freight service from
United’s hub airports inChicago,IllinoisandWashingtonD.C., (Dulles and National), the
Company offers passenger and air freight service from Continental’s hub inHouston,TexasandCleveland,Ohioand the Company offers passenger
and air freight service from Frontier’s hub inDenver,Colorado.
 
 TheUS Airways Code-Share Agreements
 
 The Company has code-share agreements
with US Airways to operate ERJ-145 and ERJ-170/175
aircraft.The
code-share agreement for the ERJ-145 aircraft terminates in March
2013.  The code-share agreement for the ERJ-170 aircraft and the
ERJ-175 aircraft terminates in September 2015 with respect to the ERJ-170
aircraft and twelve years from the in-service date for each ERJ-175 aircraft. US
Airways may terminate the code-share agreements at any time for cause upon not
less than 90 days notice and subject tothe Company’s rightto cure.
 
 The American Code-Share
Agreement
 
 The Company has a code-share agreement
with American to operate ERJ-140 aircraft.If American terminates the code-share
agreement for cause, American has a call option to require thatthe Company assignto American all of its rights under the
leases of aircraft, and to lease to American the aircraft to the extentthe Company owns
them, used at that time
under the code-share agreement. If American exercises its call option,the Company is
requiredto pay certain
maintenance costs in transferring the aircraft to American's maintenance
program.
 
 If American terminates the code-share
agreement without cause,the Company has theright to put the leases of the
aircraft, or to sell the aircraft to American to the extent owned bythe Company, used under the code-share agreement to
American. American also has a call option to requirethe Company toassign to American these leases. Ifthe Company
exercisesits putor American exercises its call right,
both parties are obligated to implement a schedule to terminate the code-share
agreement in an orderly fashion and transition the aircraft fromthe Companyto American.
 
 The term of the American code-share
agreement continues until February 1, 2013. American may reduce the term by one
year each time that the Company fails to achieve an agreed performance level.
American may only exercise this right three times during the term of the
code-share agreement. Under certain circumstances, the agreement may be subject
to termination for cause prior to that date.
  -55-
 TheDelta Code-Share Agreements
 
 The code-share agreements for the
ERJ-135/145 and ERJ-170 aircraft terminate in
May 2016 and January 2019, respectively. Delta may terminate the code-share
agreements at any time, with or without cause, if it providesthe Company 180days written notice, provided that such
notice shall not be given prior to November 2009 for the ERJ-145regional jetcode-share agreement and July 2015 for
the ERJ-170 regional jet code-share agreement.  If Delta does choose
to eliminate any aircraft at that time, it may not reduce the number of aircraft
in service to less than 12 during the 12-month period following the 180 day
initial notice period unless it completely terminates the code-share
agreement.
 
 If Delta exercises this right under
either agreement or ifthe
Company terminates eitheragreement for cause,the
Company has theright to
require Delta either to purchase, sublease or assume the lease of aircraft
leased bythe Company
withrespect to any of the aircraft the
Company previouslyoperated
for Delta under that agreement. Ifthe Company chooses notto exercise this right, or if Delta
terminates either agreement for cause, Delta may requirethe Company tosell or sublease to it or Delta may
assume the lease of aircraft leased bythe Company withrespect to any of the aircraftthe Company
previouslyoperated for it
under that agreement.
 
 TheUnitedCode-Share Agreements
 
 The ERJ-145 and ERJ-170 code-share
agreements terminate on June 30, 2014 and June 30, 2019, respectively. United
has the option of extending each agreement for five years or less; however, the
ERJ-145 code-share agreement may be terminated by United orthe Companyupon 18 months prior written notice
provided that such notice shall not be delivered by United prior to December 31,
2007, and  bythe
Companyprior to December
31, 2008. In addition,under certain conditions, United may
terminatethe code-share
agreements.
 
 United has a call option to assumethe Company’s
ownershipor leasehold
interest in certain aircraft ifthe Company wrongfullyterminates thecode-share agreements or if United
terminates the agreements forthe Company’s breachfor certain
reasons.
 
 TheContinental Code-Share Agreements
 
 The CRJ-200 aircraft are operated under
the code-share agreement on terms generally equivalent to the CRJ-200 leases,
which vary from two to five years.  The ERJ-145 aircraft have a term
of three to five years.  Under certain circumstances, Continental may
extend the term on the aircraft up to five additional
years.The term
of the agreement is effective as of January 8, 2007 and, unless earlier
terminated or extended, will continue until July, 2012.
 
 TheFrontier Code-Share Agreements
 
 On January 11, 2007, we entered into an
air services agreement with Frontier. Under the agreement, we will provide and
operate17ERJ-170 aircraft forFrontier.  The first aircraft
was placed into service in March 2007 and the last aircraft is expected to be
placed into serviceinDecember 2008. The
agreement has a term of eleven years from the date of the last aircraft
delivery. Frontier has the option to extend the agreement for up to six
additional years. The term of the agreement became effective as of March 2007,
and, unless earlier terminated or extended, will continue until December
2019.
 
 Concentrations
 
 The following sets forth our Partners’
regional airline services revenue and accounts receivable as a percentage of
total regional airline services revenue and net receivables:
 
 Regional airline services revenues
      for the years ended:
              
              Delta
              
              
              United
              
              
              US
                Airways
              
              
              American
              
              
              Continental
              
              
              FrontierDecember 31,
      2007
              
              
              33
              %
              
              
              24
              %
              
              
              22
              %
              
              
              9
              %
              
              
              10
              %
              
              
              2
              %December 31,
      2006
              
              
              35
              
              
              
              30
              
              
              
              24
              
              
              
              11
              
              
              
              —
              
              
              
              —December 31, 2005
              
              
              34
              
              
              
              32
              
              
              
              21
              
              
              
              13
              
              
              
              —
              
              
              
              —Receivables as
      of:December 31,
      2007
              
              
              3
              %
              
              
              18
              %
              
              
              18
              %
              
              
              18
              %
              
              
              4
              %
              
              
              2
              %December 31, 2006
              
              
              4
              
              
              
              19
              
              
              
              31
              
              
              
              16
              
              
              
              —
              
              
              
              —
 
 For the years ended December 31, 2007,
2006 and 2005, substantially all of the Company's revenue is derived from
agreements with its Partners. Termination of any of these code-share agreements
could have a material adverse effect on the Company's financial position,
results of operations and cash flows.
 
 -56-
 2. SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
 
 Basis
of Consolidation—The
consolidated financial statements include the accounts of the Company and its
wholly-owned subsidiaries, Chautauqua, ShuttleAmerica andRepublic Airline. All significant
intercompany accounts and transactions are eliminated in
consolidation.
 
 Risk
Management—The Company
accounts for derivatives in accordance with Statement of Financial Accounting
Standard (SFAS) No. 133,Accounting for
Derivative Instruments and Hedging Activities,as amended and interpreted.
 
 Beginning in April 2004, in
anticipation of financing the purchase of regional jet aircraft on firm order
with the manufacturer, the Company entered into fourteen treasury lock
agreements with notional amounts totaling $373,500 and a weighted average
interest rate of 4.47% with expiration dates through June 2005. Management
designated the treasury lock agreements as cash flow hedges of forecasted
transactions. The treasury lock agreements were settled at each respective
settlement date, which were the purchase dates of the respective aircraft. The
Company settled all of the agreements during 2004 and 2005 and the net amount
paid was $7,472, and was recorded in accumulated other comprehensive loss, net
of tax. Amounts paid or received on the settlement date are reclassified to
interest expense over the term of the respective aircraft debt. During
2007, 2006 and 2005, the Company reclassified $761,$299 and$286 tointerest expense, respectively. The
Company expects to reclassify$720 tointerest expense for the year ending
December 31, 2008.
  Cash
and Cash Equivalents—Cash
equivalents consist of money market funds and short-term, highly liquid
investments with maturities of three months or less when purchased.
Substantially all of our cash is on hand withtwobanks.
  Supplemental Cash Flow
Information:
 
 Years Ended December
      31,2007
              
              
              2006
              
              
              2005CASH PAID FOR INTEREST AND INCOME
      TAXES:Interest—net of amount
      capitalized
              
              $
              105,818
              
              
              $
              87,254
              
              
              $
              64,763Income taxes paid — net of
      refunds
              
              
              1,388
              
              
              
              518
              
              
              
              1,212NON-CASH
      TRANSACTIONS:Parts, training and lease credits
      received from aircraft manufacturer
              
              
              (12,540
              )
              
              
              (7,860
              )
              
              
              (26,381
              )Receipt of US Airways
      stock
              
              
              —
              
              
              
              50
              
              
              
              248Conversion of accrued interest to
      subordinated note payable to affiliate
              
              
              —
              
              
              
              —
              
              
              
              43Aircraft, inventories, and other
      equipment purchased through direct financing
      arrangements
              
              
              438,252
              
              
              
              235,260
              
              
              
              616,010Engine received and to be
      financed
              
              
              3,281
              
              
              
              3,464
              
              
              
              —Refinancing of
      aircraft
              
              
              —
              
              
              
              147,792
              
              
              
              240,235Fair value of interest rate
      hedge
              
              
              —
              
              
              
              —
              
              
              
              4,012Excess tax benefit for stock
      options exercised
              
              
              —
              
              
              
              —
              
              
              
              1,922Fair
      value of warrants surrendered by Delta
              
              
              49,103
              
              
              
              —
              
              
              
              —
 
 Inventoriesconsist primarily of spare
parts and supplies, which are charged to expense as they are used in operations.
Inventories are valued at average cost. An allowance for obsolescence is
provided to reduce inventory to estimated net realizable value. As of December
31, 2007 and 2006 this reserve was$2,157 and$1,004,
respectively.
 
 Aircraft
and Other Equipmentis
carried at cost. Incentives received from the aircraft manufacturer are recorded
as reductions to the cost of the aircraft. Depreciation for aircraft is computed
on a straight-line basis to an estimated salvage value over 16.5 years, the
estimated useful life of the regional jet aircraft. Depreciation for other
equipment, including rotable parts, is computed on a straight-line basis over 3
to 10 years, the estimated useful lives of the other equipment. Leasehold
improvements are amortized over the expected life or lease term, whichever is
less. Interest related to deposits on aircraft on firm order from the
manufacturer is capitalized. The Company capitalized approximately$4,056,$2,021 and $1,904 of interest for the
years ended December 31, 2007, 2006 and 2005,
respectively.
 
 -57-
 Restricted
Cashconsists of restricted
amounts for satisfying debt and lease payments due within the next twelve month
period.
 
 Debt
Issue Costsare capitalized
and included in intangible and other assets and are amortized, using the
effective interest method, to interest expense over the term of the related
debt. Debt issue costs, net of accumulated amortization, of$22,271 and $17,560 are included in intangible
and other assets in the consolidated balance sheets as of December 31, 2007
and 2006, respectively.
 
 Goodwilland
Intangible Assets areaccounted for in accordance with SFAS No. 142,Goodwill and Other
Intangible Assets. Goodwill
and intangible assets that have indefinite useful lives are not amortized but
are tested at least annually for impairment. Management reviewed the carrying
value of goodwill and concluded that no asset impairment existed as of December
31, 2007. Intangible assets that have finite
useful lives are amortized over their useful lives to an estimated residual
value and reviewed for impairment at each reporting date. At December 31, 2007
the remaining amortization period for theRonaldReaganWashingtonNationalAirport commuterslots is 23years. Estimated amortization expense
will approximate $388 per year.
 
 Long-Lived
Assets—Management reviews
long-lived assets for possible impairment, if there is a significant event that
detrimentally affects operations. The primary financial indicator used by the
Company to assess the recoverability of its long-lived assets held and used is
undiscounted future cash flows from operations. The amount of impairment if any,
is measured based on estimated fair value or projected future cash flows using a
discount rate reflecting the Company's average cost of funds.Management has concluded that no asset
impairment existed as of December 31, 2007.
 
 Deferred
Creditsconsist of credits
for parts and training from the aircraft and engine manufacturers,deferred gains from the sale and
leaseback of aircraft and spare jet engines anddeferred revenue from the Delta warrant
surrender and pre-petition claim. Deferred credits are amortized on a
straight-line basis as a reduction of aircraft or engine rent expense over the
term of the respective leases.  The deferred revenue is
amortized as an adjustment to regional airline services revenue based on the
weighted average aircraft in service over the life of the Delta
agreements.
 
 Comprehensive
Income—The Company reports
comprehensive income in accordance with SFAS No. 130,Reporting
Comprehensive Income,which
establishes standards for reporting and displaying comprehensive income and its
components in financial statements. The Company had accumulated other
comprehensive loss relating to treasury lock agreements of$3,009,$3,877 and $4,176, net of tax, at
December 31, 2007, 2006 and 2005, respectively.
 
 Income
Taxes—The Company accounts for income taxes
using the asset and liability method. Under the asset and liability method,
deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts for existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in future years in which those temporary
differences are expected to be recovered or settled. The measurement of deferred
tax assets is adjusted by a valuation allowance, if necessary, to recognize the
future tax benefits to the extent, based on available evidence; it is more
likely than not they will be realized.
  Aircraft
Maintenance and Repairis
charged to expense as incurred under the direct expense method. Engines and
certain airframe component overhaul and repair costs are subject to
power-by-the-hour contracts with external vendors and are expensed as the
aircraft are flown.
 
