SECURITIES
        AND EXCHANGE COMMISSION
 WASHINGTON,
        D.C. 20549
 __________________
 
 FORM
        10-K/A
  
 x
              ANNUAL
                  REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
                  ACT OF
                  1934
 
 FOR
        THE YEAR ENDED DECEMBER 31, 2004
 
 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, Indiana 46268
 (Address
          of principal executive offices)
 (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 (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. Yes x No o
 
 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. Yes x No o
 
 Indicate
          by check mark whether the registrant is an accelerated filer (as defined
          in
          Exchange Act Rule 12b-2). Yes o No x
 
 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)
          June 30, 2004 was
            approximately $71,250,000 .
 
 Indicate
          the number of shares outstanding of the issuer’s common stock as of the latest
          practicable date: As of March 7, 2005, 32,458,756 shares of common stock
          were
          outstanding.
  
 TABLE
            OF CONTENTS
 ***Part
                        I***Item 1.
                    Business
                    4Item 2.
                    Properties
                    27Item 3.
                    Legal Proceedings
                    28Item 4.
                    Submission of matters to a
                      Vote of
                      Security Holders
                    28***Part
                        II***Item 5.
                    Market for Registrant’s Common Stock and
                      Related Stockholder Matters
                    29Item 6.
                    Selected Consolidated Financial
                      Information and Operating Data
                    30Item 7.
                    Management’s
                        Discussion and Analysis of
                        Financial Condition and Results of Operations
                    33Item 7A.
                    Quantitative
                        and Qualitative Disclosures
                        About Market Risk
                    45Item 8.
                    Financial
                        Statements and Supplementary
                        Data
                    46Item 9.
                    Changes in and Disagreements
                      with
                      Accountants on Accounting and Financial Disclosure
                    68Item 9A.
                    Controls and Procedures
                    68Item 9B.
                    Other Information
                    68***Part
                        III***Item 10.
                    Directors
                        and Executive Officers of the
                        Registrant
                    69Item 11.
                    Executive
                        Compensation
                    71Item 12.
                    Security
                        Ownership of Certain Beneficial
                        Owners and Management and Related Stockholder Matters
                    78Item 13.
                    Certain
                        Relationships and Related
                        Transactions
                    80Item 14.
                    Principal
                        Accounting Fees and
                        Services
                    81***Part
                        IV***Item 15.
                    Exhibits,
                        Financial Statement
                        Schedules
                    82Signatures
                    
                    88EX-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-
 **EXPLANATORY
              NOTE**
  We
              are
              filing this Amendment No. 1 to our Annual Report on Form 10-K for the
              fiscal
              year ended December 31, 2004 for the purpose of amending and restating
              Item 8 of
              Part I, containing our audited consolidated financial statements and
              related
              notes as of December 31, 2004 and 2003 and for each of the three years
              in the
              period ended December 31, 2004. The restatement relates to the accounting
              for
              reimbursable pass-through costs, primarily fuel, in certain of our
              airline
              services agreements and is further discussed in Note 18 to the restated
              consolidated financial statements included herein. We have also updated
              Item 7
              of Part II, Management’s Discussion and Analysis of Financial Condition and
              Results of Operations, and Item 1 of Part 1, Business, to give effect
              to the
              restatement. In addition, we have amended Item 6 of Part II relating
              to Selected
              Consolidated Financial Information and Operating Data and amended Item
              15 of
              Part IV to reflect the filing of updated certifications pursuant to
              18 U.S.C.
              Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
              Act of
              2002, and we have filed certifications pursuant to Rules 13a-14(a)
              and 15d-14(a)
              under the Securities Exchange Act of 1934, as amended. Other than the
              changes
              regarding the restatement and related disclosures and subsequent events
              occurring subsequent to July 29, 2005 as disclosed in Note 17 to the
              consolidated financial statements, no other information in this
              Amendment
              No. 1 has been updated to reflect any subsequent information or events
              since the
              original filing of the Form 10-K on March 29, 2005, except for
              the current
              report on form 8-K filed on July 29, 2005 which includes consolidated
              financial
              statements giving retroactive effect to the merger with Shuttle America,
              Inc.,
              accounted for in a manner similar to a pooling of interests.
 Forward-Looking
            Statements
 
 In
            addition to
            historical information, this Annual Report on Form 10-K/A 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 belief, 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/A 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-
 ****PAR**T
            I**
 ****ITEM 1.
            BUSINESS****
 
 **General**
 
 Overview
 
 We
            are a holding company that operates
            Chautauqua Airlines, Inc. (“Chautauqua”) and Republic Airline Inc.
            (“Republic”). Chautauqua is a regional airline offering, as of December 31,
            2004, scheduled passenger service on approximately 700 flights
            daily to
            73 cities in 31 states and the Bahamas pursuant to code-share
            agreements with AMR Corp., the parent of American Airlines, Inc. (“American”),
            US Airways, Inc. (“US Airways”), Delta Air Lines, Inc. (“Delta”) and United Air
            Lines, Inc. (“United”). Currently, all of Chautauqua's flights are operated as
            US Airways Express, AmericanConnection, Delta Connection and United Express,
            providing US Airways, American, Delta and United with portions of their
            regional
            service, including service out of their hubs and focus cities in Boston,
            Chicago, Fort Lauderdale, Indianapolis, New York, Orlando, Philadelphia,
            Pittsburgh, Washington, D.C., and St. Louis. We established Republic
            Airline as
            our regional platform for the ERJ-170 aircraft family. In February 2004,
            Republic Airline entered into a code-share agreement with United Air
            Lines, Inc. pursuant to which Republic Airline is required to
            place into
            service for United, by June 2005, subject to delivery of aircraft from
            the
            manufacturer, 23 70-seat regional jets. These jets will fly, as United
            Express
            flights, the routes that United designates. Currently, as Republic Airline
            is
            not yet certified to fly aircraft, Chautauqua is operating 16 ERJ-170s
            for
            United. These aircraft will be flown by Republic Airline after its
            certification, which is expected to be received in June 2005. In January
            2005,
            we, Delta and Republic Airline entered into a code-share agreement whereby
            Republic Airline will operate 16 ERJ-170s for Delta, subject to Republic
            Airline’s receipt of its certification.
 
 We
            have long-term, fixed-fee 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-letter 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 Airlines and Northwest Airlines, certain
            of
            the routes that we fly using Delta's flight designator code are also
            flown under
            Continental's or Northwest's designator codes. We believe that fixed-fee
            agreements reduce 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
            and
            allocate our overhead more efficiently, allowing us to reduce the cost
            of our
            services to our major airline partners. For the year ended December 31,
            2004, US
            Airways accounted for 38% of our operating revenues, Delta accounted
            for 36% of
            our operating revenues, American accounted for 16% of our operating revenues
            and
            United accounted for 10% of our operating revenues. In February 2003,
            we and
            America West mutually agreed to terminate our code-share agreement and
            we
            concurrently agreed with Delta to allocate the aircraft previously designated
            for America West to Delta.
  **Markets
            and Routes**
  *Markets*
  
   -4-
 US
            Airways Express Service
  
   AmericanConnection
            Service
  
   -5-
 Delta
            Connection Service
  
   United
            Express Service
  
 -6-
 **Maintenance
            of Aircraft and Training**
  
  
  
  
  
  
 
 -7-
 Employees
  
  
 **Employee
                      Group**
                  **Approximate
                      Number**
                    **of
                      Full-Time**
                    **Equivalent
                      Employees**
                  **Representing
                      Union**
                  **Amendable
                      Date**Pilots
                  1,019
                  International
                      Brotherhood of Teamsters Airline Division Local
                      747
                  October
                      2007Flight
                      Attendants
                  523
                  International
                      Brotherhood of Teamsters Airline Division Local
                      210
                  Currently
                      under federal mediationCustomer
                      Service
                  226
                  International
                      Brotherhood of Teamsters Airline Division Local
                      135
                  December
                      2005Dispatchers
                  32
                  Transport
                      Workers Union of America Local 540
                  February
                      2007
  As
            of December 31, 2004, we had 374 maintenance technicians and other
            maintenance personnel, who are not currently represented by any union,
            and 130
            administration and 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. In connection with our proposed acquisition
            of
            28 additional Embraer regional jets required to meet our obligations
            under our
            code-share agreements and related expansion, we anticipate hiring approximately
            750 additional employees, many of whom will be represented by a union
            in their
            employment. We have never experienced any work stoppages or other job
            actions
            and generally consider our relationship with our employees to be good.
  Code-Share
            Agreements
  
  The
            US Airways Code-Share Agreement
  
  -8-
 
  
          
  In
            general, we have agreed to indemnify
            US Airways and US Airways has agreed to indemnify us for any damages
            caused by
            any breaches of our respective obligations under the code-share agreement
            or
            caused by our respective actions or inactions under the code-share agreement.
  
 On
                March
                15, 2005, the Company and Wexford Capital LLC, entered into an omnibus
                investment agreement with US Airways Group, Inc. The agreement includes
                provisions for the affirmation of an amended Chautauqua code-share
                agreement, a
                potential new jet service agreement with Republic Airline for the
                operation of
                ERJ-170 and ERJ-190 aircraft, a conditional $125 million dollar equity
                commitment and up to $110 million in asset related financing. The
                agreement can
                be terminated by the Company and Wexford Capital LLC if the Omnibus
                Order has
                not been entered by the Bankruptcy Court by April 20, 2005, and may
                be
                terminated by the Company and Wexford Capital LLC or by US Airways
                Group, Inc.
                if the closing on the issuance, sale and purchase of the new common
                stock of US
                Airways Group, Inc. is not completed by December 31, 2005.
  -9-
 *The
                  American Code-Share Agreemen* t
  As
                  of
                  December 31, 2004, Chautauqua operated 15 ERJ-140 regional
                  jets for
                  American under a fixed-fee code-share agreement. As of December 31,
                  2004,
                  Chautauqua provided 85 flights per day as AmericanConnection between
                  St. Louis
                  and designated outlying cities.
  American
                  provides reservation services, tickets, baggage handling, ticket
                  jackets and
                  similar items with respect to such flights and also controls scheduling,
                  ticket
                  prices and seat inventories with respect to such flights. In exchange
                  for
                  providing the designated number of flights and performing our other
                  obligations
                  under the code-share agreement, we receive from American a fixed-fee
                  per block
                  hour flown in revenue service and an additional amount per passenger.
                  We are
                  also eligible to receive semi-annual per passenger incentives based
                  upon on-time
                  performance, flight completion rates, lack of complaints and correct
                  baggage
                  handling. Conversely, we must pay semi-annual per passenger penalties
                  should our
                  performance not meet minimum standards for on-time performance,
                  flight
                  completion rates, complaints and correct baggage handling. 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, passenger catering, property and
                  liability
                  insurance and aircraft property costs are pass through costs. 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.
 