 Use
of Estimates—The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting periods. Under the code-share agreements, the Company
estimates operating costs for certain “pass through” costs and records revenue
based on these estimates. Actual results could differ from those
estimates.
 
 Revenue
Recognition—Regional
airline service revenues, charter revenues and ground handling revenues are
recognized in the period the services are provided.  Under our fixed-fee
arrangements with American,Delta,USAirways, United, Continental and
Frontier, the Company receives fixed-fees, as well as reimbursement of specified“pass-through”costs on a gross basis with additional
possible incentives from our Partners for superior service. Regional airline
service revenues are recognized in the period the service isprovided andwe perform an estimate of the profit
component based upon the information available at the end of the accounting
period.
 
 The reimbursement of specified costs,
known as “pass-through costs”, may include aircraft ownership cost, passenger
liability and hull insurance, aircraft property taxes, fuel, landing fees and
catering. All revenue recognized under these contracts is presented at the gross
amount billed for reimbursement pursuant to Emerging Issues Tax Force Issue
(“EITF”) No. 99-19Reporting Revenue
Gross as a Principal versus Net as an Agent.
 
 Under the Company’s code-share
agreements, the Company is reimbursed an amount per aircraft designed to
compensate the Company for certain aircraft ownership costs. In accordance with
EITF No. 01-08,Determining Whether
an Arrangement Contains a Lease, the Company has concluded that a
component of its revenue under the agreement discussed above is rental income,
inasmuch as the agreement identifies the “right of use” of a specific type and
number of aircraft over a stated period of time. The amount deemed to be rental
income during fiscal 2007, 2006 and 2005 was$310,250, $258,600 and $189,800, respectively,
and has been included in regional airline services revenue on the Company’s
consolidated statements of income.
 
 -58-
 The Company recognizes lease revenue for
subleases ofsix
ERJ-145 aircraft subleased
to an airline inMexico
underoperating leases
which expire in 2013 and 2015. In addition, the Company recognizes license
revenue from US Airways for commuter slots that were purchased by the Company in
2005 and were utilized by US Airways through 2006 for the New-York LaGuardia
commuter slots, and through 2016 for the Ronald Reagan Washington National
commuter slots. Revenues from subleases and the commuter slots are recognized
when earned and included in other operating revenue.
 
 The Company records any tax assessed by
a governmental authority that is directly imposed on a revenue-producing
transaction between the Company and its customers on a net
basis.  These taxes are currently not material to the Company’s
consolidated financial statements.
 
 Warrants—Warrants issued to non-employees and
Partners are accounted for under SFAS No. 123(R),Share-Based
Payment,and EITF 96-18,Accounting for
Equity Instruments That Are Issued to Other Than Employees for Acquiring, or in
Conjunction with Selling, Goods or Services,at fair value on the measurement date as
deferred charges and credits to stockholders’ equity. Warrants surrendered in a
non-monetary transaction are recorded at fair value on the measurement date as
reductions to deferred warrant charges and stockholders’ equity. The deferred
charges for warrantswereamortized as a reduction of
regional airline services revenue over the terms of the code-share agreements.In March 2007,
the Company amended its agreements with Delta and  in return for these
amended terms, Delta agreed to surrender its warrants for 3,435,000 shares of
the Company’s common stock, and the Company was granted a pre-petitioned,
unsecured, general claim in the amount of $91,000 in Delta's Chapter 11
bankruptcy case. In April 2007, the Company sold the $91,000 pre-petition claim
to a third party for $44,590 in cash.
 
 As a result of the
Delta amendment, in March 2007, the Company recorded a deferred credit of
$44,590, which represented the net realizable value of the pre-petition claim on
the approval date by the Bankruptcy Court. In addition, the Company recorded a
deferred gain on the surrender of the warrants from Delta of $42,735, which was
net of the write-off of the previously reported unamortized deferred warrant
charge of $6,369. Stockholders' equity was reduced by $32,892, net of tax,
resulting from the surrender of the warrants and their retirement. The deferred
credits for the proceeds of the pre-petition claim and the gain on the surrender
of the warrants totaling $87,325 will be amortized as an adjustment to revenue
over the weighted average aircraft in service during the term of the
agreements with Delta.
 
 Stock
Compensation—The Company
maintains stock-based compensation plans which allow for the issuance of
nonqualified stock options to officers, other key employees of the Company, and
to members of the Board of Directors. Prior to 2006, the Company accounted for
the stock option plans under the provisions of Accounting Principles Board
Opinion No. 25,Accounting for Stock
Issued to Employees, and
related Interpretations, whereby, stock options granted that had an
exercise price below the market value were recorded as stock compensation
expense. Effective January 1, 2006, the Company adopted the fair value
recognition provisions of SFAS No. 123(R),Share-Based Payment
(SFAS 123R). This
statement applies to all awards granted after the effective date and to
modifications, repurchases or cancellations of existing awards. Additionally,
under the modified prospective method of adoption, the Company recognizes
compensation expense for the portion of outstanding awards on the adoption date
for which the requisite service period has not yet been rendered based on the
grant-date fair value of those awards calculated under SFAS 123R.The standard also requires
that forfeitures be estimated over the vesting period of an award, rather than
being recognized as a reduction of compensation expense when the forfeiture
actually occurs.
 
 -59-
 The following table illustrates the
effect on net income and earnings per share if the Company had applied the fair
value recognition provisions of SFAS123R to stock-based employee
compensation for the year ended December
2005.
   For
      the year ended December 31,2005Net income, as
      reported
              
              $
              60,654Add:
      Stock-based employee compensation expense dteremined under the intrinsic
      value based method, net of tax of $50
              
              
              75Deduct:
      Stock-based employee compensation expense determined under the fair value
      based method, net of tax of $997
              
              
              (1,496
              )Pro forma net
      income
              
              $
              59,233Pro forma net income per
      share:Basic
              
              $
              1.65Diluted
              
              $
              1.62
 
 Net
Income per Common Shareis
based on the weighted average number of shares outstanding during the
period.
 
 The following is a reconciliation of the
weighted average common shares for the basic and diluted per share
computations:
 
 For the Years Ended December
      31,2007
              
              2006
              
              2005Weighted-average common shares
      outstanding for basic net income per common share
              
              
              40,350,256
              
              
              42,149,668
              
              
              35,854,249Effect of dilutive employee stock
      options and warrants
              
              
              695,389
              
              
              1,466,278
              
              
              694,091Adjusted weighted-average common
      shares outstanding and assumed conversions for diluted net income per
      common share
              
              
              41,045,644
              
              
              43,615,946
              
              
              36,548,340
 
 Employee stock options of1,366,000 werenot included in the calculation of
diluted net income per common share due to their anti-dilutive impact for the
year ended December 31, 2007. For the years ended December 31, 2006 and
2005, all of the employee stock options and warrants were included in the
calculation of the dilutive net income per common share.
 
 Segment
Information—The Company has
one reportable operating segment for the scheduled transportation of passengers
and air freight under code-share agreements. The Company’s charter service, slot
leasing and aircraft leasing revenues are not considered
material.
 
 New
Accounting Standards—In
September 2006, theFinancial Accounting Standards Board "FASB"issued SFAS No. 157,Fair Value
Measurements (SFAS 157), which defines fair value, establishes
a framework for measuring fair value and requires expanded disclosures about
fair value measurements. This statement is effective for fiscal years beginning
after November 15, 2007. The Companywill apply the provisions of
SFAS 157, as necessary.  The adoption did not have a material
effect on our statement of financial position or results of
operations.
 
 In
February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial
Assets and Financial Liabilities (SFAS 159). SFAS 159 is
effective for fiscal years beginning after November 15, 2007. SFAS 159
allows the Company to choose, at specified election dates, to measure eligible
financial assets and financial liabilities at fair value that are not otherwise
required to be measured at fair value. If a company elects the fair value option
for an eligible item, changes to that item's fair value in subsequent reporting
periods must be recognized in current earnings. SFAS 159 also establishes
presentation and disclosure requirements designed to draw comparison between
entities that elect different measurement attributes for similar assets and
liabilities.  The Company did not elect to fair value any of its
financial assets or financial liabilities, therefore, the adoption of
SFAS 159 did not have a material effect on the Company’s consolidated
financial statements.
 
 In
December 2007, the FASB issued SFAS No. 141 (revised 2007), Business Combinations(SFAS 141R). SFAS 141R establishes principles and requirements
for how an acquirer recognizes and measures in its financial statements the
identifiable assets acquired, the liabilities assumed, any non-controlling
interest in the acquiree and the goodwill acquired. SFAS 141R also
establishes disclosure requirements to enable the evaluation of the nature and
financial effects of the business combination. SFAS 141R is effective for
fiscal years beginning after December 15, 2008.  The Company has
not yet completed its assessment of the impact of this statement on its
consolidated financial statements.
 
 -60-
 In
December 2007, the FASB issued SFAS No. 160, Non-controlling Interests in
Consolidated Financial Statements—an amendment of Accounting Research Bulletin
No. 51 (SFAS 160). SFAS 160 establishes accounting and
reporting standards for ownership interests in subsidiaries held by parties
other than the parent, the amount of consolidated net income attributable to the
parent and to the non-controlling interest, changes in a parent's ownership
interest, and the valuation of retained non-controlling equity investments when
a subsidiary is deconsolidated. SFAS 160 also establishes disclosure
requirements that clearly identify and distinguish between the interests of the
parent and the interests of the non-controlling owners. SFAS 160 is
effective for fiscal years beginning after December 15, 2008. The Company
has not yet completed its assessment of the impact of this statement on its
consolidated financial statements.
 
 3. AIRCRAFT AND OTHER
EQUIPMENT
 
 At December 31, 2007, the Company had a total fleet of 225
aircraft (219 in operations andthree leased and threesubleased to an airline in Mexico),
including17
ERJ-135aircraft,15 ERJ-140 aircraft,68 ERJ-145 aircraft,76 ERJ-170 aircraft,25 ERJ-175 aircraft and24 CRJ-200 aircraft.The Company owns15ERJ-135aircraft, 11 ERJ-140 aircraft,30ERJ-145 aircraft, 56 ERJ-170 aircraft,22 ERJ-175 aircraft, and leases the other 91
aircraftunder operating
lease agreements.
 
 Aircraft and other equipmentconsist of the following as of
December 31:
 
 2007
              
              
              2006Aircraft
              
              $
              2,498,306
              
              
              $
              1,994,907Flight
      equipment
              
              
              104,475
              
              
              
              87,625Furniture and
      equipment
              
              
              6,808
              
              
              
              5,718Leasehold
      improvements
              
              
              14,585
              
              
              
              11,115Total aircraft and other
      equipment
              
              
              2,624,174
              
              
              
              2,099,365Less accumulated depreciation and
      amortization
              
              
              (315,448
              )
              
              
              (209,648
              )Aircraft and other
      equipment—net
              
              $
              2,308,726
              
              
              $
              1,889,717
 
 Aircraft, other equipment and slot
depreciation and amortization expense for the years ended December 31,
2007, 2006 and 2005 was$106,594,$92,228 and $64,877,
respectively.
 
 4. INTANGIBLE AND OTHER
ASSETS
 
 Intangible and other assets consist of
the following as of December 31:
 2007
              
              2005Prepaid aircraft
      rent
              
              $
              32,077
              
              $
              29,062Aircraft
      deposits
              
              
              65,382
              
              
              71,571Deferred warrant charge, net (see
      Note 10)
              
              
              —
              
              
              6,470Debt issue costs,
      net
              
              
              22,271
              
              
              17,560Commuter slots,
      net
              
              
              46,664
              
              
              47,052Other
              
              
              30,946
              
              
              20,570$
              197,340
              
              $
              192,285
 
 The Company purchased commuter slots atRonaldReaganWashingtonNationalAirport(“DCA”) andNew YorkLaGuardiaAirport(“LGA”) in 2005 from US Airways. The
licensing agreement with the Company and US Airways for the LGA commuter slots
expired on December 31, 2006, but we maintain a security interest in the LGA
slots if US Airways fails to perform under the current licensing agreement. The
LGA commuter slots were amortized over a 15 month life ending December 31, 2006,
and theDCA
commuterslots are
amortized on a straight line basis over a 25 year expected life to an estimated
residual value. Amortization was approximately $3,671 in 2006 and$388in 2007. The Company assigned the right
of use for these commuter slots to US Airways which will continue to be operated
by US Airways Express carriers until the expiration or termination of the
amended and restated Chautauqua Jet Service Agreement (“JSA”) dated as of April
26, 2005 between US Airways and Chautauqua or the Republic JSA, whichever is
later, at an agreed rate. Prior to the expiration of the agreement to license
the commuter slots, US Airways has the right to repurchase all, but not less
than all, of theDCA
commuterslots at a
predetermined price.
 
 -61-
 5. ACCRUED LIABILITIES
 
 Accrued liabilities consist of the
following as of December 31:
  2007
              
              
              2006Accrued wages, benefits and
      related taxes
              
              $
              16,061
              
              
              $
              13,966Accrued
      maintenance
              
              
              28,244
              
              
              
              23,366Accrued property
      taxes
              
              
              5,706
              
              
              
              3,512Accrued interest
      payable
              
              
              13,661
              
              
              
              13,470Accrued liabilities to
      Partners
              
              
              9,766
              
              
              
              13,935Current portion of deferred
      revenue
              
              
              7,882
              
              
              
              —Accrued aircraft
      rent
              
              
              2,747
              
              
              
              8,337Accrued landing
      fees
              
              
              7,079
              
              
              
              4,407Accrued pilot
      training
              
              
              4,582
              
              
              
              1,501Other
              
              
              14,064
              
              
              
              9,964Total accrued
      liabilities
              
              $
              109,792
              
              
              $
              92,458
 
 6. DEBT
 
 Debt consists of the following as
of December 31:
 
 2007
              
              
              2006Revolving credit
      facility with Bank of America Business Capital (the “Bank”), maximum of
      $15,000 available (including outstanding letters of credit), subject to
      30% of the net book value of spare rotable parts and 15% of the net
      book value of spare non-rotable parts and inventory. Interest is
      payable monthly at the bank’s LIBOR rate plus spreads ranging from 2.50%
      to 2.75% or the Bank’s base rate (which is generally equivalent to the
      prime rate) plus spreads ranging from 0.50% to 0.75%. Fees are payable at
      0.375% on the unused revolver amount. The credit facility expires on March
      31, 2009 and is collateralized by all the Company’s assets, excluding the
      owned aircraft and engines.
              
              $
              —
              
              
              $
              —Promissory notes with various
      banks and aircraft manufacturer, collateralized by aircraft, bearing
      interest at fixed rates ranging from 4.01% to 8.49% with semi-annual
      principal and interest paymentstotaling$113,353 through
      2022.
              
              
              1,913,580
              
              
              
              1,568,803Total
              
              
              1,913,580
              
              
              
              1,568,803Current portion (including Bank
      term loan)
              
              
              131,700
              
              
              
              86,688Debt
      and notes payable - less current portion
              
              $
              1,781,880
              
              
              $
              1,482,115
 
 
 The Company has outstanding letters of
credit totaling$12,550and $10,957 as of
December 31, 2007 and 2006, respectively. The American code-share agreement
requires a debt sinking fund for the Company’s required semi-annual
payments.
  TheCompany’s revolving credit facilitywith Bank of America
Business Capitalhasa liquidity
covenant,aspecified fixed charge coverage ratio
and a debt to earnings leverage ratio covenant.The Company was in compliance with the
covenantsat December 31,
2007.The credit
facility limits the Company’s ability to incur indebtedness or create or incur
liens on its assets.
  -62-
 Future maturities of debt are payable as
follows for the years ending December 31:
 
 2008
              
              $
              131,7002009
              
              
              116,2782010
              
              
              123,7022011
              
              
              131,6122012
              
              
              140,039Thereafter
              
              
              1,270,249Total
              
              $
              1,913,580
 
 
 During the year ended December 31, 2007,
the Company acquired22
aircraft through debt financing totaling approximately $438,252. The debt was obtained from banks and
the aircraft manufacturer for twelve to fifteen year terms at interest rates
ranging from6.22% to
7.28%.
 
 7. COMMITMENTS
 
 As of December 31, 2007, the Company
leased91aircraft and22 spareregional jet engines with varying terms
extending through2029 and
terminal space, operating facilities and office equipment with terms extending
through 2026under
operating leases. The components of rent expense for the years ended
December 31 are as follows:
  2007
              
              
              2006
              
              
              2005Aircraft and engine
      rent
              
              $
              124,961
              
              
              $
              94,773
              
              
              $
              77,725Other
              
              
              6,008
              
              
              
              5,315
              
              
              
              4,225Total rent
      expense
              
              $
              130,969
              
              
              $
              100,088
              
              
              $
              81,950
 
 The Company has long-term maintenance
agreements with an avionics equipment manufacturer and maintenance provider that
has a guaranteed minimum annual flight hour requirement. The minimum guaranteed
amount based on the Company's current operations is$4,852 peryear through December 2014 for the
ERJ-145 family of aircraft and$8,161 peryear through December 2014 for the
ERJ-170 family of aircraft. The Company did not record a liability for this
guarantee because the Company does not believe that any aircraft will be
utilized below the minimum flight hour requirement during the term of the
agreement.
 
 The Company has long-term maintenance
agreements withaviation
equipment manufacturersfor
the ERJ-145 family of aircraft and the CRJ-200 aircraft throughJune2013 andDecember 2012, respectively. The
agreement has a penalty payment provision if more than twenty percent of the
Company's aircraft are removed from service based on the annual flight activity
prior to the date of removal. The Company did not record a liability for this
penalty provision because the Company does not believe that more than twenty
percent of their aircraft will be removed from service during the term of the
agreement.
 
 The Company has long-term maintenance
agreements based uponflight activity with engine
manufacturersthroughFebruary 2010 for the
CRJ-200 aircraft,October
2012 for the ERJ-145 family of aircraft and through December 2014 for the
ERJ-170family ofaircraft.
 
 The Company has long-term maintenance
agreements forwheels and
brakes throughJune 2014 for the ERJ-145family ofaircraft and through 2017 for theERJ-170 family of
aircraft. The agreement has
an early termination penalty, if the Company removes sellers equipment from
certain aircraft, sells or leases certain aircraft to a third party or
terminates the services prior to expiration of the agreement. The Company did
not record a liability for this penalty provision, because the Company does not
believe the contract will be terminated prior to the expiration
date.
 
 The Company has a long-term agreement to
provide,manage and repair
certain airframe components and spare parts onthe CRJ-200 aircraft through December
2009.
 
 Total payments under these long-term
maintenance agreements were$76,832, $56,070 and $53,647 for the years
ended December 31, 2007, 2006 and 2005, respectively.
  As part of the Company's lease
agreements, the Company typically indemnifies the lessor of the respective
aircraft against liabilities that may arise due to changes in benefits from tax
ownership or tax laws of the respective leased aircraft. The Company has not
recorded a liability for these indemnifications because they are not estimable.
The Company is responsible for all other maintenance costs of its aircraft and
must meet specified return conditions upon lease expiration for both the air
frames and engines. The Company is unable to estimate the liability for these
return conditions as of December 31, 2007, because the leases expire beginning
in 2009. The Company will record a liability for these return conditions once
the liability is probable and reasonably estimable.
 
 -63-
 Future minimum payments under
non-cancelable operating leases are as follows for the years ending
December 31:
  Aircraft
              
              
              Other
              
              
              Total2008
              
              $
              138,733
              
              
              $
              12,168
              
              
              $
              150,9012009
              
              
              121,257
              
              
              
              11,613
              
              
              
              132,8702010
              
              
              107,447
              
              
              
              11,522
              
              
              
              118,9692011
              
              
              99,067
              
              
              
              11,533
              
              
              
              110,6002012
              
              
              96,562
              
              
              
              11,559
              
              
              
              108,121Thereafter
              
              
              563,942
              
              
              
              74,723
              
              
              
              638,665Total
              
              $
              1,127,008
              
              
              $
              133,118
              
              
              $
              1,260,126
  As of December 31, 2007, the Company had
firm orders to purchase29
ERJ-170/175 aircraft all of
which are currently allocated to code-share agreements. The current total list
price of the 29 aircraft is $899,000. The Company has received commitments
fromthird parties
tofinance allof these aircraft. During the year
ended December 31, 2007, the Companypaidaircraft deposits totaling$51,414 inaccordance with the aircraft
commitments. Aircraft
deposits are included in intangible and other assets. The Company also has a
commitment to acquirenine
spareaircraft engines with
a current list price of approximately$40,500. These commitments are subject to
customary closing conditions.
 
 The Company’s firm orders and options
with an aircraft manufacturer are shown below as of December 31,
2007:
  Commitments as of December 31,
      2007Firm
              
              
              Options
              
              
              TotalAircraft Orders with Aircraft
      Manufacturer:ERJ-170/175
              
              
              29
              
              
              
              74
              
              
              
              103
 
 8. CONTINGENCIES
 
 The Company is subject to certain legal
and administrative actions which management considers routine to their business
activities. As of December 31, 2007, management believes, after consultation
with legal counsel, the ultimate outcome of any pending legal matters will not
have a material adverse effect on the Company's financial position, liquidity or
results of operations.
 
 American may terminate the code-share
agreement without cause upon 180 days notice, provided that such notice may
not be given prior to September 30, 2008. If American exercises this right,
it is required to reimburse us for certain costs and the Company and American
have certain "put" and "call" rights with respect to the aircraft we operate for
them.
  If Delta exercises its partial
termination right or if we terminate the code-share agreement because of Delta's
bankruptcy or insolvency, a breach of the agreement by Delta or because of an
event of force majeure has occurred that continues for at least two consecutive
months, we may require Delta to either purchase or sublease any of the
terminated aircraft we own at a specified price or to assume the lease of any
aircraft that we lease. If we choose not to exercise this "put" right upon any
termination by Delta, Delta has the right to require us to sell or sublease to
them the terminated aircraft we own for a specified amount or to assume the
leases of the terminated aircraft that we lease. Delta may also exercise this
"call" right if it terminates the code-share agreement for any of the reasons
set forth above.
 
 United has a call option to assume our
ownership or leasehold interest in certain aircraft if we wrongfully terminate
the code-share agreements or if United terminates the agreements for our breach
of certain reasons.
  As of December 31, 2007, approximately77%of the Company's workforce is employed
under union contracts. Theunion contract forPilots is currently
amendable.
  -64-
 9. RELATED PARTY
TRANSACTIONS
 
 WexAir RJET LLC, which is owned by
several investment funds managed by Wexford, previously held a majority interest
in our common stock. Currently, Wexford owns less than1% of our common stock butone of our directors is a general partner
of Wexford and its affiliates.Wexford and its affiliates are actively
engaged in the airline business. Conflicts of interest may in the future arise
between Wexford and its affiliates, on the one hand, and us, on the other hand,
in a number of areas relating to our business and our past and ongoing
relationships.
 
 Fees are paid to Wexford for
administrative functions not performed by the Company. Fees incurred were
approximately $324 and $1,065 for the years ended December 31, 2006
and 2005, respectively. In addition, included in accrued liabilities were
$26 due to Wexford Capital as of December 31,
2006.
 
 During 2007, the Company purchased from
WexAir RJET LLC a total  of 6,555,000 shares of its holdings in the
Company’s common stock, par value $.001 per share, at a weighted average price
of $20.15 per share, for total consideration
of  $132,100.  The transactions were recorded as treasury
stock on the Company’s consolidated balance sheet.
 
 10. CAPITAL STOCK, STOCK OPTIONS AND
WARRANTS
 
 In March
2007, the Company purchased from WexAir RJET LLC 2,000,000 shares of its
holdings in the Company’s common stock, par value $.001 per share, at a price of
$20.50 per share, for total consideration of $41,000. The transaction was
recorded as treasury stock on the Company’s consolidated balance
sheet.
 
 On August 28, 2007, the
Company’s Board of Directors authorized the purchase of up to $100,000 of the
Company’s common stock.  The buy-back program provided for the shares
to be purchased on the open market or through privately-negotiated transactions
from time-to-time during the twelve month period following the
authorization.  Under the authorization, the timing and amount of
purchase would be based upon market conditions, securities law limitations and
other factors.  The stock buy-back program did not obligate the
Company to acquire any specific number of shares in any period, and could be
modified, suspended, extended or discontinued at any time without prior notice.
The Company purchased 4,994,159 shares of which 4,555,000 were purchased from
WexAir LLC and the remainder were purchased on the open market at a weighted
average stock price of $20.02 for total consideration of $100,000. This
authorization was closed in November 2007.
 
 On
December 14, 2007, the Company’s Board of Directors authorized the purchase of
up to $100,000 of the Company’s common stock.   The shares will be
purchased on the open market or through privately-negotiated transactions from
time-to-time during the twelve month period following the authorization. Under
the authorization, the timing and amount of purchase would be based upon market
conditions, securities law limitations and other factors. The stock buy-back
program does not obligate the Company to acquire any specific number of shares
in any period, and may be modified, suspended, extended or discontinued at any
time without prior notice. As of December 31, 2007, pursuant to this
authorization, the Company purchased 72,735 shares on the open market at a
weighted average stock price of $19.42 for total consideration of $1,412. At
December 31, 2007, the amount under this authorization was $98,588.
 
 At December 31, 2007,2,710,818shares of the Company’s 150,000,000
authorized shares were reserved for issuances under the Equity Incentive Plans.
At December 31, 2007, the number of securities remaining available for future
issuance under equity compensation plans was3,728,000 shares.
 