  
  
  
  -10-
 
  
  
  
  
  
                      
  
  
 In
              October,
              2004, in order to accommodate American with respect to its scope restrictions,
              we agreed to modify our Agreement with American to preclude the continued
              use of
              larger regional jets on our Chautauqua Airlines Air Carrier Operating
              Certificate. We have also agreed to pay American an aggregate of approximately
              $500,000 through February 19, 2005, in connection with our operation
              of
              ERJ-170s for United through Chautauqua instead of Republic Airline.
              Approximately $291,000 of this amount was paid in 2004. Additionally,
              we will
              pay approximately $36,000 per day to American for each day Chautauqua
              is
              operating any ERJ-170s after April 21, 2005. This payment will
              continue
              until Chautauqua no longer operates ERJ-170 aircraft. Consequently,
              we will most
              likely pay this daily penalty through November 2005. Also, as agreed
              with
              American, Chautauqua can fly no more than 18 ERJ-170 aircraft.
 
 -11-
 The Delta Code-Share Agreements
  
  Chautauqua
  
  
  
  
  
  -12-
 
  
  
  
  
                    -13-
 
  
  
  
  
  
  Republic
            Airline
  
  
  -14-
 The
            United Code-Share Agreements
  
  Chautauqua
  
  
  
  
      
      
  
      -15-
 
  
        
  
  
  
  -16-
 Republic
            Airline
  
  
  Competition
            and Economic Conditions
  
  
  
  Government
            Regulation
  
  
  
  
  -17-
 Risk
            Factors
  
  Risks
            Related to Our Operations
  We
            are dependent on our code-share relationships with our
            major partners.
    In
            addition, because all of our
            passenger 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.
  
  -18-
 If
            our code-share agreement is terminated in connection
            with US Airways' bankruptcy or US Airways seeks to renegotiate the agreement
            on
            terms less favorable to us, our operating revenues and net income may
            be
            materially adversely affected.
    
  Our
            code-share agreements with United will be terminated
            if United does not emerge from bankruptcy.
    Republic
            Airline requires an operating certificate before
            it can commence flying operations.
  Republic
              Airline has applied for, but does not yet have, an operating certificate.
              This
              certificate is required before Republic Airline can commence flying.
              Consequently, we will be unable to fly ERJ-170s for Delta unless Republic
              Airline is certified. In October, 2004, in order to accommodate American
              with
              respect to its scope restrictions, we agreed to modify our Agreement
              with
              American to preclude the continued use of larger regional jets on our
              Chautauqua
              Airlines Air Carrier Operating Certificate. We have also agreed to
              pay American
              an aggregate of approximately $500,000 through February 19,
              2005, in
              connection with our operation of ERJ-170s for United through Chautauqua
              instead
              of Republic Airline. Approximately $291,000 of this amount was paid
              in 2004.
              Additionally, we will pay approximately $36,000 per day to American
              for each day
              Chautauqua is operating any ERJ-170s after April 21, 2005. This
              payment
              will continue until Chautauqua no longer operates ERJ-170 aircraft.
              Consequently, we will most likely pay this daily penalty through November
              2005.
              Also, as agreed with American, Chautauqua can fly no more than 18 ERJ-170
              aircraft. In addition, unless Republic Airline receives its certification
              or we
              acquire another Air Carrier Operating Certificate, we will be unable
              to execute
              our strategy of operating single fleet types in our operating subsidiaries.
              We
              expect that Republic Airline will receive its required certification
              on or
              before the end of August 2005. The certification process, however,
              is
              lengthy and complicated and we can give no assurance that we will meet
              this
              date. In addition, the FAA may limit how quickly we can transfer all
              ERJ-170
              aircraft from Chautauqua to Republic Airline or another Air Carrier
              Operating
              Certificate. If Republic Airline does not receive its required certification
              and
              if the ERJ-170 aircraft are not transferred from Chautauqua to Republic
              Airline
              or another Air Carrier Operating Certificate, our financial condition,
              results
              of operations and price of our common stock could be materially adversely
              affected.
 If
            the financial strength of any of our code-share
            partners decreases, our financial strength is at risk.
  -19-
 Our
            code-share partners may expand their direct operation
            of regional jets thus limiting the expansion of our relationships with
            them
    Any
            labor disruption or labor strikes would adversely
            affect our ability to conduct our business.
  
  
  
  
  Our
            current growth plans may be materially affected by
            substantial risks, some of which are outside of our control.
    
  -20-
 
  
  
  Our
            code-share partners may be restricted in increasing
            the level of business that they conduct with us, thereby limiting our
            growth.
    
  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.
    
        
  -21-
 We
            depend on Embraer to supply us with the aircraft we
            require to expand.
  
              
  
  
  Reduced
            utilization levels of our aircraft under the
            fixed-fee agreements would adversely impact our revenues and
            earnings.
    Increases
            in our labor costs, which constitute a
            substantial portion of our total operating costs, will directly impact
            our
            earnings.
    Our
            business could be harmed if we lose the services of
            our key personnel.
  
  -22-
 We
            may experience difficulty finding, training and
            retaining employees.
  
  
  We
            are at risk of losses stemming from an accident
            involving any of our aircraft
    
  We
            will be controlled by Wexford Capital as long as they
            own or control a majority of our common stock, and they may make decisions
            with
            which you disagree.
    We
            may have conflicts of interest with Wexford Capital,
            and because of their controlling ownership, we may not be able to resolve
            these
            conflicts on an arm's length basis.
            -23-
 
  The
            airline industry is highly competitive.
  
  
  
  The
            airline industry has been subject to a number of
            strikes which could affect our business.
  
  Airlines
            are often affected by certain factors beyond
            their control, including weather conditions which can affect their
            operations.
    The
            airline industry has recently gone through a period of
            consolidation and transition; consequently, we have fewer potential
            partners.
    The
            airline industry is heavily regulated.
  
  
  
  -24-
 
  
  Risks
            Related To Our Common Stock
  Our
            stock price is volatile.
  
                  
  
  Future
            sales of our common stock by our stockholders could
            depress the price of our common stock.
    -25-
 Our
            incorporation documents and Delaware law have
            provisions that could delay or prevent a change in control of our company,
            which
            could negatively affect your investment.
            
  Our
            charter documents include provisions limiting voting
            by foreign owners.
  
  -26-
 ****ITEM
            2: PROPERTIES****
  Flight
            Equipment
  
  **Type**
                    
                    **Total**
                      **Aircraft**
                    
                    **Owned**
                    
                    **Leased**
                    
                    **Option**
                      **Aircraft**
                    
                    **Average
                        Age**
                      **(in
                        years)**
                    
                    **Firm**
                      **Orders**
                    
                    **Seats
                        in**
                      **Standard**
                      **Configuration**ERJ-145LR
                    
                    
                    68
                    
                    
                    25
                    
                    
                    43
                    
                    
                    
                    
                    
                    2.7
                    
                    
                    0
                    
                    
                    50ERJ-140LR
                    
                    
                    15
                    
                    
                    11
                    
                    
                    4
                    
                    
                    
                    
                    
                    2.8
                    
                    
                    0
                    
                    
                    44ERJ-135LR
                    
                    
                    17
                    
                    
                    15
                    
                    
                    2(1
                    )
                    
                    
                    
                    
                    1.5
                    
                    
                    0
                    
                    
                    37ERJ-170LR
                    
                    
                    11
                    
                    
                    11
                    
                    
                    
                    
                    
                    
                    
                    
                    0.1
                    
                    
                    28
                    
                    
                    70Total
                    
                    
                    111
                    
                    
                    62
                    
                    
                    49
                    
                    
                    95(2
                    )
                    
                    
                    
                    
                    28
      
   
 
 **ERJ-170
                      Aircraft**
                  
                  **ERJ-145
                      Aircraft**
                  
                  **ERJ-140
                      Aircraft**
                  
                  **ERJ-135
                      Aircraft**
                  
                  **Total****In**
                    **Operation**
                  
                  **Total**
                    **Required**
                    **Aircraft**
                  
                  **In**
                    **Operation**
                  
                  **Total**
                    **Required**
                    **Aircraft**
                  
                  **In**
                    **Operation**
                  
                  **Total**
                    **Required**
                    **Aircraft**
                  
                  **In**
                    **Operation**
                    **(1)**
                  
                  **Total**
                    **Required**
                    **Aircraft**
                  
                  **Jets
                      In**
                    **Operation**
                    **(1)**
                  
                  **Total
                      Required**
                    **Embraer**
                    **Regional
                      Jets(1)**US
                      Airways
                  
                  
                  —
                  
                  
                  —
                  
                  
                  35
                  
                  
                  35
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  35
                  
                  
                  35American
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  15
                  
                  
                  15
                  
                  
                  —
                  
                  
                  —
                  
                  
                  15
                  
                  
                  15Delta
                  
                  
                  —
                  
                  
                  16
                  
                  
                  24
                  
                  
                  24
                  
                  
                  —
                  
                  
                  —
                  
                  
                  15
                  
                  
                  15
                  
                  
                  39
                  
                  
                  55United
                  
                  
                  11
                  
                  
                  23
                  
                  
                  9
                  
                  
                  9
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  20
                  
                  
                  32Total
                  
                  
                  11
                  
                  
                  39
                  
                  
                  68
                  
                  
                  68
                  
                  
                  15
                  
                  
                  15
                  
                  
                  15
                  
                  
                  15
                  
                  
                  109
                  
                  
                  137
 
 
 
 -27-
 Ground
            Operations and Properties
  
  
  
  ****ITEM
            3. LEGAL PROCEEDINGS****
  
  ****ITEM
            4. SUBMISSION**OF MATTERS TO A VOTE OF
            SECURITY HOLDERS**
  
  -28-
 **PART**
            II
  ****ITEM
            5. MARKET**FOR REGISTRANT’S COMMON STOCK AND
            RELATED STOCKHOLDER MATTERS**
  Market
            Price
    **Year
                    Ended December 31, 2004**
                  
                  **High**
                  
                  **Low**Second
                      Quarter (beginning May 27, 2004)
                  
                  $
                  15.00
                  
                  $
                  11.58Third
                      Quarter
                  
                  
                  14.08
                  
                  
                  8.37Fourth
                      Quarter
                  
                  
                  13.54
                  
                  
                  8.15
    
  
  
  -29-
 **ITEM
              6. SELECTED CONSOLIDATED FINANCIAL INFORMATION AND OPERATING
              STATISTICS**
 
  **Years
                      Ended December 31,****2004
                      (12)**
                  
                  **2003
                      (12)**
                  
                  **2002
                      (12)**
                  
                  **2001(12)**
                  
                  **2000(12)****(in
                      thousands, except share, per share and airline operating
                      data)****Statement
                      of Operations Data:**Total
                      operating revenues
                  