 Employee Stock
Options
  The 2002 Equity Incentive Plan provides
for the granting of up to 2,180,000 shares of our common stock and as of
December 31, 2007, 47,215 shares of the Company’s common stock remain available
for issuance under the plan.The 2007 Equity Incentive Plan provides
for the granting of up to5,000,000 sharesof our common stock andas of December 31, 2007, 3,680,000
shares of the Company’s common stock remain available for issuance under the
plan.Stock optionsgranted under these plans typicallyvest ratably overthe term of the employment
agreements or48 months andare grantedwith exercise prices equal to market
prices on thedate of
grant. The options normally
expireten years from the
date of grant.Options aretypicallygranted to officers and key employees
selected by the Compensation Committee of the Board of
Directors.
 
 In connection with employment agreements
for certain key employees, the Company granted options to purchase
shares of the Company's common stock with exercise prices ranging from
$7.83 to$20.27. These stock options vest ratably
over the term of the employment agreements or48 monthsand are exercisable for five years
following the vesting dates orten years from the date of
grant.
  Non-employee
Director Stock Options
  The Company also granted options for
non-employee directorson
the day prior to commencement of the Company’s initial public offeringunder the 2002 Equity
Incentive Plan at a price equal to the fair market value of thecommonstock on the date of the grant. These
Optionsvested
overa 3 year period with
1/24 of the shares vesting monthly for the first 12 months and 1/48 of the
shares vesting monthly over the remaining 24 months.Additionally,non-employee directors are to receive
2,500 options on the first trading day after each annual meeting of stockholders
at which he or she is re-elected as a non-employee director. These options vest
ratably over 12 months of continuous service. The non-employee options are
exercisable until 10 years from the date of grant.
 
 -65-
 
 The following table summarizes option
activity under the stock option plans as of December 31,
2007:
 
 Options
              
              
              Weighted
                Average
                Exercise
    Price
              
              
              Aggregate
                Intrinsic
                Value
              
              
              Weighted
                Average
                Contractual
                Term
                (in years)Outstanding at January 1,
      2007
              
              
              1,725,576
              
              
              $
              12.54Granted
              
              
              1,775,000
              
              
              
              19.04Exercised
              
              
              728,090
              
              
              
              11.24Forfeited
              
              
              61,668
              
              
              
              14.19Outstanding at December 31,
      2007
              
              
              2,710,818
              
              
              $
              16.81
              
              
              $
              6,728
              
              
              
              8.80Vested or expected to vest at
      December 31, 2007
              
              
              2,263,533
              
              
              $
              17.11
              
              
              $
              5,618
              
              
              
              8.80ExercisableatDecember 31,
      2007
              
              
              1,029,995
              
              
              $
              14.63
              
              
              $
              5,104
              
              
              
              7.58
  The intrinsic value of options exercised
during the years ended December 31, 2007, 2006 and 2005 was $6,081, $12,429 and
$5,140.
 
 There were 1,199,052 and 1,709,700
options exercisable at December 31, 2006 and 2005 respectively. The weighted
average exercise price for the options exercisable at December 31, 2006 and 2005
was $11.92 and $4.07. The remaining contractual life for the options outstanding
at December 31, 2006 and 2005 was 7.6 years and 6.3 years,
respectively.
 
 During the years ended December 31,
2007, 2006 and 2005,$3,119
($1,871 net of tax), $1,297
($785 net of tax) and $125 ($75 net of tax), respectively, was charged to
expense relating to the stock option plans. The Company has a policy of issuing
new common shares to satisfy the exercise of stock options. At December 31, 2007
there was$7,808
ofunrecognized stock-based
employee compensation expense for unvested stock options, and the expected
remaining expense period is3.9years. The Company did not recognize
excess tax benefits related to stock option exercises in 2007 since the Company
did not have taxable income in 2007.
 
 The weighted average grant date fair
value of options granted in 2007, 2006 and 2005 was$5.30, $7.62, and $3.98, respectively. The
Company estimates the fair value of stock options issued using the Black-Scholes
option pricing model. Expected volatilities are based on the historical
volatility of the Company’s stock and other factors. The Company uses historical
data to estimate option exercises and employee terminations within the valuation
model. Dividends were based on an estimated dividend yield. The risk-free rates
for the periods within the contractual life of the option are based on the U.S.
Treasury rates in effect at the time of the grant. The forfeiture rate is based
on historical information and managements best estimate of future forfeitures.
The expected term of options granted is derived from historical exercise
experience and represents the period of time the Company expects options granted
to be outstanding. Option valuation models require the input of subjective
assumptions including the expected volatility and lives. Actual values of grants
could vary significantly from the results of the
calculations.
 
 The following assumptions were used to
value stock option grants during the following periods:
 
 December
31,2007
              
              
              2006
              
              
              2005Dividend
    yield
              
              
              —
              
              
              
              —
              
              
              
              —Expected
      volatility
              
              
              37%-38
              %
              
              
              38
              %
              
              
              40
              %Risk-free interest
      rate
              
              
              4.3%-5.1
              %
              
              
              4.5-4.7
              %
              
              
              3.9
              %Expected life ( in years
      )
              
              
              2-7
              
              
              
              1-4
              
              
              
              1-4
  -66-
 Warrants
 
 In connection with the Delta code-share
agreement, the Company had issued warrants to purchase shares of its common
stock related to the code-share agreement. Warrants issued were accounted for
under SFAS No. 123 and EITF 96-18,Accounting for
Equity Instruments That Are Issued to Other Than Employees for Acquiring, or in
Conjunction with Selling, Goods or Services, at fair value on the measurement date.
Accordingly, there was no impact on the accounting for warrants from the
adoption of SFAS 123(R).
  The Company recorded deferred warrant
charges on the measurement date based upon an option pricing model that
considered continuous compounding of dividends and dilution using an estimated
fair value of the Company’s common stock on the grant date, an estimated
dividend yield, a risk-free interest rate commensurate with the warrant term,
volatility of 40% and an expected life of 10 years.Amortization of deferred warrant chargeswas$0, $565 and$372 for the years ended December 31,
2007, 2006 and2005, respectively.
 
 In March 2007,the Company amendeditsfixed-feecode-shareagreements with Delta.As a part of this amendment, Delta agreed to surrender its warrants
for 3,435,000 shares of the Company’s common stock.  The Company recorded a deferred gain on
the surrender of the warrants from Delta of $42,735, which was net of the
write-off of the previously reported unamortized deferred warrant charge of
$6,369. Stockholders' equity was reduced by $32,892, net of tax, resulting from the
surrender of the warrants and their retirement. The deferredcredits for the proceeds of the
pre-petition claim and the gain onthe surrender of the warrants totaling
$87,325isbeing amortizedas an adjustment to revenue over the
weightedaverage aircraft
in service during the termof the agreements with
Delta.
 
 11. INCOME TAXES
 
 The components of the provision for
income tax expense for the years ended December 31 are as
follows:
   2007
              
              
              2006
              
              
              2005Federal:Current
              
              $
              —
              
              
              $
              —
              
              
              $
              —Deferred
              
              
              45,102
              
              
              
              43,171
              
              
              
              32,855Total
      Federal
              
              
              45,102
              
              
              
              43,171
              
              
              
              32,855State:Current
              
              
              120
              
              
              
              495
              
              
              
              1,915Deferred
              
              
              5,094
              
              
              
              8,233
              
              
              
              4,751Total
      State
              
              
              5,214
              
              
              
              8,728
              
              
              
              6,666Expense for
      uncertain tax positions (FIN 48)
              
              
              894
              
              
              
              —
              
              
              
              —Income tax
      expense
              
              $
              51,210
              
              
              $
              51,899
              
              
              $
              39,521
   A reconciliation of income tax expense
at the applicable federal statutory income tax rate to the tax provision as
reported for the years ended December 31 are as
follows:
   2007
              
              
              2006
              
              
              2005Federal income tax expense at
      statutory rate
              
              $
              46,799
              
              
              $
              45,993
              
              
              $
              35,163State income tax expense, net of
      federal benefit
              
              
              3,489
              
              
              
              5,673
              
              
              
              4,333Other
              
              
              28
              
              
              
              233
              
              
              
              25Expensefor uncertain tax positions (FIN
      48)
              
              
              894
              
              
              
              −
              
              
              
              −Income tax
      expense
              
              $
              51,210
              
              
              $
              51,899
              
              
              $
              39,521
  
 -67-
 The components of deferred tax assets
and liabilities as of December 31 are as follows:
 
 2007
              
              
              2006DEFERRED TAX
      ASSETSCurrent:Nondeductible reserves and
      accruals
              
              $
              7,510
              
              
              $
              3,467Total current deferred tax
      assets
              
              $
              7,510
              
              
              $
              3,467Noncurrent:Nondeductible
      accrualsand
      deferred revenue
              
              $
              30,561
              
              
              $
              5,304Treasury
    locks
              
              
              2,006
              
              
              
              2,585Stock option excess tax
      benefits
              
              
              2,661
              
              
              
              2,661Alternative minimum tax
      credit
              
              
              759
              
              
              
              636Deferred gain on Delta
      warrant
              
              
              14,147
              
              
              
              —Net operating loss carryforward,
      net of liability for uncertain tax positions (FIN
      48)
              
              
              152,806
              
              
              
              149,360Prepaid
rent
              
              
              20,867
              
              
              
              14,894Share-based
      compensation
              
              
              1,744
              
              
              
              540Deferred credits and sale
      leaseback gain
              
              
              10,474
              
              
              
              8,446Total
              
              
              236,025
              
              
              
              184,426Valuation
      allowance
              
              
              (8,119
              )
              
              
              (8,119
              )Total noncurrent
      deferred tax assets
              
              
              227,906
              
              
              
              176,307DEFERRED TAX LIABILITIESNoncurrent:Slot
      amortization
              
              
              (3,880
              )
              
              
              (2,272
              )Accelerated depreciation and fixed
      asset basis differences for tax purposes
              
              
              (408,330
              )
              
              
              (314,921
              )Totalnoncurrent deferred tax
      liabilities
              
              
              (412,210
              )
              
              
              (317,193
              )Totalnet noncurrentdeferred tax
      liabilities
              
              $
              (184,304
              )
              
              $
              (140,886
              )
 
 The Company adopted the
provisions of
FASBInterpretation No. 48,Accounting for
Uncertainty in Income Taxes – An Interpretation of FASB 109(FIN48).  The Company adopted the
provisions of FIN48
on January 1, 2007.  The total amount of unrecognized tax benefits as
of the date of the adoption was $3,515, of which the Company had previously
recorded $1,148
forincome tax
contingencies prior to adoption.  Accordingly, the Company recognized
a $2,367 increasein the
liability for the unrecognized tax benefits which was accounted for as a
reduction to retained earnings and an increase to deferred tax
liability.  During the year ended December 31, 2007, the Company
recognized approximately $894 additional tax expense for unrecognized tax
benefits.  All of the unrecognized tax benefits as of December 31,
2007, if recognized, would affect the effective tax rate.  The Company
monitors ongoing tax cases related to its unrecognized tax
benefits.  If an unfavorable tax case judgment is rendered, the
Company may increase its tax liability for the unrecognized tax benefits by up
to $1,500.  In addition, the Company’s 2001 through2007 taxyears remain subject to examination by
major tax jurisdictions due to our net operating loss carryforwards.
   
 The following table reconciles the
Company’s tax liability for uncertain tax positions for the year ended December
31, 2007:
 
 2007Balance at January
      1,
              
              $
              3,515Additions based on tax positions
      taken in current year
              
              
              894Additions for tax positions taken
      in prior years
              
              
              −Reductions for tax positions of
      prior years
              
              
              −Settlements with tax
      authorities
              
              
              −Balance at December
      31,
              
              $
              4,409
 
 
 Deferred tax assets include benefits
expected to be realized from the utilization of alternative minimum tax credit
carryforwards of $759, which do not expire, and net operating loss carryforwards
totaling $449,000, which begin expiring in 2022. Approximately $396,000 of the
net operating loss carryforwards are limited under Internal Revenue Code Section
382, and approximately $23,000 is not expected to be realized prior to
expiration, and therefore, a valuation allowance has been recorded of
$8,119.
 
 12. FAIR VALUE OF FINANCIAL
INSTRUMENTS
 
 The fair value of a financial instrument
is defined as the amount at which the instrument could be exchanged in an arm's
length transaction between knowledgeable, willing parties. The fair value of
long term debt is estimated based on discounting expected cash flows at the
rates currently offered to the Company for debt with similar remaining
maturities. As of December 31, 2007 and 2006 respectively, the carrying
value of long-term debt was greater than its fair value by approximately$136,800 and$112,200.
 
 13. BENEFIT
PLAN—401(k)
 
 Republic has a defined contribution
retirement plan covering substantially all eligible employees. The Company
matches up to 6% of eligible employees' wages. Employees are generally vested in
matching contributions after three years of service with the Company. Employees
are also permitted to make pre-tax contributions of up to 90% (up to the annual
Internal Revenue Code limit) and after-tax contributions of up to 10% of their
annual compensation. The Company's expense under this plan was$2,941, $2,266, and $1,660 for the years ended
December 31, 2007, 2006 and 2005, respectively.
 