                  $
                  646,324
                  
                  $
                  492,280
                  
                  $
                  356,197
                  
                  $
                  241,028
                  
                  $
                  149,008Operating
                      expenses:Wages
                      and benefits
                  
                  
                  112,305
                  
                  
                  86,949
                  
                  
                  63,572
                  
                  
                  45,107
                  
                  
                  30,782Aircraft
                      fuel
                  
                  
                  174,208
                  
                  
                  106,840
                  
                  
                  64,869
                  
                  
                  41,426
                  
                  
                  23,723Passenger
                      fees and commissions
                  
                  
                  2,939
                  
                  
                  6,254
                  
                  
                  7,925
                  
                  
                  11,065
                  
                  
                  12,883Landing
                      fees
                  
                  
                  24,201
                  
                  
                  19,098
                  
                  
                  13,053
                  
                  
                  7,091
                  
                  
                  3,753Aircraft
                      and engine rent
                  
                  
                  74,514
                  
                  
                  67,350
                  
                  
                  64,991
                  
                  
                  46,160
                  
                  
                  22,903Maintenance
                      and repair
                  
                  
                  70,290
                  
                  
                  53,475
                  
                  
                  43,441
                  
                  
                  34,069
                  
                  
                  19,667Insurance
                      and taxes
                  
                  
                  13,186
                  
                  
                  12,859
                  
                  
                  17,103
                  
                  
                  5,710
                  
                  
                  2,822Depreciation
                      and amortization
                  
                  
                  34,412
                  
                  
                  23,873
                  
                  
                  12,032
                  
                  
                  7,783
                  
                  
                  4,110Impairment
                      loss and accrued aircraft return costs(1)(2)
                  
                  
                  1,441
                  
                  
                  2,756
                  
                  
                  7,196
                  
                  
                  8,100
                  
                  
                  —Other
                  
                  
                  47,483
                  
                  
                  30,115
                  
                  
                  32,444
                  
                  
                  19,070
                  
                  
                  21,143Total
                      operating
                      expenses
                  
                  
                  554,979
                  
                  
                  409,568
                  
                  
                  326,626
                  
                  
                  225,581
                  
                  
                  141,786Operating
                      income
                  
                  
                  91,345
                  
                  
                  82,712
                  
                  
                  29,571
                  
                  
                  15,447
                  
                  
                  7,222Other
                      income (expense):Interest
                      expense
                  
                  
                  (28,464
                  )
                  
                  (22,789
                  )
                  
                  (12,868
                  )
                  
                  (6,227
                  )
                  
                  (3,550
                  )Other
                      income
                  
                  
                  518
                  
                  
                  195
                  
                  
                  526
                  
                  
                  1,607
                  
                  
                  1,792Total
                      other income
                      (expense)
                  
                  
                  (27,946
                  )
                  
                  (22,594
                  )
                  
                  (12,342
                  )
                  
                  (4,620
                  )
                  
                  (1,758
                  )Income
                      before income taxes
                  
                  
                  63,399
                  
                  
                  60,117
                  
                  
                  17,229
                  
                  
                  10,827
                  
                  
                  5,464Income
                      tax expense
                  
                  
                  24,547
                  
                  
                  23,979
                  
                  
                  9,540
                  
                  
                  4,760
                  
                  
                  2,942Net
                      income
                  
                  
                  38,852
                  
                  
                  36,138
                  
                  
                  7,689
                  
                  
                  6,067
                  
                  
                  2,522Preferred
                      stock dividends(3)
                  
                  
                  
                  
                  
                  (170
                  )
                  
                  (413
                  )
                  
                  (418
                  )
                  
                  (255
                  )Net
                      income available for common stockholders
                  
                  $
                  38,852
                  
                  $
                  35,968
                  
                  $
                  7,276
                  
                  $
                  5,649
                  
                  $
                  2,267Net
                      income available for common stockholders per share(4):Basic
                  
                  $
                  1.66
                  
                  $
                  1.80
                  
                  $
                  0.36
                  
                  $
                  0.28
                  
                  $
                  0.11Diluted
                  
                  $
                  1.62
                  
                  $
                  1.73
                  
                  $
                  0.35
                  
                  $
                  0.27
                  
                  $
                  0.11Weighted
                      average common shares outstanding(4):Basic
                  
                  
                  23,349,613
                  
                  
                  20,000,000
                  
                  
                  20,000,000
                  
                  
                  20,000,000
                  
                  
                  20,000,000Diluted
                  
                  
                  23,906,762
                  
                  
                  20,841,415
                  
                  
                  20,832,750
                  
                  
                  20,689,886
                  
                  
                  20,000,000**Other
                      Financial Data:**Net
                      cash from:Operating
                      activities
                  
                  $
                  116,827
                  
                  $
                  91,627
                  
                  $
                  42,710
                  
                  $
                  22,956
                  
                  $
                  6,710Investing
                      activities
                  
                  $
                  (102,424
                  )
                  $
                  (30,683
                  )
                  $
                  (34,552
                  )
                  $
                  (12,690
                  )
                  $
                  (10,812
                  )Financing
                      activities
                  
                  $
                  9,282
                  
                  $
                  (45,093
                  )
                  $
                  (4,747
                  )
                  $
                  (7,383
                  )
                  $
                  3,975**Airline
                      Operating Data:**Passengers
                      carried
                  
                  
                  6,842,407
                  
                  
                  5,120,987
                  
                  
                  3,758,748
                  
                  
                  2,240,822
                  
                  
                  1,280,884Revenue
                      passenger miles(5)
                  
                  
                  3,062,940,174
                  
                  
                  2,319,261,441
                  
                  
                  1,523,201,642
                  
                  
                  880,569,802
                  
                  
                  463,050,021Available
                      seat miles(6)
                  
                  
                  4,618,042,586
                  
                  
                  3,665,876,102
                  
                  
                  2,535,087,476
                  
                  
                  1,649,171,823
                  
                  
                  869,629,172Passenger
                      load factor(7)
                  
                  
                  66.3
                  %
                  
                  63.3
                  %
                  
                  60.1
                  %
                  
                  53.4
                  %
                  
                  53.2
                  %Revenue
                      per available seat mile(8)(12)
                  
                  $
                  0.140
                  
                  $
                  0.134
                  
                  $
                  0.141
                  
                  $
                  0.146
                  
                  $
                  0.171Cost
                      per available seat mile(9)(12)
                  
                  $
                  0.126
                  
                  $
                  0.118
                  
                  $
                  0.134
                  
                  $
                  0.141
                  
                  $
                  0.167EBITDA(10)
                  
                  $
                  126,275
                  
                  $
                  106,779
                  
                  $
                  42,129
                  
                  $
                  24,837
                  
                  $
                  13,124Average
                      passenger trip length (miles)
                  
                  
                  448
                  
                  
                  453
                  
                  
                  405
                  
                  
                  393
                  
                  
                  362Number
                      of aircraft in service (end of period):Embraer
                      Regional Jets:Owned
                  
                  
                  62
                  
                  
                  38
                  
                  
                  18
                  
                  
                  7
                  
                  
                  —Leased
                  
                  
                  49
                  
                  
                  45
                  
                  
                  41
                  
                  
                  38
                  
                  
                  18Saab
                      Turboprops(11):Owned
                  
                  
                  4
                  
                  
                  0
                  
                  
                  0
                  
                  
                  2
                  
                  
                  2Leased
                  
                  
                  13
                  
                  
                  21
                  
                  
                  21
                  
                  
                  23
                  
                  
                  24Jetstream
                      31 (Leased)
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  15Total
                      aircraft
                  
                  
                  128
                  
                  
                  104
                  
                  
                  80
                  
                  
                  70
                  
                  
                  59
  -30-
 
 **As
                      of December 31,****2004**
                  
                  **2003**
                  
                  **2002**
                  
                  **2001**
                  
                  **2000****(in
                      thousands)****Consolidated
                      Balance Sheet Data:**Cash
                      and cash equivalents
                  
                  $
                  46,220
                  
                  $
                  22,535
                  
                  $
                  6,684
                  
                  $
                  3,272
                  
                  $
                  389Aircraft
                      and other equipment, net
                  
                  
                  984,512
                  
                  
                  549,009
                  
                  
                  301,905
                  
                  
                  133,810
                  
                  
                  25,529Total
                      assets
                  
                  
                  1,171,820
                  
                  
                  669,783
                  
                  
                  401,260
                  
                  
                  204,802
                  
                  
                  72,601Long-term
                      debt, including current maturities
                  
                  
                  850,869
                  
                  
                  486,146
                  
                  
                  284,067
                  
                  
                  131,350
                  
                  
                  32,885Redeemable
                      preferred stock
                    of
                      subsidiary
                    at
                      redemption value
                  
                  
                  —
                  
                  
                  —
                  
                  
                  5,160
                  
                  
                  4,747
                  
                  
                  4,329Total
                      stockholders' equity
                  
                  
                  174,651
                  
                  
                  72,405
                  
                  
                  31,270
                  
                  
                  9,792
                  
                  
                  4,053
  (1) We
              recorded impairment losses and accrued aircraft return cost of $8.1,
              $7.2, $2.8,
              and $1.4 million in 2001, 2002, 2003 and 2004 respectively.
              As of December
              31, 2004, we maintained a reserve of $4.6 million with respect
              to such
              losses which we believe is adequate to cover our expected costs. These
              calculations are further described in Management's Discussion and Analysis
              of
              Financial Condition and Results of Operations.
  (2) 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
              is
              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.
  (3) On
              June 4, 2002, our board of directors declared a 200,000:1 stock
              split. All
              per share amounts, number of shares and options outstanding in the
              consolidated
              financial statements have been adjusted for the stock split.
  (4) Revenue
              passengers multiplied by 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 generally accepted
              accounting principles 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 generally accepted
              accounting
              principles and should not be considered as an alternative to net income
              (loss)
              or operating income (loss) 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 regional airline industry and, consequently,
              we
              have provided this information.
  -31-
 The
              following represents a reconciliation of EBITDA to net cash from operating
              activities for the periods indicated (dollars in thousands):
 **Years
                      Ended December 31,****2004**
                  
                  **2003**
                  
                  **2002**
                  
                  **2001**
                  
                  **2000****EBITDA**
                  
                  $
                  126,275
                  
                  $
                  106,779
                  
                  $
                  42,129
                  
                  $
                  24,837
                  
                  $
                  13,124Interest
                      expense
                  
                  
                  (28,464
                  )
                  
                  (22,789
                  )
                  
                  (12,868
                  )
                  
                  (6,227
                  )
                  
                  (3,550
                  )Debt
                      issue and other amortization
                  
                  
                  1,928
                  
                  
                  1,968
                  
                  
                  339Warrant
                      amortization
                  
                  
                  800
                  
                  
                  359
                  
                  
                  9(Gain)
                      loss on aircraft and other equipment disposals
                  
                  
                  1,151
                  
                  
                  1,079
                  
                  
                  193
                  
                  
                  (460
                  )
                  
                  (31
                  )Impairment
                      loss and accrued aircraft return costs
                  
                  
                  1,441
                  
                  
                  2,756
                  
                  
                  7,196
                  
                  
                  8,100Amortization
                      of deferred credits
                  
                  
                  (1,285
                  )
                  
                  (1,249
                  )
                  
                  (1,132
                  )
                  
                  (889
                  )
                  
                  (278
                  )Unrealized
                      (gain) loss on fuel swaps
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  202
                  
                  
                  (841
                  )Stock
                      compensation expense
                  
                  
                  214
                  
                  
                  214
                  
                  
                  214
                  
                  
                  90Current
                      income tax expense (benefit)
                  
                  
                  (520
                  )
                  
                  (237
                  )
                  
                  4,485
                  
                  
                  (6,659
                  )
                  
                  (776
                  )Changes
                      in certain assets and liabilities:Receivables
                  
                  
                  10,480
                  
                  
                  (7,124
                  )
                  
                  (481)
                  
                  
                  896
                  
                  
                  (884
                  )Inventories
                  
                  
                  (2,683
                  )
                  
                  (2
                  )
                  
                  715
                  
                  
                  579
                  
                  
                  (1,597
                  )Prepaid
                      expenses and other current assets
                  
                  
                  (1,022
                  )
                  
                  1,057
                  
                  
                  (1,116
                  )
                  
                  (368
                  )
                  
                  (373
                  )Accounts
                      payable
                  
                  
                  1,963
                  
                  
                  (4,405
                  )
                  
                  4,209
                  
                  
                  1,490
                  
                  
                  2,512Accrued
                      liabilities
                  
                  
                  11,370
                  
                  
                  14,937
                  
                  
                  1,805
                  
                  
                  10,826
                  
                  
                  7,164Other
                      assets
                  
                  
                  (4,821
                  )
                  
                  (1,716
                  )
                  
                  (2,987
                  )
                  
                  (9,461
                  )
                  
                  (7,760
                  )Net
                      cash from operating activities
                  
                  $
                  116,827
                  
                  $
                  91,627
                  
                  $
                  42,710
                  
                  $
                  22,956
                  
                  $
                  6,710
  (10) 
              Excludes two Saab 340 aircraft held for sale at December 31,
            2002 and 2003 and one as of December 31, 2004, one leased Saab 340 aircraft
            at
            December 31, 2002.
  (11)
            Amounts
            for 2001 and 2000 have not been restated to include Shuttle America because
            the
            activities were not commonly controlled by Wexford Capital LLC until
            December 7,
            2001 and the operating activity of Shuttle America from December 7, 2001
            through
            December 31, 2001 was not significant.
 (12)
                Restated as
                described in Note 18 to the consolidated financial statements at
                item 8 of this
                form 10-K/A.
  -32-
 **ITEM
            7.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
            OF OPERATIONS**
 The
              accompanying management's discussion and analysis of financial condition
              and
              results of operations gives effect to the restatement of the consolidated
              financial statements for the three years in the period ended December
              31, 2004
              as described in Note 18 to the consolidated financial statements.
  **Overview**
  We
              are a
              holding company that operates Chautauqua Airlines, Inc., Republic
              Airline Inc. and Shuttle America Corporation, a regional airlines
              offering
              scheduled passenger service on approximately 770 flights daily
              to
              78 cities in 32 states, and the Bahamas pursuant to code-share
              agreements with American, US Airways, Delta and United. Currently,
              all of our
              flights are operated as US Airways Express, AmericanConnection, Delta
              Connection
              or United Express, providing US Airways, American, Delta and United
              with
              portions of their regional service, including service out of their
              hubs and
              focus cities in Boston, Chicago, Fort Lauderdale, Indianapolis, New
              York,
              Orlando, Philadelphia, Pittsburgh, Washington, D.C. and St. Louis.
              We have
              established Chautauqua to operate regional jets having 50 or fewer
              seats;
              Shuttle America to operate regional jets having 70 seats; and Republic
              Airline
              to operate regional jets having 70 or more seats. In February 2004,
              we
              entered into a code-share agreement with United Air Lines, Inc.
              pursuant to
              which we are required to place into service for United by June 2005,
              subject to delivery of aircraft from the manufacturer, 23 70-seat regional
              jets.
              These jets will fly, as United Express flights, the routes that United
              designates. On May 6, 2005, we acquired Shuttle America Corporation
              from an
              affiliate of our majority stockholder.  The acquisition of Shuttle
              America
              provides us with increased flexibility to operate 70-seat and larger
              aircraft.
              We began to transition the United Express ERJ-170 flights currently
              being
              operated by Chautauqua to Shuttle America beginning in June 2005. We
              expect
              Republic Airline to receive its certification on or before the end
              of September
              2005, after which we expect Republic Airline and Shuttle America to
              fly ERJ-170s
              for United. In January 2005, we entered into a code-share agreement
              with Delta
              whereby we will operate 16 ERJ-170s. From 2000 to 2004, our ASMs have
              grown
              at a compounded annual growth rate of 51.8%. As of December 31,
              2004, our
              128 aircraft fleet consisted of 111 Embraer regional jets, 100 of which
              range in
              capacity from 37 to 50 seats , 11 70-seat regional jets and
              17 30-seat
              turboprops operated by Shuttle America.
  We
              have
              long-term, fixed-fee 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-letter 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
              Airlines and Northwest Airlines, certain of the routes that we fly
              using Delta's
              flight designator code are also flown under Continental's or Northwest's
              designator codes. We believe that fixed-fee agreements reduce 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 and allocate our overhead
              more
              efficiently, allowing us to reduce the cost of our services to our
              major airline
              partners.
  For
              the years
              ended December 31, 2004 and 2003, respectively, US Airways accounted
              for
              38% and 43% of our passenger revenues, Delta accounted for 36% and
              29% of our
              passenger revenues, American accounted for 16% and 21% of our passenger
              revenues, United accounted for 10% and 0% of our passenger revenues
              and America
              West accounted for 0% and 7% of our passenger revenues. In February
              2003, we and
              America West mutually agreed to terminate our code-share agreement
              and we
              concurrently agreed with Delta to allocate the aircraft previously
              designated
              for America West to Delta. In December 2005, Shuttle America’s turboprop
              code-share with United agreement will expire.
  We
              have a
              long operating history as a regional airline, having operated as a
              code-share
              partner of US Airways or its predecessors for more than 30 years.
              We became
              a TWA code-share partner in April 2000, which became a code-share
              relationship with American following its acquisition of TWA, an America
              West
              code-share partner in August 2001 until June 2003, a Delta code-share
              partner in June 2002 and a United code-share partner in February 2004.
              We have
              worked proactively with our code-share partners to adapt to the new
              airline
              environment by renegotiating our code-share agreements. For example,
              in
              October 2003, in exchange for agreeing to extend the date of
              their early
              termination right, we granted American certain economic concessions
              in the form
              of a monthly rebate. In December 2004, in exchange for, among other
              things,
              Delta extending the term of its code-share agreement and canceling
              previously
              issued warrants to purchase 2,025,000 shares of our common stock, we
              agreed to
              reduce our compensation level on the ERJ-145 fleet by 3% for the remainder
              of
              the term of the agreement.
  **Code-Share
              Agreements**
  On
              September 12, 2004, US Airways, which represented 38% of our
              revenue for
              the year ended December 31, 2004, filed a petition for Chapter 11 bankruptcy
              protection. Unpaid amounts related to pre-petition claims were approximately
              $3.2 million, which are fully reserved at December 31, 2004.
              We have been
              paid for all amounts due post-petition in accordance with our code-share
              agreement. In March 2005, the assumption of the US Airways code-share
              agreement was approved by the bankruptcy court. United, which represented
              10% of
              our revenue for the year ended December 31, 2004, is attempting to
              reorganize
              its business under Chapter 11 of the bankruptcy code. Our code-share
              agreements
              with United are also approved by the bankruptcy court.
  We
              continue
              to operate normal flight schedules for US Airways and United; however,
              contingency plans have been developed to address potential outcomes
              of the US
              Airways and United bankruptcy proceedings.
  Delta,
              which
              represented 36% of our revenue for the year ended December 31, 2004,
              has
              recently reported operating losses and has announced that if it fails
              to achieve
              a competitive cost structure it will need to restructure through bankruptcy.
              In
              December 2004, in exchange for, among other things, Delta extending
              the
              term of its code-share agreement and canceling previously issued warrants
              to
              purchase 2,025,000 shares of our common stock, we agreed to reduce
              our
              compensation level on the ERJ-145 fleet by 3% through May 2016.
  Termination
              of any of our regional jet code-share agreements could have a material
              adverse
              effect on our financial position, results of operations and cash flows.
  -33-
 **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,**
                    ********
                    ****
                    **2002**
                    ****
                    **2003**
                    ****
                    **2004**
                    ********
                    ****
                    **Total**
                    ****
                    **Owned**
                    ****
                    **Leased**
                    ****
                    **Total**
                    ****
                    **Owned**
                    ****
                    **Leased**
                    ****
                    **Total**
                    ****
                    **Owned**
                    ****
                    **Leased**Regional
                        Jets:Embraer
                        ERJ-145 LR
                    
                    
                    42
                    
                    
                    5
                    
                    
                    37
                    
                    
                    53
                    
                    
                    12
                    
                    
                    41
                    
                    
                    68
                    
                    
                    25
                    
                    
                    43Embraer
                        ERJ-140 LR
                    
                    
                    15
                    
                    
                    11
                    
                    
                    4
                    
                    
                    15
                    
                    
                    11
                    
                    
                    4
                    
                    
                    15
                    
                    
                    11
                    
                    
                    4Embraer
                        ERJ-135 LR
                    
                    
                    2
                    
                    
                    2
                    
                    
                    —
                    
                    
                    15
                    
                    
                    15
                    
                    
                    —
                    
                    
                    17
                    
                    
                    15
                    
                    
                    2(1
                    )Embraer
                        ERJ-170 LR
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    11
                    
                    
                    11
                    
                    
                    —**Turboprops:**Saab
                        340 (2)
                    