 14. IMPAIRMENT LOSS
AND ACCRUED AIRCRAFT RETURN COSTS
  Pursuant to the aircraft lease
agreements, the Companywasrequired to return Saab 340 aircraft to
the lessor in specified conditions. Based upon flight schedules and maintenance
costs, return costs were estimated and accrued. Each year the Company decreased
the accrual for actual costs incurred and adjusted the accrual for its revised
estimate of expected return costs. In December 2005, ShuttleAmerica’s turboprop code-share agreement with
United expired thus allowing for the return of our Saab aircraft to the lessor.
An agreement was reached with the lessors that released the Company of any
further financial obligations upon return of the aircraft resulting in a $4,218
reduction in the accrued liability. In 2006, we recorded a gain of $2,050
relating to the disposition of Saab aircraft and spare
parts.
  The following table reflects impairment
costs and accrued aircraft return costs for the years endedDecember 31, 2005 and
2006.
 
   Description
                of
      Charge
              
              Reserve at
                Jan 1, 2005
              
              
              2005
      Provision
                (Adjustment)
                Charged
                To
      Expense
              
              
              2005
                Payments
              
              
              Reserve
      at
                Dec.
      31,
                2005
              
              2006
      Provision
                (Adjustment)
                Charged
      to
                ExpenseAircraft
      return costs:Costs to return
      aircraft
              
              $
              4,599
              
              
              $
              (4,218
              )
              
              $
              (381
              )
              $
              —
              
              $Gain on disposition
      of Saab aircraft and spare parts
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (2,050
              )Total
              
              $
              4,599
              
              
              $
              (4,218
              )
              
              $
              (381
              )
              $
              —
              
              $
              (2,050
              )
 
 -69-
 15. VALUATION AND QUALIFYING
ACCOUNTS
 
 Description
              Balance at
                Beginning
                Of Year
              
              Additions
                Charged to
                Expense
              
              Deductions
    (1)
              
              
              
              Balance at
                End
                of YearAllowance for doubtful accounts
      receivables:December 31,
      2007
              $
              340
              
              $
              607
              
              $
              (50
              )
              
              
              $
              897December 31,
      2006
              
              343
              
              
              —
              
              
              (3
              )
              
              
              
              340December 31,
      2005
              
              3,869
              
              
              87
              
              
              (3,613
              )
              (2)
              
              
              343
 
 (1) Uncollectible accounts written
      off net of recoveries, if
any.
 
 (2) Write off of US Airways
receivable.
  ITEM 9. CHANGES IN AND
DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
  There were no disagreements with
accountants on accounting and financial disclosure.
  ITEM 9A. CONTROLS AND
PROCEDURES
  Evaluation of Disclosure Controls and
Procedures.
  We maintain "disclosure controls and
procedures", as such term is defined under Securities Exchange Act
Rule 13a-15(e), that are designed to ensure that information required to be
disclosed in our Exchange Act reports is recorded, processed, summarized and
reported within the time periods specified in the SEC's rules and forms, and
that such information is accumulated and communicated to our management,
including our Chief Executive Officer and Chief Financial Officer, as
appropriate, to allow timely decisions regarding required disclosures. In
designing and evaluating the disclosure controls and procedures, our management
recognized that any controls and procedures, no matter how well designed and
operated, can provide only reasonable assurance of achieving the desired control
objectives and our management necessarily was required to apply its judgment in
evaluating the cost-benefit relationship of possible controls and procedures. We
have carried out an evaluation, as of the end of the period covered by this
report, under the supervision and with the participation of our management,
including our Chief Executive Officer and Chief Financial Officer, of the
effectiveness of the design and operation of our disclosure controls and
procedures. Based upon their evaluation and subject to the foregoing, the Chief
Executive Officer and Chief Financial Officer concluded that our disclosure
controls and procedures were effective in ensuring that material information
relating to us is made known to the Chief Executive Officer and Chief Financial
Officer by others within the Company during the period in which this
report was being prepared.
  Management’s Annual Report on Internal
Control Over Financial Reporting
  Management is responsible for
establishing and maintaining adequate internal control over financial reporting,
as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Securities
Exchange Act of 1934. Our internal control over financial reporting is designed
to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposed in accordance
with accounting principles generally accepted in theUnited States of America.
  Because of its inherent limitations,
internal control over financial reporting may not prevent or detect
misstatements. Projections of any evaluation of effectiveness to future periods
are subject to the risk that controls may become inadequate because of changes
in conditions, or that the degree of compliance with the policies may
deteriorate.
  Under the supervision and with the
participation of the Company’s Chief Executive Officer and Chief Financial
Officer, the Company’s management conducted an evaluation of the effectiveness
of our internal control over financial reporting as of December 31,
2007using the criteria issued by the
Committee of Sponsoring Organizations of the Treadway Commission inInternal
Control-Integrated Framework. Based on that evaluation, the
Company’s management concluded that our internal control over financial
reporting was effective as of December 31, 2007.
  Management’s assessment of the
effectiveness of our internal control over financial reporting as of December
31, 2007has been audited by Deloitte &
Touche LLP, an independent registered public accounting firm, which also audited
our Consolidated Financial Statements. Deloitte & Touche LLP’s report on
management’s assessment of internal control over financial reporting appears on
page50herein.
  ITEM 9B. OTHER
INFORMATION
  Not applicable.
  -70-
  PART
III
  ITEM 10.
DIRECTORS,EXECUTIVE OFFICERSAND CORPORATE
GOVERNANCE
 
 Directors
 
 The information set forth under the
caption "Proposal No. 1—Election of Directors" in the Company's definitive
Proxy Statement to be used in connection with the 2008 AnnualMeeting of Stockholders is incorporated
herein by reference.
  Executive Officers
 
 See "Part I—Executive Officers of
the Company."
  Code of Ethics
  We have adopted a Code of Ethics within
the meaning of Item 406(b) of SEC Regulation S-K. This Code of Ethics applies to
our principal executive officer, principal financial officer and principal
accounting officer. This Code of Ethics is publicly available on our website atwww.rjet.com. If we make substantive amendments to
this Code of Ethics or grant any waiver, including any implicit waiver, we will
disclose the nature of such amendment or waiver on our website or in a report on
Form 8-K within four days of such amendment or waiver.
 
 Section
16(a) Beneficial Ownership Reporting Compliance
  Section 16(a) of the Securities Exchange
Act of 1934, as amended (the “Exchange Act”), requires that Company’s executive
officers and directors, and person who beneficially own more than ten percent of
the Company’s common stock, to file initial reports of ownership and reports of
changes in ownership with the SEC and the National Association of Securities
Dealers, Inc. Executive officers, directors, and greater than ten percent
beneficial owners are required by SEC regulations to furnish the Company with
copies of all Section 16(a) forms they file. Based upon a review of the copies
of such forms furnished to the Company and written representations from the
Company’s executive officers, directors and greater, we believe that during
fiscal  2007 allSection 16(a) filing requirements applicable to its executive officers,
directors and greater than ten percent beneficial owners were complied with.
  Corporate Governance
  The
information set forth under the caption "Corporate Governance" in the Company's
definitive Proxy Statement to be used in connection with the 2008 Annual Meeting
of Shareholders is incorporated herein by reference.
  ITEM 11. EXECUTIVE
COMPENSATION
 
 The information set forth under the
caption "Executive Compensation" in the Company's definitive Proxy Statement to
be used in connection with the 2008 AnnualMeeting of Stockholders is incorporated
herein by reference.
 
 ITEM 12. SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER
MATTERS
  The information set forth under the
caption "Beneficial Ownership of Common Stock by Certain Stockholders and
Management" in the Company's definitive Proxy Statement to be used in connection
with the 2008 AnnualMeeting of Stockholders is incorporated herein by
reference.
  ITEM 13. CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS,AND DIRECTORINDEPENDENCE
  The information set forth under the
captions "Compensation Committee Interlocks and Insider Participation" and
"Certain Relationships and Related Transactions" in the Company's definitive
Proxy Statement to be used in connection with the 2008 AnnualMeeting of Stockholders is incorporated
herein by reference.
 
 ITEM 14. PRINCIPAL
ACCOUNTING FEESAND
SERVICES
 
 The information set forth under "Audit
Matters" in the Company's definitive proxy statement to be used in connection
with the2008Annual Meeting of Stockholders is
incorporated herein by reference.
   -71-
  PART
IV
  ITEM 15.
EXHIBITS,FINANCIAL STATEMENTS
SCHEDULES
  (a)Documents filed as
part of this report:
  Report of Independent Registered Public
Accounting Firm, Financial Statements: Consolidated Balance Sheets as of
December 31, 2007 and2006, Consolidated Statements of Income for
the years ended December 31,2007, 2006and 2005, Consolidated Statements of Cash Flows
for the years ended December 31, 2007, 2006and 2005, Consolidated Statements of
Stockholders’ Equity and Comprehensive Income for the years ended December 31,
2007, 2006 and2005and Notes to Consolidated Financial
Statements.
  (b)Exhibits
 