                    
                    21
                    
                    
                    —
                    
                    
                    21
                    
                    
                    21
                    
                    
                    —
                    
                    
                    21
                    
                    
                    17
                    
                    
                    4
                    
                    
                    13Total
                    
                    
                    80
                    
                    
                    18
                    
                    
                    62
                    
                    
                    104
                    
                    
                    38
                    
                    
                    66
                    
                    
                    128
                    
                    
                    66
                    
                    
                    62
  (1) We
            use these aircraft as spares and for charters. They are not assigned
            to any of
            our code-share partners.
 (2) Excludes
              two Saab 340 aircraft held for sale at December 31, 2002
              and 2003 and
              one at December 31, 2004.
  We
              recorded
              impairment losses and accrued aircraft return cost of $7.2, $2.8 million
              and $1.4 million in 2002 and 2003 and 2004, respectively. As of December
              31,
              2004, we maintained a reserve of $4.6 million with respect to
              such losses,
              which we believe is adequate to cover our exposure for expected costs.
              The
              impairment losses reduced the carrying value of the owned Saab 340
              aircraft to
              be disposed of to the estimated fair value less costs to sell. The
              impairment
              losses were based on the estimated fair values obtained from aircraft
              dealers,
              less selling costs. The accrued aircraft return costs represent the
              Company's
              overhaul and return costs in order to meet required return
              conditions.
  During
              1999,
              we began operating Embraer regional jets on behalf of US Airways under
              a
              fixed-fee arrangement. There were 26, 34 and 35 Embraer aircraft operating
              on
              behalf of US Airways under this agreement at December 31, 2002,
              2003 and
              2004, respectively. During 2000, we began operating Saab 340 turboprops
              and
              Embraer regional jets on behalf of TWA under a fixed-fee arrangement;
              TWA was
              subsequently acquired by American. There were 15 Embraer regional jets
              operating
              under the agreement with American at December 31, 2002, 2003
              and 2004. At
              December 31, 2002, 2003 and 2004, respectively, we had
              six, 34
              and 39 aircraft in operation under the agreement with Delta.
              We began
              flying Embraer regional jets and Saab turboprops for United in June
              2004 and at
              December 31, 2004, we had 30 aircraft in operation under the agreement
              with
              United. During 2002, 90.8% of our ASMs and 89.7% of our passenger revenues
              were
              generated under fixed-fee agreements. During 2003, 94.5% of our ASMs
              and 91.0%
              of our passenger revenues were generated under fixed-fee agreements.
              During
              2004, 97.6% of our ASMs and 96.0% of our passenger revenues were generated
              under
              fixed-fee agreements. The shift to fixed-fee flying has reduced our
              exposure to
              fluctuations in fuel prices, fare competition and passenger volumes.
              As of
              December 31, 2004, we operated 111 Embraer regional jets and
              17 Saab
              turboprops for four code-share partners.
  **Revenue**
  Under
              our
              fixed-fee arrangements with American, Delta, US Airways and United
              for regional
              jets, we receive a fixed-fee, as well as reimbursement of specified
              costs with
              additional possible incentives from our partners for superior performance.
              Under
              our previous pro-rate revenue sharing agreement with US Airways for
              turboprop
              aircraft, we received a negotiated portion of ticket revenue. As of
              December 31, 2002, 2003 and 2004 approximately 89.7%, 91.0%
              and 96.0%,
              respectively, of our passenger revenue was earned under our fixed-fee
              arrangements. Because all of our passenger revenue is now derived from
              these
              fixed-fee arrangements, the number of aircraft we operate, as opposed
              to the
              number of passengers that we carry, will have the largest impact on
              our
              revenues.
  -34-
 **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 operations and changes
              in wage
              rates for contract and non-contract employees.
  **Aircraft
              Fuel**
  Fuel
              expense
              includes the cost of aircraft fuel, including fuel taxes and into-plane
              fees.
  **Passenger
              Fees and Commissions**
  This
              expense
              includes the costs of travel agent commissions, computer reservation
              system fees
              and certain fees paid to US Airways for aircraft ground and passenger
              handling
              and use of the US Airways aircraft facilities and services with respect
              to
              turboprop pro-rate revenue sharing flights on behalf of US Airways. 
              These
              expenses are not borne by us under any of the fixed-fee agreements.
  **Landing
              Fees**
  This
              expense
              consists of fees charged by airports for each aircraft landing.
  **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. Under our fixed-fee agreements we
              are
              reimbursed for our actual costs.
  **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
              by 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 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 United fixed-fee agreements, we are reimbursed
              for the
              actual costs of such items other than aircraft hull insurance, which
              will be
              reimbursed at agreed upon rates.
  -35-
 **Depreciation
              and Amortization**
  This
              expense
              includes the depreciation of all fixed assets, including aircraft that
              we own.
              Additionally, goodwill, which was incurred in connection with Republic
              Airways'
              acquisition of Chautauqua in 1998, was amortized over a 20-year period.
              Beginning January 1, 2002, we no longer amortize this goodwill,
              which
              aggregated $807,000 annually, but are required to evaluate it on an
              annual basis
              to determine whether there is an impairment of the goodwill. If we
              determine the
              goodwill is impaired, we are required to write-off the amount of goodwill
              that
              is impaired. As of December 31, 2004, goodwill was $13,335,000.
  **Other**
  This
              expense
              includes the costs of crew training, crew travel, airport, passenger
              and ground
              handling related expenses, all other lease expense, professional fees
              and all
              other administrative, facilities and operational overhead expenses
              not included
              in other line items above.
  **Income
              Tax**
  Income
              tax
              expense is computed by applying estimated effective income tax rates
              to income
              before income taxes. Income tax expense varies from the statutory federal
              income
              tax rate due primarily to state taxes and non-deductible meals and
              entertainment
              expense, and, in 2002, discharge of indebtness income.
  **Deferred
              Warrant Charge**
  Pursuant
              to
              our code-share agreements with Delta, we have issued Delta the following
              warrants:
 **Issued**
                  ****
                  **Number**
                    **of
                      Shares**
                  ****
                  **Exercise**
                    **Price**
                  ****
                  **Vesting**
                  ****
                  **Exercise
                      Period**June
                      2002
                  
                  
                  825,000(1
                  )
                  $
                  12.50(2
                  )
                  
                  Fully
                      Vested
                  
                  
                  Through
                      June 2012June
                      2004
                  
                  
                  825,000(1
                  )
                  
                  12.35(2
                  )
                  
                  Fully
                      Vested
                  
                  
                  Through
                      May 2014February
                      2003
                  
                  
                  396,000(1
                  )
                  
                  13.00
                  
                  
                  Fully
                      Vested
                  
                  
                  Through
                      February 2013October
                      2003
                  
                  
                  165,000(1
                  )
                  
                  12.35
                  
                  
                  Fully
                      Vested
                  
                  
                  Through
                      October 2013March
                      2004
                  
                  
                  264,000(1
                  )
                  
                  12.35
                  
                  
                  Fully
                      Vested
                  
                  
                  Through
                      March 2014December
                      2004
                  
                  
                  960,000(3
                  )
                  
                  11.60
                  
                  
                  Fully
                      Vested
                  
                  
                  Through
                      December 2014
         -36-
 Certain
            Statistical Information
  **Years
                      Ended December 31,**
                  ********
                  ****
                  **Operating
                      Expenses per ASM in cents**
                  ********
                  ****
                  **2004**
                  ****
                  **2003**
                  ****
                  **2002**Wages
                      and benefits
                  
                  
                  2.43
                  
                  
                  2.37
                  
                  
                  2.51Aircraft
                      fuel
                  
                  
                  3.77
                  
                  
                  2.91
                  
                  
                  2.56Passenger
                      fees and commissions
                  
                  
                  0.06
                  
                  
                  0.17
                  
                  
                  0.31Landing
                      fees
                  
                  
                  0.52
                  
                  
                  0.52
                  
                  
                  0.51Aircraft
                      and engine rent
                  
                  
                  1.61
                  
                  
                  1.84
                  
                  
                  2.56Maintenance
                      and repair
                  
                  
                  1.52
                  
                  
                  1.46
                  
                  
                  1.71Insurance
                      and taxes
                  
                  
                  0.29
                  
                  
                  0.35
                  
                  
                  0.67Depreciation
                      and amortization
                  
                  
                  0.75
                  
                  
                  0.65
                  
                  
                  0.47Impairment
                      loss and accrued aircraft return
                    costs
                      (1)
                  
                  
                  0.03
                  
                  
                  0.08
                  
                  
                  0.28Other
                  
                  
                  1.03
                  
                  
                  0.82
                  
                  
                  1.28Total
                      operating expenses
                  
                  
                  12.01
                  
                  
                  11.17
                  
                  
                  12.86Plus
                      interest
                      expense
                  
                  
                  0.62
                  
                  
                  0.62
                  
                  
                  0.51Total
                      operating and interest expenses
                  
                  
                  12.63
                  
                  
                  11.79
                  
                  
                  13.37
 
 (1) 
            We recorded impairment losses and accrued aircraft return cost of $7.2,
            $2.8,
            and $1.4 million in 2002, 2003 and 2004 respectively. As of
            December 31, 2004, we maintained a reserve of $4.6 million
            with
            respect to such losses which we believe is adequate to cover our expected
            costs.
 **Years
                        Ended December
                        31,**********
                    ****
                    **2004**
                    ****
                    **Increase/**
                      **(Decrease)**
                      **2004-2003**
                    ****
                    **2003**
                    ****
                    **Increase/**
                      **(Decrease)**
                      **2003-2002**
                    ****
                    **2002**Revenue
                        passengers
                    
                    
                    6,842,407
                    
                    
                    33.6
                    %
                    
                    5,120,987
                    
                    
                    36.2
                    %
                    
                    3,758,748Revenue
                        passenger miles (1)
                    
                    
                    3,062,940,174
                    
                    
                    32.1
                    %
                    
                    2,319,261,441
                    
                    
                    52.3
                    %
                    
                    1,523,201,642Available
                        seat miles (2)
                    
                    
                    4,618,042,586
                    
                    
                    26.0
                    %
                    
                    3,665,876,102
                    
                    
                    44.6
                    %
                    
                    2,535,087,476Passenger
                        load factor (3)
                    
                    
                    66.3
                    %
                    
                    3.0pp
                    
                    
                    63.3
                    %
                    
                    3.2pp
                    
                    
                    60.1
                    %Cost
                        per available seat mile (4)
                    
                    
                    12.63¢
                    
                    
                    7.12
                    %
                    
                    11.79¢
                    
                    
                    (11.82
                    %)
                    
                    13.37¢Average
                        price per gallon of fuel (5)
                    
                    
                    $1.38
                    
                    
                    25.5
                    %
                    
                    $1.10
                    
                    
                    15.8
                    %
                    
                    $.95Fuel
                        gallons consumed
                    
                    
                    126,344,270
                    
                    
                    30.4
                    %
                    
                    96,863,325
                    
                    
                    42.5
                    %
                    
                    67,991,980Block
                        hours (6)
                    
                    
                    374,749
                    
                    
                    27.02
                    %
                    
                    295,021
                    
                    
                    35.6
                    %
                    
                    217,538Average
                        length of aircraft flight (miles)
                    
                    
                    440
                    
                    
                    (0.5
                    %)
                    
                    442
                    
                    
                    10.2
                    %
                    
                    401Average
                        daily utilization of each aircraft (hours) (7)
                    
                    
                    10:16
                    
                    
                    5.1
                    %
                    
                    9:46
                    
                    
                    2.6
                    %
                    
                    9:31Aircraft
                        in service at end of period
                    
                    
                    128
                    
                    
                    20.8
                    %
                    
                    106
                    
                    
                    27.7
                    %
                    
                    83
 (1) Revenue
              passenger miles are the number of scheduled miles flown by revenue
              passengers.
  (2) Available
              seat miles are the number of seats available for passengers multiplied
              by the
              number of scheduled miles those seats are flown.
  (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) Hours
              from takeoff to landing, including taxi time.
  (7) Average
              number of hours per day that an aircraft flown in revenue service is
              operated
              (from gate departure to gate arrival).
  -37-
 **Effects
              of September 11, 2001**
  Following
              the
              terrorist attacks of September 11, 2001, the FAA immediately
              suspended the
              entire air travel system in the United States. This suspension lasted
              until
              September 13, 2001, when limited flights were allowed.
  Ronald
              Reagan
              Washington National Airport in Washington, D.C., referred to as DCA,
              was closed
              until October 4, 2001. Because of US Airways' position as the
              dominant
              carrier at DCA, US Airways has suffered a more severe economic impact
              than other
              carriers without such a concentration of flights in and out of DCA.
  Subsequent
              to
              September 11, 2001, the airline industry experienced an immediate
              and
              significant decline in traffic, particularly business traffic (which
              has a
              higher yield than leisure traffic). All of our code-share partners
              experienced
              significant declines. Under our fixed-fee contracts, however, we continued
              to be
              reimbursed for our expenses. The impact on our short haul, turboprop
              operations
              was devastating. Due to heightened airport security, it became more
              convenient
              for passengers to drive to a hub rather than wait long periods for
              short
              flights. Revenues associated with our "at-risk" prorate business suffered
              declines greater than 50% of normal revenues. Given that the profitability
              of
              our turboprop operation was marginal prior to September 11,
              2001, we
              subsequently determined that the operations were unsustainable. Accordingly,
              we
              elected to ground over half of our turboprop fleet and upgrade our
              fleet from
              Saab 340 turboprops to Embraer regional jet operations.
  In
              addition
              to greatly curtailing our turboprop operation for US Airways, to stem
              our losses
              after these attacks, we took the following steps:
  •
              reduced staffing
              levels by 20%, consisting of 204 pilots, flight attendants and customer
              service
              agents, and 71 other personnel;
  •
              instituted a hiring
              freeze;
  •
              froze pay for
              salaried employees; and
  •
              deferred aircraft
              deliveries.
  On
              September 22, 2001, the President signed into law the Stabilization
              Act.
              Among other things, the Stabilization Act:
  •
              provided
              $5 billion in payments to compensate U.S. passenger and cargo
              airlines for
              losses incurred by the airline industry from September 11, 2001
              through
              December 31, 2001 as a result of the September 11 terrorist
              attacks;
  •
              subject to certain
              conditions and fees, authorized the issuance of up to $10 billion
              in
              federal loan guarantees to airlines for which credit is not reasonably
              available;
  •
              sought to ensure
              the continuity of air service to communities, including government
              subsidized
              essential air service to small communities;
  •
              reimbursed airlines
              for certain increased costs of aviation insurance;
  •
              extended the due
              date for payments on certain taxes by airlines;
  •
              limited the
              liability of airlines relating to the September 11 attacks;
              and
  •
              established a
              federal compensation fund for the victims of the September 11
              terrorist
              attacks.
  Under
              the
              Stabilization Act, each airline was entitled to receive the lesser
              of
              (a) its direct and incremental pre-tax losses for the period
              of
              September 11, 2001 to December 31, 2001 or (b) its
              available seat
              mile share of the $5 billion compensation ($4.5 billion
              for passenger
              airlines) available under the Stabilization Act. We have received
              $9.7 million in compensation under the Stabilization Act. Our
              losses as a
              direct result of the September 11, 2001, terrorist attacks exceeded
              the
              amount of compensation we received under the Stabilization Act.
  -38-
 **Results
              of Operations**
  *2004
              Compared to 2003*
  Operating
              revenue in 2004 increased by 31.3%, or $154.0 million, to
              $646.3 million compared to $492.3 million in 2003. The
              increase was
              due to the 28 additional regional jets added to revenue service in
              2004. Twenty
              regional jets were added for United, including 11 Embraer 170 regional
              jets,
              five were added for Delta, one was added for US Airways and two were
              added for
              spares and charters and are not currently assigned to any of our code-share
              partners. In February 2003, we and America West mutually agreed to
              terminate our
              code-share agreement and we concurrently allocated the aircraft previously
              designated for America West to Delta. The transition of these aircraft
              was
              completed during the second quarter of 2003. We recorded a breakage
              fee of $6.0
              million from America West in the second quarter of 2003 as a result
              of this
              transaction.
  Total
              operating expenses increased by 35.5%, or $145.4 million, to $555.0
              million in
              2004 compared to $409.6 million in 2003 due to the increase in flight
              operations. Total operating and interest expenses increased by 34.9%,
              or $151.1
              million, to $583.4 million for 2004 compared to $432.4 million
              during 2003.
              The unit cost on total operating and interest expenses, excluding fuel
              charges,
              remained unchanged at 8.9¢ per available seat mile in 2004 compared to 2003.
              Factors relating to the change in operating expenses are discussed
              below.
  Wages
              and
              benefits increased by 29.2%, or $25.4 million, to $112.3 million
              for
              2004 compared to $86.9 million for 2003 due to a 24.5% increase
              in full
              time equivalent employees to support the increased regional jet operations
              and
              an increase in the costs of providing employee benefits. The cost per
              available
              seat mile remained unchanged at 2.4¢.
  Aircraft
              fuel
              expense increased 63.1%, or $67.4 million, to $174.2 million
              for 2004
              compared to $106.8 million for 2003 due to a 30.4% increase
              in fuel
              consumption and a 25.5% increase in average fuel prices. The average
              price per
              gallon was $1.38 in 2004 and $1.10 in 2003.  The unit cost increased
              to
              3.8¢ in 2004 compared to 2.9¢ in 2003 due to the increase in average fuel
              prices.
  Passenger
              fees and commissions decreased by 53.0%, or $3.3 million, to $2.9 million
              for
              2004 compared to $6.3 million for 2003 due to the phase out and elimination
              of
              pro-rate operations by September 2004. There are no passenger fees
              and
              commissions on any of the fixed-fee operations, including the turboprops
              operated for United. The unit cost decreased to 0.1¢ in 2004 compared to 0.2¢ in
              2003.
  Landing
              fees
              increased by 26.7%, or $5.1 million, to $24.2 million
              in 2004 compared
              to $19.1 million in 2003. The increase is due to a 24.6% increase
              in
              departures. 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 10.6%, or $7.2 million, to $74.5 million
              in 2004
              compared to $67.4 million in 2003 due to the addition of four
              leased
              regional jets in 2004 and the full year effect of four regional jets
              leased in
              2003. This increase was partially offset by the termination of eight
              leased Saab
              340 turboprops. The unit cost decrease of 12.5% to 1.6¢ for 2004 compared to
              1.8¢ for 2003 is attributable to the increase in capacity from the regional
              jet
              operations and because we lease financed only four of the 28 aircraft
              added to
              the regional jet fleet in 2004.
  Maintenance
              and repair expenses increased by 31.4%, or $16.8 million, to $70.3
              million in
              2004 compared to $53.5 million for 2003 due the increase in flying
              of the
              regional jets, an increase in the number of heavy airframe inspections,
              increase
              in regional jet aircraft not covered under the manufacturer’s warranty. The unit
              cost remained unchanged at 1.5¢.
  Insurance
              and
              taxes increased 2.5%, or $0.3 million, to $13.2 million
              in 2004
              compared to $12.9 million in 2003. The increase in operations
              and an
              increase in aircraft property taxes were mostly offset by a decline
              in insurance
              rates during 2004. The unit cost decreased to 0.3¢ in 2004 compared to 0.4¢ in
              2003 due to the decline in insurance rates.
  Depreciation
              and amortization increased 44.1%, or $10.5 million, to $34.4 million
              in 2004 compared to $23.9 million in 2003 due to depreciation
              on 24
              regional jet aircraft purchased in 2004, including 11 Embraer 170 regional
              jets.
              The unit cost increased to 0.8¢ in 2004 compared to 0.7¢ in 2003.
  Impairment
              loss and accrued aircraft return costs decreased 47.7%, or $1.3 million
              to $1.4
              million in 2004 compared to $2.8 million in 2003. In 2004, this charge
              consisted
              of a reduction of $0.2 million to reflect the estimated liability for
              Saab 340
              aircraft lease return costs, $1.3 million to reflect the write off
              of purchased
              route costs on markets that were abandoned and $0.2 million due to
              the
              retirement of one owned Saab 340 aircraft. In 2003 this charge consisted
              of $2.1
              million to reflect deterioration of the market value for Saab turboprop
              aircraft
              and related spare parts and a reduction of $0.3 million to reflect
              the estimated
              liability for Saab 340 aircraft lease return costs.
  Other
              expenses increased 57.7%, or $17.4 million, to $47.5 million in 2004
              from $30.1
              million in 2003, due to an increase in bad debt reserves (primarily
              attributable
              to obligations owed to us by US Airways), increased pilot training
              costs, and
              higher crew-related and administrative expenses to support the growing
              regional
              jet operations. The unit cost increased to 1.0¢ in 2004 compared to 0.8¢ in
              2003.
  Interest
              expense increased 24.9% or $5.7 million, to $28.5 million
              in 2004 from
              $22.8 million in 2003 primarily due to interest on debt related to
              the purchase
              of additional aircraft since the beginning of 2003. The weighted average
              interest rate was unchanged at 5.2%. The unit cost remained unchanged
              at 0.6¢.
  We
              incurred
              income tax expense of $24.5 million during 2004, compared to $24.0
              million in
              2003. The effective tax rates for 2004 and 2003 were 38.7% and 39.9%,
              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.
  -39-
 *2003
              Compared to 2002*
  Operating
              revenue in 2003 increased by 38.2%, or $136.1 million, to $492.3million
              in
              2003 compared to $356.2 million in 2002. The increase was due
              to the
              additional regional jets added to the fixed-fee flying. Twenty-four
              additional
              Embraer regional jets were added to the fleet since December 31,
              2002.
              Sixteen regional jets were added for Delta and eight regional jets
              were added
              for US Airways. In February 2003, we and America West mutually
              agreed to
              terminate our code-share agreement and we concurrently allocated the
              aircraft
              previously designated for America West to Delta. The transition of
              these
              aircraft was completed during the second quarter of 2003. We recorded
              a breakage
              fee of $6.0 million from America West as a result of this transaction.
  Total
              operating expenses increased by 25.4%, or $82.9 million, to $409.6
              million for
              2003 compared to $326.6 million during 2002 due to the increase in
              flight
              operations. Total operating and interest expenses increased by $92.9
              million, or
              27.4%. The unit cost on total operating and interest expenses, excluding
              fuel
              charges, decreased to 8.9¢ for 2003 compared to 10.8¢ for 2002 due primarily to
              the increase in capacity (as measured by ASMs) associated with the
              additional
              Embraer regional jets. Factors relating to the change in operating
              expenses are
              discussed below.
  Wages
              and
              benefits increased by 36.8%, or $23.4 million, to $86.9 million
              for
              2003 compared to $63.6 million for 2002 due to a 22.1% increase
              in full
              time equivalent employees to support the increased regional jet operations
              and
              an increase in the costs of providing employee benefit plans. Wages
              and benefits
              cost per available seat mile decreased to 2.4¢ in 2003 compared to 2.5¢ in 2002.
  Aircraft
              fuel
              expense increased 64.7%, or $42.0 million, to $106.8 million
              for 2003
              compared to $64.9 million for 2002 due to a 42.5% increase in
              fuel
              consumption, compouned by a 15.8% increase in fuel pricing. The average
              price
              per gallon was $1.10 in 2003 and $0.95 in 2002. The unit
              cost
              increased to 2.9¢ in 2003 compared to 2.6¢ in 2002 due to the increase in
              the average fuel price.
  Passenger
              fees and commissions decreased by 21.1%, or $1.7 million, to $6.3 million