 
 Exhibit
                No.
              Description1.1
              Form of Purchase
      Agreement.(viii)3.1
              Amended and Restated Certificate
      of Incorporation.(i)3.2
              Amended and Restated
      Bylaws.(xxxi)4.1
              Specimen Stock
      Certificate.(i)10.1
              2002 Equity Incentive
      Plan.(xxv)10.1(a)
              Restricted Stock
      Agreement.(xxi)10.1(b)
              2007
      Equity Incentive Plan.(xxv)10.2
              Form of Option Agreement for
      Non-Employee Directors.(i)10.3
              Form of Option Agreement for
      Officers.(i)10.3(a)
              Stock Option Agreement Pursuant to
      the Republic Airways Holdings Inc. 2002 Equity Incentive Plan, by and
      between Republic Airways Holdings Inc. and Bryan K. Bedford, dated as of
      December 27, 2004.(v)10.3(b)
              Stock Option Agreement Pursuant to
      the Republic Airways Holdings Inc. 2002 Equity Incentive Plan, by and
      between Republic Airways Holdings Inc. and Bryan K. Bedford, dated as of
      December 27, 2004.(v)10.3(c)
              Stock Option Agreement Pursuant to
      the Republic Airways Holdings Inc. 2002 Equity Incentive Plan, by and
      between Republic Airways Holdings Inc. and Robert Hal Cooper, dated as of
      December 27, 2004.(v)10.3(d)
              Stock Option Agreement Pursuant to
      the Republic Airways Holdings Inc. 2002 Equity Incentive Plan, by and
      between Republic Airways Holdings Inc. and Robert Hal Cooper, dated as of
      December 27, 2004.(v)10.3(e)
              Stock Option Agreement Pursuant to
      the Republic Airways Holdings Inc. 2002 Equity Incentive Plan, by and
      between Republic Airways Holdings Inc. and Wayne C. Heller, dated as of
      December 27, 2004.(v)10.3(f)
              Stock Option Agreement Pursuant to
      the Republic Airways Holdings Inc. 2002 Equity Incentive Plan, by and
      between Republic Airways Holdings Inc. and Wayne C. Heller, dated as of
      December 27, 2004.(xxiii)10.4†
              Amended and Restated Regional Jet
      Air Services Agreement, dated as of June 12, 2002, by and between AMR
      Corporation and Chautauqua Airlines, Inc.(i)10.4(a)
              Letter Agreement between AMR
      Corporation and Chautauqua Airlines, Inc. dated July 30,
      2002.(i)10.4(b)†
              Side Letter Agreement, dated as of
      March 26, 2003, by and between AMR Corporation and Chautauqua
      Airlines, Inc.(i)10.4(c)†
              Amendment to Amended and Restated
      Air Services Agreement, by and between AMR Corporation and Chautauqua
      Airlines, Inc., dated as of October 28,
    2003.(i)10.5
              Office Lease Agreement, by and
      between College Park Plaza, LLC and Republic Airways Holdings Inc., dated
      as of April 23, 2004.(i)10.6†
              Chautauqua Jet Service Agreement,
      by and between US Airways, Inc. and Chautauqua Airlines, Inc., dated as of
      March 19, 1999.(i)10.6(a)†
              First Amendment to the Chautauqua
      Jet Service Agreement, by and between US Airways, Inc. and Chautauqua
      Airlines, Inc., dated as of September 6,
    2000.(i)10.6(b)†
              Second Amendment to the Chautauqua
      Jet Service Agreement, by and between US Airways, Inc. and Chautauqua
      Airlines, Inc., dated as of September 20,
    2000.(i)10.6(c)†
              Third Amendment to the Chautauqua
      Jet Service Agreement, by and between US Airways, Inc. and Chautauqua
      Airlines, Inc., dated as of July 11,
  2001.(i)10.6(d)†
              Fourth Amendment to the Chautauqua
      Jet Service Agreement, by and between US Airways, Inc. and Chautauqua
      Airlines, Inc., dated as of December 18,
    2002.(i)10.6(e)†
              Amended and Restated Chautauqua
      Jet Service Agreement between US Airways, Inc. and Chautauqua
      Airlines, Inc. dated April 26, 2005.(xiii)10.6(f)†
              First Amendment to Amended and
      Restated Chautauqua Jet Service Agreement, by and between US Airways, Inc.
      and Chautauqua Airlines, Inc., dated as of July 21,
      2006.(xix)10.7
              Agreement between Chautauqua
      Airlines, Inc. and Teamsters Airline Division Local 747 representing the
      Pilots of Chautauqua Airlines, dated as of October 17,
      2003.(i)10.8
              Agreement between Chautauqua
      Airlines, Inc. and the Flight Attendants of Chautauqua Airlines, Inc. as
      represented by the Airline Division, International Brotherhood of
      Teamsters, AFL-CIO, dated as of March 9,
    1999.(i)10.9
              Agreement between Chautauqua
      Airlines, Inc. and the Flight Dispatchers in the employ of Chautauqua
      Airlines, Inc. as represented by Transport Workers Union of America,
      AFL-CIO, dated as of June 1, 2007.(xxvi)10.10
              Agreement between Chautauqua
      Airlines, Inc. and the Passenger and Fleet Service Employees in the
      service of Chautauqua Airlines, Inc. as represented by the International
      Brotherhood of Teamsters, dated as of December 15,
      1999.(i)10.11
              Agreement among Republic Airways
      Holdings Inc., Chautauqua Airlines, Inc. and Solitair Corp., dated as of
      February 12, 2002.(i)10.12†
              EMB-145LR
      Amended and Restated Purchase Agreement Number GCT-025/98, by and between Embraer-Empresa
      Brasileira de Aeronбutica S.A. and Republic Airways Holdings Inc., dated
      as of April 19, 2002.(i)10.12(a)†
              Partial Assignment and Assumption
      of Purchase Agreement GCT-025/98, by and between Republic Airways Holdings
      Inc. andSolitair
      Corp., and consented to by Embraer-Empresa Brasileira de Aeronбutica S.A.,
      dated as of April 18, 2002.(i)10.12(b)†
              Amendment Number 1 to Amended and
      Restated Purchase Agreement GCT-025/98 between Republic Airways Holdings
      Inc and Embraer-Empresa
      Brasileira de Aeronбutica S.A., dated as of June 7,
      2002.(i)10.12(c)†
              Amendment Number 2 to Amended and
      Restated Purchase Agreement GCT-025/98, by and between Embraer-Empresa
      Brasileira de Aeronбutica S.A. and Republic Airways Holdings Inc., dated
      as of
      July 25, 2002.(i)10.12(d)†
              Amendment Number 3 to Amended and
      Restated Purchase Agreement GCT-025/98, by and between Embraer-Empresa
      Brasileira de Aeronбutica S.A. and Republic Airways Holdings Inc., dated
      as of December 18,
2002.(i)
  -72-
 10.12(e)†
              Amendment Number 4 to Amended and
      Restated Purchase Agreement GCT-025/98, by and between Embraer-Empresa
      Brasileira de Aeronбutica S.A. and Republic Airways Holdings Inc., dated
      as of May 30, 2003.(i)10.12(f)†
              Amendment
      Number 5 to Amended and Restated Purchase Agreement GCT-025/98, by and
      between Embraer-Empresa Brasileira de Aeronбutica S.A. and Republic
      Airways Holdings Inc., dated as of September 30,
      2003.(i)10.12(g)†
              Amendment
      Number 6 to Amended and Restated Purchase Agreement GCT-025/98, by and
      betweenEmbraer-Empresa Brasileira de
      Aeronбutica S.A. and Republic Airways Holdings Inc., dated as of
      October 31, 2003.(i)10.12(h)†
              Amendment Number 7 to Amended and
      Restated Purchase Agreement GCT-025/98, by and between Embraer-Empresa
      Brasileira de Aeronбutica
      S.A. and Republic Airways Holdings Inc., dated as of December 31,
      2003.(i)10.12(i)†
              Amendment Number 8 to Amended and
      Restated Purchase Agreement GCT-025/98, by and between Embraer-Empresa
      Brasileira de Aeronбutica S.A. and Republic Airways Holdings Inc.,
      dated as of February 16, 2004.(i)10.12(j)†
              Amendment Number 9 to Amended and
      Restated Purchase Agreement GCT-025/98, by and between Republic Airways
      Holdings Inc. and Embraer-Empresa Brasileira de Aeronбutica S.A., dated as
      of May 24, 2004.(viii)10.12(l)†
              Amendment Number 10 to Amended and
      Restated Purchase Agreement GCT-025/98, by and between Republic Airways
      Holdings Inc. and Embraer-Empresa Brasileira de Aeronбutica S.A., dated as
      of January 17, 2005.(vii)10.12(m)†
              Amendment No. 11
      to Amended and Restated Purchase Agreement GCT-025/98, by and
      between Embraer-Empresa Brasilicica de Aeronautica S.A. and
      Republic Airways Holdings Inc., dated May
      31, 2005.(xiii)10.13†
              Amended
      and Restated Letter Agreement GCT-026/98, by and between
      Embraer-Empresa
      Brasileira de Aeronбutica S.A. and Republic Airways Holdings Inc., dated
      as of April 19, 2002.(i)10.13(a)†
              Amendment Number 1 to Amended and
      Restated Letter Agreement GCT-026/98 between Republic Airways Holdings Inc
      and Embraer-Empresa Brasileira de Aeronбutica
      S.A., dated as of June 7, 2002.(i)10.13(b)†
              Amendment Number 2 to Amended and
      Restated Letter Agreement GCT-026/98 between Republic Airways Holdings
      Inc. and Embraer-Empresa Brasileira de Aeronбutica S.A., dated as of
      July 25, 2002.(i)10.13(c)†
              Amendment Number 3 to Amended and
      Restated Letter Agreement GCT-026/98 between Republic Airways Holdings
      Inc. and Embraer-Empresa Brasileira de Aeronбutica S.A., dated as of
      August 29, 2002.(i)10.13(d)†
              Amendment
      Number 4 to Amended and Restated Letter Agreement GCT-026/98 between
      Republic Airways Holdings Inc. and Embraer-Empresa Brasileira de
      Aeronбutica S.A., dated as of December 10,
      2002.(i)10.13(e)†
              Amendment Number 5 to Amended and
      Restated Letter Agreement GCT-026/98 between Republic AirwaysHoldings
      Inc. and Embraer-Empresa Brasileira de Aeronбutica S.A., dated as of
      April 30, 2003.(i)10.13(f)†
              Amendment Number 6 to Amended and
      Restated Letter Agreement GCT-026/98 between Republic Airways Holdings
      Inc. and Embraer-Empresa Brasileira de Aeronбutica
      S.A., dated as of May 30, 2003.(i)10.13(g)†
              Amendment Number 7 to Amended and
      Restated Letter Agreement GCT-026/98 between Republic Airways Holdings
      Inc. and Embraer-Empresa Brasileira de Aeronбutica S.A., dated as of
      December 31, 2003.(i)10.13(h)†
              Amendment Number 8 to Amended and
      Restated Letter Agreement GCT-026/98 between Republic Airways Holdings
      Inc. and Embraer-Empresa Brasileira de Aeronбutica S.A., dated as of
      March 22, 2004.(i)10.14
              Amended and Restated Registration
      Rights Agreement, dated as of June 7, 2002, by and among Republic
      Airways Holdings Inc., Imprimis Investors, LLC, Wexford Spectrum Fund I,
      L.P., Wexford Offshore Spectrum Fund, Wexford Partners Investment Co. LLC,
      WexAir LLC, and Delta Air Lines, Inc.(i)10.15
              Loan and Security Agreement, by
      and between Fleet Capital Corporation and Chautauqua Airlines, Inc., dated
      as of December 9, 1998.(i)10.16
              Consolidated Amendment No. 1 to
      Loan and Security Agreement, by and between Fleet Capital Corporation and
      Chautauqua Airlines, Inc., dated as of March 27,
      2002.(i)10.16(a)†
              Amendment No. 3 to Loan and
      Security Agreement, by and between Fleet Capital Corporation and
      Chautauqua Airlines, Inc., dated as of October 30,
      2003.(i)10.16(b)
              Amendment No. 4 to Loan and
      Security Agreement, by and between Fleet Capital Corporation and
      Chautauqua Airlines, Inc., dated as of January 9,
      2004.(i)10.16(c)
              Amendment No. 8 to Loan and
      Security Agreement, by and between Bank of America, N.A. (successor by
      assignment to Fleet Capital Corporation) and Chautauqua Airlines, Inc.,
      dated as of November 2, 2005.(xvi)10.16(d)
              Amendment No. 9 to Loan and
      Security Agreement, by and between Bank of America, N.A. (successor by
      assignment to Fleet Capital Corporation) and Chautauqua Airlines, Inc.,
      dated as of January 12, 2006.(xvii)10.16(e)
              Amendment No. 10 to Loan and
      Security Agreement, by and between Bank of America, N.A. (successor by
      assignment to Fleet Capital Corporation) and Chautauqua Airlines, Inc.,
      dated as of March 22, 2006.(xvii)10.16(f)
              Joinder and Consolidated Amendment
      to Loan and Security Agreement, by and among Bank of America, N.A.,
      Chautauqua Airlines, Inc., Republic Airways Holdings Inc., Republic
      Airline Inc. and Shuttle America Corporation, dated as of May 15,
      2006.(xviii)10.16(g)
              Amendment
      No. 2 to Loan and Security Agreement, by and among Bank of America, N.A.
      Chautauqua Airlines, Inc., Republic Airways Holdings Inc., Republic
      Airline Inc. and Shuttle America Corporation, dated as of March 21,
      2007.(xxiv)10.17
              Amendment No. 1 to the Term Note,
      dated as of March 27, 2002, by and between Fleet Capital Corporation
      and Chautauqua Airlines, Inc.(i)10.18
              Lease Agreement by and between the
      Indianapolis Airport Authority and Chautauqua Airlines, Inc. dba US
      Airways Express, dated as of June 17,
  1994.(i)10.18(a)
              First Amendment to Office Lease
      Agreement, by and between the Indianapolis Airport Authority and
      Chautauqua Airlines, Inc., dated as of July 17,
      1998.(i)10.18(b)
              Second Amendment to Office Lease
      Agreement, by and between the Indianapolis Airport Authority and
      Chautauqua Airlines, Inc., dated as of October 2,
      1998.(i)10.18(c)
              Third Amendment to Office Lease
      Agreement, by and between the Indianapolis Airport Authority and
      Chautauqua Airlines, Inc., dated as of November 6,
      1998.(i)10.18(d)
              Fourth Amendment to Office Lease
      Agreement, by and between the Indianapolis Airport Authority and
      Chautauqua Airlines, Inc., dated as of September 3,
      1999.(i)10.19
              Letter Agreement by and between
      the Indianapolis Airport Authority and Chautauqua Airlines, Inc., dated as
      of July 17, 2000, amending Lease Agreement for office
      space.(i)10.20†
              Loan Agreement between Chautauqua
      Airlines, Inc. and Agкncia Especial de Financiamento Industrial (FINAME),
      dated as of December 27, 2001. There are fourteen additional Loan
      Agreements which are substantially identical in all material respects
      except as indicated
      on the exhibit.(i)10.21
              Aircraft Security Agreement
      between Chautauqua Airlines, Inc. as Borrower and JPMorgan Chase Bank as
      Security Trustee, dated as of December 27, 2001. There are fourteen
      additional Aircraft Security Agreements which are substantially identical
      in all material respects except as indicated on the
      exhibit.(i)
 