              for
              2003 compared to $7.9 million for 2002 due to the phase out and elimination
              of
              pro-rate operations by September 2004. There are no passenger fees
              and
              commissions on any of the fixed-fee operations. The unit cost decreased
              to 0.2¢
              in 2003 compared to 0.3¢ in 2002.
  Landing
              fees increased by 46.3%, or $6.0 million, to $19.1 million
              in 2003
              compared to $13.1 million in 2002. The increase is due to the
              increase in
              flying and an increase in the average landing fee rate charged by airports.
              The
              unit cost remained unchanged at 0.5¢. Our fixed-fee agreements provide for a
              direct reimbursement of landing fees.
  Aircraft
              and
              engine rent increased 3.6%, or $2.4 million, to $67.4 million
              in 2003
              compared to $65.0 million in 2002 due to the addition of three
              leased
              Embraer regional jets in October and November 2002, and four
              leased Embraer
              regional jets in October and November 2003. Unit cost decreased
              to 1.8¢ for
              2003 compared to 2.6¢ for 2002 due to the increase in capacity from the Embraer
              regional jet operations and because we lease financed only four of
              the 24
              additional regional jet aircraft added in 2003.
  Maintenance
              and repair expenses increased by 23.1%, or $10.0 million, to
              $53.5 million in 2003 compared to $43.4 million for 2002
              due to the
              increase in flying of the regional jets. The unit cost decreased to
              1.5¢ in 2003
              compared to 1.7¢ in 2002 due to the increase in capacity from the Embraer
              regional jet operations.
  Insurance
              and
              taxes decreased 24.8%, or $4.2 million, to $12.9 million in
              2003 compared
              to $17.1 million in 2002. While the average fleet value has
              increased due
              to the growth of our regional jet fleet, insurance rates for passenger
              liability, war risk and hull insurance decreased during 2003 due to
              obtaining
              war risk coverage from the U.S. government in February 2003
              which was less
              expensive compared to commercial rates and lower passenger liability
              and hull
              rates obtained from the commercial markets in 2003 as rates have stabilized
              since the terrorist attacks in September 2001. Additionally, aircraft
              property
              tax expense has decreased because we have changed Chautauqua's state
              of
              incorporation to Indiana effective February 2003, which eliminated
              Indiana
              aircraft property tax expense for 2003. Unit cost decreased to 0.4¢ in 2003
              compared to 0.7¢ in 2002.
  Depreciation
              and amortization increased 98.4%, or $11.8 million, to $23.9 million
              in 2003 compared to $12.0 million in 2002 due to the purchase
              of an
              additional twenty Embraer regional jets since December 31, 2002.
              The cost
              per available seat mile increased to 0.7¢ in 2003 from 0.5¢ in 2002.
  During
              2003,
              a charge for impairment loss and accrued aircraft return costs of $2.8
              million
              was recorded. This charge consists of an impairment loss of $2.8 million
              to
              reflect a further deterioration of the market value for Saab turboprop
              aircraft
              and related parts and a reduction of $0.3 million to reflect the estimated
              liability for Saab 340 aircraft lease return costs. During 2002, a
              charge for
              impairment loss and accrued aircraft return costs of $7.2 million was
              recorded.
              This charge consists of $4.9 million to reflect deterioration of the
              market
              value of Saab turboprop aircraft and related parts, a $0.8 million
              charge for
              aircraft return cost accruals and $1.5 million due to the retirement
              to two
              owned Saab 340 aircraft.
  Other
              expenses decreased 7.2%, or $2.3 million, to $30.1 million in 2003
              from $32.4
              million in 2002. The decrease is due to decreases in professional fees
              incurred
              for a previous public stock offering attempt that were
              recorded in
              2002 offset by increase in crew related expenses and administrative
              expenses.
              Increase in crew related expenses and administrative expenses are due
              to support
              of the growing regional jet operation. The unit cost decreased to 0.8¢ in 2003
              compared to 1.3¢ in 2002 due to the increased capacity resulting from the
              Embraer regional jet flying.
  Interest
              expense increased by 77.1% or $9.9 million, to $22.8 million
              in 2003
              from $12.9 million in 2002 primarily due to interest on debt
              related to the
              purchase of twenty Embraer aircraft since December 2002. This
              increase was
              partially offset by decrease in average borrowings on the revolving
              credit
              facility and a lower weighted average interest rate of 5.2% in 2003,
              versus 6.2%
              in 2002.
  Other
              non-operating income decreased 62.9% to $0.2 million in 2003
              compared to
              $0.5 million in 2002. Non-operating income consists primarily
              of net gains
              on speculative fuel derivatives that we benefited from during the first
              quarter
              of 2002 and interest income.
  We
              incurred
              income tax expense of $24.0 million during 2003, compared to $9.5 million
              in
              2002. The effective tax rates for 2003 and 2002 were 39.9% and 55.4%,
              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, and in 2002, discharge of indebtedness income.
  -40-
 **Liquidity
              and Capital Resources**
  Prior
              to June
              2004, we have used internally generated funds and third-party financing
              to meet
              our working capital and capital expenditure requirements. In June 2004,
              we
              completed our initial public common stock offering, which provided
              approximately
              $58.2 million, net of offering expenses and before the repayment
              of debt.
              In addition, we completed a follow-on offering in February 2005, which
              provided
              approximately $80.8 million of proceeds, net of offering expenses.
              In July 2005,
              we completed a follow-on offering which provided approximately $105.0
              million of
              proceeds, net of offering expenses. As a result of our code-share agreements
              with Delta and United, which require us to significantly increase our
              fleet of
              regional jets, we will significantly increase our cash requirements
              for debt
              service and lease payments.
  As
              of
              December 31, 2004, we had $46.2 million in cash and $16.7 million
              available under our revolving credit facility. At December 31, 2004,
              we had a
              working capital deficit of $33.4 million primarily due to
              $47.4 million due for principal payments under long term debt
              obligations
              incurred pursuant to the acquisition of our Embraer jets, all coming
              due within
              12 months. Additionally, we have $47.4 million in aircraft
              deposits
              that are classified as non-current assets. We have had a working capital
              deficiency since 1999; however, we have been able to meet all of our
              current
              obligations due to the net cash generated from operating activities
              and the
              deficiency has not impaired our ability to implement our growth plan.
  Chautauqua
              has a credit facility with Bank of America Business Capital, which
              currently
              provides it with a $25.0 million revolving credit facility,
              less the
              aggregate principal balance of the term loan and the equipment loans.
              The
              equipment loans cannot exceed $5 million. At December 31, 2004, Chautauqua
              had
              $3.2 million outstanding under a term loan. At December 31,
              2004,
              Chautauqua had $4.8 million of outstanding letters of credit.
              The proceeds
              of the term loan were obtained in December 2004 for a GE engine purchased
              in
              October 2004. The loan is payable in monthly principal installments
              of $53,543
              through March 2006 with the remaining balance due March 31, 2006. The
              $3.2 million is classified as a current liability on the balance
              sheet. The
              revolving credit facility expires March 31, 2006.
  The
              revolving
              credit facility allows Chautauqua to borrow up to 70% of the lower
              of net book
              value or appraised orderly liquidation value of spare rotable parts
              and up to
              40% 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 Chautauqua's assets, excluding
              the owned
              aircraft and engines. Borrowings under the credit facility bear interest
              at a
              rate equal to, at Chautauqua's option, LIBOR plus spreads ranging from
              2.0% to
              2.75% or the bank's base rate (which is generally equivalent to the
              prime rate)
              plus spreads ranging from 0.25% to 0.75%. Chautauqua 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 Chautauqua's
              ability to
              incur indebtedness or create or incur liens on our assets. In addition,
              the
              credit facility requires Chautauqua to maintain a specified fixed charge
              coverage ratio and a debt to earnings leverage ratio. Chautauqua received
              a
              waiver from the lender under the revolving credit facility for non-compliance
              with the debt to earnings leverage ratio for the fourth quarter of
              2004 and the
              first quarter of 2005. The credit facility can be terminated if WexAir LLC
              and its affiliates cease to own at least 51% of the voting control
              of Republic
              Airways.
  As
              of
              December 31, 2004, we currently lease nine spare regional jet engines
              from
              General Electric Capital Aviation Services and five spare regional
              jet engines
              from RRPF Engine Leasing (US) LLC.
  Net
              cash from
              operating activities was $42.7 million, $91.6 million
              and $116.8
              million for the years ended December 31, 2002, 2003 and 2004,
              respectively.
              The increase from operating activities is primarily due to the continued
              growth
              of our business. For 2004, net cash from operating activities is primarily
              net
              income of $38.9 million, depreciation and amortization of
              $34.4 million, the change in deferred income taxes of $24.0 million
              and the increase in accounts payable and other current liabilities
              of
              $13.3 million. For 2003, net cash from operating activities
              consisted
              primarily of net income of $36.1 million, depreciation and amortization
              of
              $23.9 million, the change in deferred income taxes of $23.7 million,
              a
              non-cash charge for impairment loss and accrued aircraft return costs
              of
              $2.8 million and an increase in current accrued liabilities
              of
              $14.9 million partially offset by increases in receivables and
              other assets
              of $(7.8) million. For 2002, net cash from operating activities
              represents
              net income of $7.7 million, a non-cash charge for impairment loss and
              accrued
              aircraft return costs of $7.2 million, depreciation and amortization
              of
              $12.0 million and change in deferred income taxes of $14.0 million.
  Net
              cash from
              investing activities was $(34.6) million, $(30.7) million and
              $(102.4)
              million for the years ended December 31, 2002, 2003 and 2004,
              respectively.
              In 2004, we purchased 24 Embraer regional jets and our aircraft deposits
              totaled
              $38.8 million. In 2003, we purchased 20 Embraer regional jets, $4.3 million
              of spare parts, $2.4 million in aircraft leasehold improvements
              and
              $1.1 million of maintenance equipment. In 2002, we purchased
              11 Embraer
              regional jets.
  Net
              cash from
              financing activities was $(4.8) million, $(45.1) million
              and $9.3
              million for the years ended December 31, 2002, 2003 and 2004,
              respectively.
              For 2004, we made scheduled debt payments and payments to the debt
              sinking fund
              of $26.9 million. Our net cash from financing activities included
              $58.2 million net cash received from stock offering proceeds
              in June 2004.
              We used $20.4 million to repay WexAir LLC for indebtedness we
              originally
              incurred in May 1998 to finance a portion of our purchase of
              Chautauqua. In
              2003, we made $39.1 million of scheduled debt payments primarily
              related to
              the Embraer regional jets, paid $5.4 million to redeem preferred
              stock to
              an affiliate of WexAir LLC and paid $2.0 million in fees to
              obtain
              financing for the Embraer regional jets. In 2002, we repaid $7.0 million
              of
              the revolving credit facility, paid $3.9 million in fees relating
              to
              obtaining permanent financing for the Embraer regional jets and made
              $5.4 million of scheduled debt payments related to the Embraer
              regional
              jets. These decreases were partially offset by $2.1 million
              of proceeds
              from the refinancing of the Embraer regional jets in January and June
              of 2002.
  -41-
 *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. These leases expire between 2005 and 2020. As of December 31,
              2004, our
              total mandatory payments under operating leases aggregated approximately
              $795.8 million and total minimum annual aircraft rental payments
              for the
              next 12 months under all noncancellable operating leases is
              approximately
              $72.3 million. Other non-cancelable operating leases
              consist of
              engines, terminal space, operating facilities, office space and office
              equipment. The leases expire through 2017. As of December 31, 2004,
              our total
              mandatory payments under other non-cancelable operating leases aggregated
              approximately $51.5 million. Total minimum annual other rental
              payments for
              the next 12 months are approximately $5.1 million.
  *Purchase
              Commitments*
  Subsequent
              to
              December 31, 2004, we acquired 8 aircraft through debt financing from
              a bank and
              the aircraft manufacturer. Total debt incurred was $147.7 million,
              with
              twelve to fifteen year terms and interest rates ranging from 6.13%
              to 6.76%. We
              also acquired 2 aircraft that were lease-financed and the total mandatory
              lease
              payments are $71.2. We have substantial commitments for capital expenditures,
              primarily for the acquisition of new aircraft. We intend to finance
              these
              aircraft through long-term loans or lease arrangements, although there
              can be no
              assurance we will be able to do so.
  As
              of
              December 31, 2004, our code-share agreements required that we
              acquire
              (subject to financing commitments) and place into service an additional
              28 regional jets over the next 18 months. Embraer's current
              list price
              of these 28 regional jets is approximately $752.2 million.
  We
              have
              commitments to obtain financing for 24 of the 28 firm order regional
              jets. These
              commitments are subject to customary closing conditions.
  We
              expect to
              fund future capital commitments through internally generated funds,
              third-party
              aircraft financings, and debt and other financings.
  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, 2004, include
              the
              following (in thousands):
 **Payments
                      Due By Period**
                  ********
                  ****
                  **Less
                      than**
                    **1
                      year**
                  ****
                  **1-3
                      years**
                  ****
                  **4-5
                      years**
                  ****
                  **Over**
                    **5
                      years**
                  ****
                  **Total**Long-term
                      debt (including interest)
                  