 -73-
  10.22
              Security Agreement Supplement No.
      1 between Chautauqua Airlines, Inc. as Borrower and JPMorgan Chase Bank as
      Security Trustee, dated as of January 17, 2002. There are fourteen
      additional Security Agreement Supplements No. 1 which are substantially
      identical in all material respects except as indicated on the
      exhibit.(i)10.23†
              Securities
      Account Control Agreement among Chautauqua Airlines, Inc. as Debtor,
      AgкnciaEspecial de
      Financiamento Industrial (FINAME) as Lender, and JPMorgan Chase Bank as
      Securities Intermediary and Security Deposit Trustee, dated as of
      December 27, 2001. There are fourteen additional Securities Account
      Control Agreements which are substantially identical in all material
      respects except as indicated on the exhibit.(i)10.24†
              Security Deposit Agreement, among
      Chautauqua Airlines, Inc. as Debtor, Agкncia Especial de Financiamento
      Industrial (FINAME) as Lender, and JPMorgan Chase Bank as Securities
      Intermediary and Security Deposit Trustee, dated as of December 27,
      2001. There are
      fourteen additional Security Deposit Agreements which are substantially
      identical in all material respects except as indicated on the
      exhibit.(i)10.25†
              Funding
      Agreement between Chautauqua Airlines, Inc. and Agкncia Especial de
      Financiamento Industrial(FINAME), dated as of
      December 27, 2001. There are eleven additional Funding Agreements
      which are substantially identical in all material respects except as
      indicated on the exhibit.(i)10.25(a)†
              First
      Amendment to the Funding Agreement, dated as of June11, 2002, by and between
      Chautauqua Airlines, Inc. and Agкncia Especial de Financiamento
      Industrial.(i)10.26
              Agreement, dated as of
      June 7, 2002, by and between Republic Airways Holdings Inc. and Delta
      Air Lines, Inc.(i)10.27
              Amendment No. 1 to Agreement
      between Republic Airways Holdings Inc. and Delta Air Lines, Inc., dated
      October 1, 2003.(i)10.28
              Warrant to purchase shares of
      common stock of Republic Airways Holdings Inc. issued to Delta Air Lines,
      Inc., dated as of June 7, 2002.(i)10.28(a)
              Warrant to purchase shares of
      common stock of Republic Airways Holdings Inc. issued to Delta Air Lines,
      Inc., dated as of February 7, 2003.(i)10.28(b)
              Warrant to purchase shares of
      common stock of Republic Airways Holdings Inc. issued to Delta Air Lines,
      Inc., dated as of October 1, 2003.(i)10.28(c)
              Warrant to purchase shares of
      common stock of Republic Airways Holdings Inc. issued to Delta Air Lines,
      Inc., dated as of March 10, 2004.(i)10.28(d)
              Warrant Surrender Agreement, by
      and between Republic Airways Holdings Inc. and Delta Air Lines, Inc.,
      dated as of December 22, 2004.(iv)10.28(e)
              Form of Warrant to Purchase Shares
      of Common Stock of Republic Airways Holdings Inc. issued to Delta Air
      Lines, Inc., dated as of December 22,
  2004.(iv)10.29
              Form of warrant to purchase shares
      of common stock of Republic Airways Holdings Inc. issued to Delta Air
      Lines, Inc.(i)10.30
              Form of warrant to purchase shares
      of common stock of Republic Airways Holdings Inc. issued to Delta Air
      Lines, Inc.(i)10.31†
              Delta Connection Agreement, dated
      as of June 7, 2002, by and among Delta Air Lines, Inc., Chautauqua
      Airlines, Inc., and Republic Airways Holdings
    Inc.(i)10.31(a)†
              Amendment No. 1 to Delta
      Connection Agreement, dated as of February 7, 2003, by and among
      Delta Air Lines, Inc., Chautauqua Airlines, Inc., and Republic Airways
      Holdings Inc.(i)10.31(b)†
              Amendment Number Two to Delta
      Connection Agreement, dated September 30, 2003, by and among Delta
      Air Lines, Inc., Chautauqua Airlines, Inc. and Republic Airways Holdings
      Inc.(i)10.31(c)†
              Amendment Number Three to Delta
      Connection Agreement, dated March, 2004, by and among Delta Air Lines,
      Inc., Chautauqua Airlines, Inc. and Republic Airways Holdings
      Inc.(i)10.31(d)†
              Amendment No. 4 to Delta
      Connection Agreement by and among Delta Air Lines, Inc., Chautauqua
      Airlines, Inc. and Republic Airways Holdings Inc., dated as of
      August 12, 2004.(iii)10.31(e)†
              Amendment Number Five to Delta
      Connection Agreement, as amended, among Delta Air Lines, Inc., Chautauqua
      Airlines, Inc. and Republic Airways Holdings Inc., dated as of
      December 22, 2004.(iv)10.31(f)†
              Amendment
      Number Six to Delta Connection Agreement, by and among Delta Air Lines,
      Inc., Chautauqua Airlines, Inc. and Republic Airways Holdings Inc., dated
      as of March 12, 2007.(xxiii)10.32
              Amended Promissory Note of
      Republic Airways Holdings Inc. (FKA Wexford Air Holdings Inc.) (FKA
      Wexford III Corp.), dated as of May 14, 2003, in favor of WexAir LLC
      in the principal amount of $20,391,996.04.(i)10.33
              Second Amended and Restated
      Employment Agreement by and between Bryan K. Bedford and Republic Airways
      Holdings Inc., dated as of July 1, 2003.(i)10.33(a)
              Amendment No. 1 to Second Amended
      and Restated Employment Agreement, by and between Bryan K. Bedford and
      Republic Airways Holdings Inc., dated as of December 27,
      2004.(v)10.33(b)
              Amendment No. 2 to Second
      Amended and Restated Employment Agreement, by and between Bryan K.
      Bedford  and Republic Airways Holdings Inc., dated as of February 20,
      2007. (xx)10.33(c)
              Amendment
      No. 3 to Second Amended and Restated Employment Agreement, by and between
      Bryan K. Bedford and Republic Airways Holdings Inc., dated as of September
      5, 2007. (xxvii)10.34
              Second Amended and Restated
      Employment Agreement by and between Robert Cooper and Republic Airways
      Holdings Inc., dated as of August 1,
  2003.(i)10.34(a)
              Amendment No. 1 to Second Amended
      and Restated Employment Agreement, by and between Robert Hal Cooper and
      Republic Airways Holdings Inc., dated as of December 27,
      2004.(v)10.34(b)
              Amendment No. 2 to Second
      Amended and Restated Employment Agreement, by and between Robert Hal
      Cooper and Republic Airways Holdings Inc., dated as of February 20, 2007.
      (xx)10.34(c)
              Amendment
      No. 3 to Second Amended and Restated Employment Agreement, by and between
      Robert Hal Cooper and Republic Airways Holdings Inc., dated as of
      September 5, 2007.(xxvii)10.35
              Second Amended and Restated
      Employment Agreement by and between Wayne Heller and Chautauqua Airlines,
      Inc., dated as of August 1, 2003.(i)10.35(a)
              Amendment No. 1 to Second Amended
      and Restated Employment Agreement, by and between Wayne C. Heller and
      Chautauqua Airlines, Inc., dated as of December 27,
      2004.(v)10.35(b)
              Amendment No. 2 to Second
      Amended and Restated Employment Agreement, by and between Wayne C.
      Heller and Republic Airways Holdings Inc., dated as of February 20,
      2007. (xx)10.35(c)
              Amendment
      No. 3 to Second Amended and Restated Employment Agreement, by and between
      Wayne C. Heller and Republic Airways Holdings Inc., dated as of September
      5, 2007. (xxvii)10.36
              Port Columbus International
      Airport Signatory Airline Operating Agreement and Lease, dated as of
      January 1, 2000.(i)10.37
              Office/Shop Space Permit by and
      between Signature Combs and Chautauqua Airlines, Inc., dated as of
      January 16, 2001.(i)10.38
              Hangar and Office Lease by and
      between AMR Combs, Inc. and Chautauqua Airlines, Inc., dated as of
      December 22, 1998.(i)
  -74-
 10.39†
              Purchase Agreement DCT-014/2004,
      by and between Empresa Brasileira de Aeronбutica S.A. and Republic Airline
      Inc., dated as of March 19, 2004.(i)10.39(a)†
              Amendment No. 1 to Purchase
      Agreement DCT-014/2004, by and between Embraer — Empresa Brasileira de
      AeronбuticaS.A.and
      Republic Airline Inc., dated as of April 28,
      2004.(ii)
 10.39(b)†
              Amendment No. 2 to Purchase
      Agreement DCT-014/2004 between Embraer-Empresa Brasileira de Aeronбutica
      S.A. and Republic Airline Inc., dated as of dated July 8,
      2004.(iii)10.39(c)†
              Amendment No. 3 to Purchase
      Agreement DCT-014/2004 between Embraer-Empresa Brasileira de Aeronбutica
      S.A. and Republic Airline Inc., dated as of July 30,
      2004.(iii)10.39(d)†
              Amendment
      No. 4 to Purchase Agreement DCT-014/2004 between Embraer-Empresa Brasileira de Aeronбutica
      S.A. and Republic Airline Inc., dated as of August 11,
      2004.(iii)10.39(e)†
              Amendment No. 5 to Purchase
      Agreement DCT-014/2004 between Embraer-Empresa Brasileira de Aeronбutica
      S.A. and Republic Airline Inc., dated as ofSeptember 29,
      2004.(iii)10.39(f)†
              Amendment No. 6 to Purchase
      Agreement DCT-014/2004 between Embraer-Empresa Brasileira de Aeronбutica
      S.A. and Republic Airline Inc., dated as of November 9,
      2004.(viii)10.39(g)†
              Amendment
      No. 7 to Purchase Agreement DCT-014/2004 between Embraer-Empresa
      Brasileira de Aeronбutica S.A. and Republic Airline Inc., dated as of
      December 23, 2004.(viii)10.39(h)†
              Amendment No. 8 to Purchase
      Agreement DCT-014/2004, by and between Embraer—Empresa Brasileira de
      AeronбuticaS.A.and
      Republic Airline Inc., dated as of February 28, 2005.
      (x)10.39(i)†
              Amendment No. 9 to Purchase
      Agreement DCT-014/2004, by and between Embraer—Empresa Brasileira de
      AeronбuticaS.A.and Republic Airline Inc., dated
      as of March 31, 2005. (x)10.39(j)†
              Amendment No. 10 to Purchase
      Agreement DCT-014/2004, by and between Embraer-Empresa Brasilicica de
      Aeronautica S.A. and Republic Airline Inc., dated as of April 30, 2005.
      (xiii)10.39(k)†
              Amendment No. 11 to Purchase
      Agreement DCT-014/2004, by and between Embraer-Empresa Brasileira de
      Aeronautica S.A. and Republic Airline Inc., dated as of August 30, 2005.
      (xv)10.39(l)†
              Amendment No. 12 to Purchase
      Agreement DCT-014/2004, by and between Embraer-Empresa Brasileira de
      Aeronautica S.A. and Republic Airline Inc., dated as of October 7,
      2005.(xvi)10.39(m)†
              Amendment No. 13 to Purchase
      Agreement DCT-014/2004, by and between Embraer-Empresa Brasileira de
      Aeronautica S.A. and Republic Airline Inc., dated as of October 18,
      2005.(xvi)10.39(n)†
              Amendment No. 14 to Purchase
      Agreement DCT-014/2004, by and between Embraer-Empresa Brasileira de
      Aeronautica S.A. and Republic Airline Inc., dated as of November 9,
      2005.(xvi)10.39(o)†
              Amendment No. 15 to Purchase
      Agreement DCT-014/2004, by and between Embraer-Empresa Brasileira de
      Aeronautica S.A. and Republic Airline Inc., dated as of April 24,
      2006.(xviii)10.39(p)†
              Amendment No. 16 to Purchase
      Agreement DCT-014/2004, by and between Embraer-Empresa Brasileira de
      Aeronautica S.A. and Republic Airline Inc., dated as of July 21,
      2006.(xix)10.39(q)†
              Amendment No. 17 to Purchase
      Agreement DCT-014/2004, by and between Embraer-Empresa Brasileira de
      Aeronautica S.A. and Republic Airline Inc., dated as of November 14,
      2006.(xxi)10.39(r)†
              Amendment No. 18 to Purchase
      Agreement DCT-014/2004, by and between Embraer-Empresa Brasileira de
      Aeronautica S.A. and Republic Airline Inc., dated as of January 12,
      2007.(xxiv)10.39(s)†
              Amendment No. 19 to Purchase
      Agreement DCT-014/2004 by and between Embraer-Empresa Brasileira de
      Aeronautica S.A. and Republic Airline Inc., dated as of June 22,
      2007.(xxvi)10.39(t)††
              Amendment No. 20 to Purchase
      Agreement DCT-014/2004 by and between Embraer-Empresa Brasileira de
      Aeronautica S.A. and Republic Airline Inc., dated as of October 18,
      2007.(xxx)10.40†
              Letter Agreement DCT-015/2004, by
      and between Republic Airline Inc. and Embraer-Empresa Brasileira de
      Aeronбutica S.A., dated as of March 19,
      2004.(i)10.40(a)†
              Amendment No. 1 to Letter
      Agreement DCT-015/2004, by and between Republic Airline Inc. and
      Embraer-Empresa Brasileira de Aeronбutica S.A., dated as of July 8,
      2004.(viii)10.40(b)†
              Amendment
      No. 2 to Letter Agreement DCT-015/2004, by and between Republic Airline
      Inc. and Embraer-Empresa Brasileira de Aeronбutica S.A., dated as of
      December 23, 2004.(viii)10.40(c)†
              Amendment No. 3 to Letter
      Agreement DCT-015/2004, by and between Embraer—Empresa Brasileira de
      AeronбuticaS.A.andRepublic
      Airline Inc., dated as of February 28, 2005.(x)10.40(d)†
              Amendment No. 4 to Letter
      Agreement DCT-015/2004, by and between Embraer—Empresa Brasileira de
      AeronбuticaS.A.and Republic Airline Inc., dated
      as of April 13, 2005.(x)  -75-
 10.40(e)†
                Amendment No. 5
      to Letter Agreement DCT-015/2004, by and between Embraer-Empresa
      Brasilicica de Aeronautica S.A. and Republic Airline Inc., dated as of
      April 30, 2005.(xiii)10.40(f)†
                Amendment No. 6 to Letter
      Agreement DCT-015/2004, by and between Embraer-Empresa Brasileira de
      Aeronautica S.A. and Republic Airline, Inc., dated as of October 18,
      2005.(xvi)10.40(g)†
                Amendment No. 7 to Letter
      Agreement DCT-015/2004, by and between Embraer-Empresa Brasileira de
      Aeronautica S.A. and Republic Airline, Inc., dated as of November 9,
      2005.(xvi)10.40(h)†
                Amendment No. 8 to Letter
      Agreement DCT-015/2004, by and between Embraer-Empresa Brasileira de
      Aeronautica S.A. and Republic Airline Inc., dated as of July 21,
      2006.(xix)10.40(i)†
                Amendment No. 9 to Letter
      Agreement DCT-015/2004, by and between Embraer-Empresa Brasileira de
      Aeronautica S.A. and Republic Airline Inc., dated as of September 19,
      2006.(xxi)10.40(j)†
                Amendment No. 10 to Letter
      Agreement DCT-015/2004, by and between Embraer-Empresa Brasileira de
      Aeronautica S.A. and Republic Airline Inc., dated as of November 14,
      2006.(xxi)10.40(k)†
                Amendment No. 11 to Letter
      Agreement DCT-015/2004, by and between Embraer-Empresa Brasileira de
      Aeronautica S.A. and Republic Airline inc., dated as of May 29,
      2007.(xxvi)10.40(l)†
                Amendment No. 12 to Letter
      Agreement DCT-015/2004, by and between Embraer-Empresa Brasileira de
      Aeronautica S.A. and Republic Airline inc., dated as of June 22,
      2007.(xxvi)10.40(m)††
                Amendment No. 13 to Letter
      Agreement DCT-015/2004, by and between Embraer-Empresa Brasileira de
      Aeronautica S.A. and Republic Airline inc., dated as of October 18,
      2007.(xxx)10.41†
                United Express Agreement, by and
      between United Air Lines, Inc. and Shuttle America Corp., dated as of
      December 28, 2006.(xxi)10.41(a)††
                First
      Amendment to United Express Agreement, by and between United Air Lines,
      Inc. and Shuttle America Corp., dated as of August 21,
  2007.(xxx)10.42†
                United Express Agreement, by and
      between United Air Lines, Inc. and Chautauqua Airlines, Inc., dated as of
      February 13, 2004.(i)10.42(a)
                Amendment No. 1 to United Express
      Agreement, by and between United Air Lines, Inc. and Chautauqua Airlines,
      Inc., dated as of July 6,
2004.(ii)
 10.43†
                Letter Agreement, by and between
      United Air Lines, Inc. and Republic Airways Holdings Inc., dated as of
      February 13, 2004.(i)10.43(a)†
                Letter Agreement, by and between
      United Air Lines, Inc. and Republic Airways Holdings Inc., dated as of
      July 7, 2004.(ii)10.44
                Lease Agreement, by and between
      Chautauqua Airlines, Inc. and the Indianapolis Airport Authority, dated as
      of December 17, 2004.(viii)10.45†
                Delta Connection Agreement, dated
      as of January 13, 2005, by and among Delta Air Lines, Inc., Republic
      Airline Inc. and Republic Airways Holdings
  Inc.(vi)10.45(a)†
                Amendment
      Number One to Delta Connection Agreement, by and among Delta Air Lines,
      Inc., Shuttle America Corp. (as assignee of Republic Airline Inc.) and
      Republic Airways Holdings Inc., dated as of March 12, 2007.
    (xxiii)10.45(b)††
                Amendment
      Number Two to Delta Connection Agreement, by and among Delta Airlines,
      Inc., Shuttle America Corp. (as assignee of Republic Airline Inc.) and
      Republic Airways Holdings Inc., dated as of August 21,
  2007.(xxx)
  -76-
 10.45(c)†
                Letter
      Agreement, by and among Delta Airlines, Inc., Republic Airways Holdings
      Inc., Chautauqua Airlines, Inc. and Shuttle America Corp., dated as of
      March 12, 2007.(xxiii)
 10.46
              Stock Purchase Agreement, dated
      May 6, 2005, by and among Republic Airways Holdings, inc., Shuttle America
      Corporation and Shuttle Acquisition LLC.(ix)10.47
              Promissory Note in the principal
      amount of $1,000,000 dated May 6, 2005, made by Republic Airways Holdings
      Inc. payable to Shuttle Acquisition LLC.(ix)10.48†
              Investment Agreement dated as of
      March 15, 2005 among Wexford Capital LLC, Republic Airways Holdings Inc.,
      US Airways Group, Inc. and US Airways, Inc.(x)10.49
              Letter dated June 23, 2005 from US
      Airways Group, Inc. and US Airways, Inc.(xi)10.50
              Amendment No. 3 to United
      Express Agreement between United Airlines, Inc. and Republic
      Airline Inc. and Amendment No. 2 to United Express Agreement
      between United Airlines, Inc. and Chautauqua Airlines, Inc.
      dated as of June 22, 2005.(xii)10.51
              Agreement between Chautauqua
      Airlines, Inc. and the Flight Attendants in the service of Chautauqua
      Airlines, Inc. as represented by the International Brotherhood Of
      Teamsters, AFL-CIO, dated as of September 1,
    2005.(xiv)10.52(a)†
              Republic Jet Service Agreement, by
      and between US Airways, Inc. and Republic Airline Inc., dated as
      of September 2, 2005.(xv)10.52(b)†
              Amendment Number One to Republic
      Jet Service Agreement, by and between US Airways, Inc. and Republic
      Airline Inc., dated as of September 21,
2005.(xv)10.52(c)†
              Second Amendment to Republic Jet
      Service Agreement, by and between US Airways, Inc. and Republic Airline
      Inc., dated as of July 21, 2006.(xix)10.52(d)†
              Third Amendment to Republic Jet
      Service Agreement, by and between US Airways, Inc. and Republic Airline
      Inc., dated as of December 19, 2006.(xxi)10.53†
              Global Aircraft Transaction
      Agreement, by and between Republic Airways Holdings Inc. and US
      Airways, Inc., dated as of September 21,
  2005.(xv)10.54†
              Commuter Slot Option Agreement, by
      and between Republic Airways Holdings Inc. and US Airways, Inc., dated as
      of September 22, 2005.(xv)10.55†
              Capacity Purchase Agreement, by
      and between Continental Airlines, Inc., Republic Airways Holdings Inc. and
      Chautauqua Airlines, Inc., dated as of July 21,
      2006.(xix)10.55(a)†
              First
      Amendment to the Capacity Purchase Agreement, by and among Continental
      Airlines, Inc., Republic Airways Holdings Inc. and Chautauqua Airlines,
      Inc., dated as of January 8, 2007.(xxiv)10.56†
              Airline Services Agreement, by and
      between Frontier Airlines, Inc., Republic Airline Inc., Frontier Airlines
      Holdings, Inc. and Republic Airways Holdings Inc., dated as of January 11,
      2007.(xxi)10.57
              Evidence
      of Transfer of Claim by Republic Airways Holdings Inc. in favor of
      JPMorgan Chase Bank, N.A., dated as of April 11, 2007.(xxiv)10.58
              Stock
      Purchase Agreement, dated as of March 16, 2007, by and between Republic
      Airways Holdings Inc. and WexAir LLC.(xxii)10.59
              Stock
      Purchase Agreement, dated as of September 4, 2007, by and between Republic
      Airways Holdings Inc. and WexAir RJET LLC.(xxvii)10.60
              Stock
      Purchase Agreement, dated as of September 11, 2007, by and between
      Republic Airways Holdings Inc. and WexAir RJET LLC.(xxviii)10.61
              Stock
      Purchase Agreement, dated as of October 26, 2007, by and between Republic
      Airways Holdings Inc. and WexAir RJET LLC.(xxix)21.1
              Subsidiaries of Republic Airways
      Holdings Inc.(i)23.1
              Consent of Deloitte & Touche
      LLP.31.1
              Certification by Bryan K. Bedford
      pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted
      pursuant to section 302 of the Sarbanes-Oxley Act of
      2002.31.2
              Certification by Robert H. Cooper
      pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted
      pursuant to section 302 of the Sarbanes-Oxley Act of
      2002.32.1
              Certification by Bryan K. Bedford
      pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of
      the Sarbanes-Oxley Act of 2002.32.2
              Certification by Robert H. Cooper
      pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of
      the Sarbanes-Oxley Act of
2002.
  -77-
  †
              Portions of the indicated document
      have been afforded confidential treatment and have been filed separately
      with the Commission as required by Rule 406.††
              A request for confidential
      treatment was filed for certain portions of the indicated document.
      Confidential portions have been omitted and filed separately with the
      Commission as required by Rule 406.(i)
              Incorporated by reference to the
      Registrant’s Registration Statement on Form S-1, File No. 333-84092, which
      was declared effective on May 26, 2004.(ii)
              Incorporated by reference to the
      Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30,
      2004.(iii)
              Incorporated by reference to the
      Registrant’s Quarterly Report on Form 10-Q for the quarter ended September
      30, 2004.(iv)
              Incorporated by reference to the
      Registrant’s Current Report on Form 8-K filed on December 29,
      2004.(v)
              Incorporated by reference to the
      Registrant’s Current Report on Form 8-K filed on December 30,
      2004.(vi)
              Incorporated by reference to the
      Registrant’s Current Report on Form 8-K filed on January 20,
      2005.(vii)
              Incorporated by reference to the
      Registrant’s Current Report on Form 8-K filed on January 21,
      2005.(viii)
              Incorporated by reference to the
      Registrant’s Registration Statement on Form S-1, File No. 333-122033,
      which was declared effective on February 1,
2005.(ix)
              Incorporated by reference to the
      Registrant’s Current Report on Form 8-K filed on May 9,
      2005(x)
              Incorporated by reference to the
      Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31,
      2005.(xi)
              Incorporated by reference to the
      Registrant’s Current Report on Form 8-K filed on June 28,
      2005.(xii)
              Incorporated by reference to the
      Registrant’s Registration Statement on Form S-3, file No. 333-126357,
      which was declared effective on July 18, 2005.(xiii)
              Incorporated by reference to the
      Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30,
      2005.(xiv)
              Incorporated by reference to the
      Registrant’s Current Report on Form 8-K filed on September 7,
      2005.(xv)
              Incorporated by reference to the
      Registrant’s Quarterly Report on Form 10-Q for the quarter ended September
      30, 2005.(xvi)
              Incorporated by reference to the
      Registrant’s Annual Report on Form 10-K for the year ended December 31,
      2005.(xvii)
              Incorporated by reference to the
      Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31,
      2006.(xviii)
              Incorporated by reference to the
      Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30,
      2006.(xix)
              Incorporated by reference to the
      Registrant’s Quarterly Report on Form 10-Q for the quarter ended September
      30, 2006.(xx)
              Incorporated by reference to the
      Registrant’s Current Report on Form 8-K filed on February 26,
      2007.(xxi)
              Incorporated
      by reference to the Registrant's Annual Report on Form 10-K for the year
      ended December 31, 2006.(xxii)
              Incorporated
      by reference to the Registrant's Current Report on Form 8-K filed on March
      19, 2007.(xxiii)
              Incorporated
      by reference to the Registrant's Current Report on Form 8-K filed on March
      30, 2007.(xxiv)
              Incorporated
      by reference to the Registrant's Quarterly Report on Form 10-Q for
      the quarter ended March 31, 2007.(xxv)
              Incorporated
      by reference to the Registrant's Current Report on Form 8-K filed on June
      8, 2007.(xxvi)
              Incorporated
      by reference to the Registrant's Quarterly Report on Form 10-Q for
      the quarter ended June 30, 2007.(xxvii)
              Incorporated
      by reference to the Registrant's Current Report on Form 8-K filed on
      September 5, 2007.(xxviii)
              Incorporated
      by reference to the Registrant's Current Report on Form 8-K filed on
      September 12, 2007.(xxix)
              Incorporated
      by reference to the Registrant's Current Report on Form 8-K filed on
      October 29, 2007.(xxx)
              Incorporated
      by reference to the Registrant's Quarterly Report on Form 10-Q for
      the quarter ended September 30, 2007.(xxxi)
              Incorporated
      by reference to the Registrant's Current Report on Form 8-K filed on
      December 10, 2007.
   
 
 
  -78-
  SIGNATURES
 
 Pursuant to the requirements of Section
13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
 
 
 REPUBLIC AIRWAYS HOLDINGS
      INC.(Registrant)Dated: February 20,
      2008
              By: /s/ Bryan K.
      BedfordBryan K.
      BedfordChairman of the Board, Chief
      Executive Officer and President(principal executive
      officer)
 
 
 
 Pursuant to the requirements of the
Securities Exchange Act of 1934, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
 
  Signature
              Title
              Date/s/ Bryan K.
      BedfordBryan K.
      Bedford
              Chairman of the Board, Chief
      Executive Officer and President (Principal Executive
      Officer)
              February 20,
      2008/s/ Robert H.
      CooperRobert H.
      Cooper
              Executive Vice President and Chief
      Financial Officer (Principal Financial and Accounting
      Officer)
              February 20,
      2008/s/ Joseph M.
      JacobsJoseph M.
      Jacobs
              Director
              February 20,
      2008/s/ Douglas J.
      LambertDouglas J.
      Lambert
              Director
              February 20,
      2008/s/ Lawrence J.
      CohenLawrenceJ. Cohen
              Director
              February 20,
      2008/s/ Mark E.
      LandesmanMark E.
      Landesman
              Director
              February 20,
      2008/s/ Mark L.
      PlaumannMark L.
      Plaumann
              Director
              February 20,
      2008
 
  -79-