                  $
                  90,061
                  
                  $
                  268,330
                  
                  $
                  175,764
                  
                  $
                  682,189
                  
                  $
                  1,216,344Operating
                      leases
                  
                  
                  77,345
                  
                  
                  222,253
                  
                  
                  142,892
                  
                  
                  404,812
                  
                  
                  847,302Aircraft
                      under firm orders:Debt-financed
                      (28)
                  
                  
                  752,200
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  752,200Engines
                      under firm orders
                  
                  
                  10,671
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  10,671Total
                      contractual cash obligations
                  
                  $
                  930,277
                  
                  $
                  490,583
                  
                  $
                  318,656
                  
                  $
                  1,087,001
                  
                  $
                  2,826,517
  We
              have a
              long-term maintenance agreement with an avionics equipment manufacturer
              and
              maintenance provider that has a guaranteed minimum annual flight hour
              requirement. The minimum guaranteed amount based on our current operations
              is
              $3.9 million per year through January 2012. We did not
              record a
              liability for this guarantee because we did not believe that any aircraft
              will
              be utilized below the minimum flight hour requirement during the term
              of the
              agreement.
  We
              have a
              long-term maintenance agreement with an aviation equipment manufacturer
              through
              October 2013. The agreement has a penalty payment provision
              if more than
              twenty percent of Chautauqua's aircraft are removed from service based
              on the
              annual flight activity prior to the date of removal. We did not record
              a
              liability for this penalty provision because we do not believe that
              more than
              twenty percent of their aircraft will be removed from service during
              the term of
              the agreement.
  We
              have a
              long-term maintenance agreement based upon flight activity with engine
              manufacturers and maintenance providers through June 2014.
  We
              have a
              long-term maintenance agreement for wheels and brakes through June 2014.
              The agreement has an early termination penalty if Chautauqua removes
              the
              equipment from aircraft, sells or leases aircraft to a third party
              or terminates
              the services prior to expiration of agreement. The maximum penalty
              during the
              first two years is $0.7 million and is reduced every two years
              thereafter.
              We did not record a liability for this penalty provision because we
              did not
              believe the contract would be terminated prior to the expiration date.
  Total
              payments under these long-term maintenance agreements were $21.2 million,
              $29.4 million and $40.0 million for the years ended December 31,
              2002,
              2003 and 2004, respectively.
  -42-
 Our
              commercial commitments at December 31, 2004 include the following
              (in
              thousands):
 **Expiration****Less
                      than**
                    **1
                      year**
                  
                  **Total**Letters
                      of credit
                  
                  $
                  4,782
                  
                  $
                  4,782Total
                      commercial commitments
                  
                  $
                  4,782
                  
                  $
                  4,782
 Cash payments for interest were approximately $27.1 million
              in 2004. Tax
              payments in 2004 were not significant.
  In
              2004,
              Republic Airline applied for an operating certificate which it received
              in
              September 2005. This certificate is required before Republic Airline
              can
              commence flying. In October, 2004, in order to accommodate American
              with respect
              to its scope restrictions, the Company agreed to modify its code-share
              agreement
              with American to preclude the continued use of larger regional jets
              on its
              Chautauqua Airlines Air Carrier Operating Certificate. The Company
              also agreed
              to pay American an aggregate of approximately $500,000 through February 19,
              2005, in connection with its operation of ERJ-170 aircraft for
              United
              through Chautauqua instead of Republic Airline. Approximately $291,000
              of this
              amount was paid in 2004. Additionally, the Company paid approximately
              $39,000 per day to American for each day Chautauqua operated
              any ERJ-170
              after April 21, 2005 through September 2005. In September
              2005, the
              ERJ-170 aircraft commenced flying on Republic Airline's operating
              certificate. The Company paid penalties of $6,150 in 2005. Also,
              as ageed
              with American, Chautauqua can fly no more than 18 ERJ-170
              aircraft.
  **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 the United
              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.
  •
              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
              aircraft
              and spare parts.
  •
              Aircraft Maintenance and Repair. We believe our accounting policy is
              consistent
              with our competitors. We follow a method of expensing such amounts
              as incurred
              rather than accruing for expected costs or capitalizing and amortizing
              such
              costs. However, maintenance and repairs for engines and airframe components
              under power-by-the-hour contracts (such as avionics, APUs, wheels and
              brakes)
              are accrued for as the aircraft are operated; therefore, amounts are
              expensed
              based upon actual hours flown.
  •
              Warrants.
              Warrants issued to non-employees are accounted for under SFAS No. 123,
              Accounting for Stock-Based Compensation, 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 offering in February 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.
  -43-
 **Quarterly
                Information (unaudited)**
  The
                following table sets forth summary quarterly financial information
                for the years
                ended December 31, 2003 and 2004.
   **Quarters
                          Ended**
                      ********
                      ****
                      **March
                          31**
                      ****
                      **June
                          30**
                      ****
                      **September
                          30**
                      ****
                      **December
                          31**
                      ********
                      ****
                      **(dollars
                          in thousands)**2004Operating
                          revenues
                      
                      $
                      141,885
                      
                      $
                      150,466
                      
                      $
                      165,453
                      
                      $
                      188,520Operating
                          income
                      
                      
                      20,641
                      
                      
                      18,762
                      
                      
                      20,670
                      
                      
                      31,273Net
                          income
                      
                      
                      8,280
                      
                      
                      7,234
                      
                      
                      8,572
                      
                      
                      14,766Net
                          income available for common stockholders
                      
                      
                      8,280
                      
                      
                      7,234
                      
                      
                      8,572
                      
                      
                      14,766Net
                          income available for common stockholders per share:Basic
                      
                      $
                      0.41
                      
                      $
                      0.32
                      
                      $
                      0.34
                      
                      $
                      0.58Diluted
                      
                      $
                      0.40
                      
                      $
                      0.31
                      
                      $
                      0.33
                      
                      $
                      0.56Weighted
                          average number of shares outstanding:Basic
                      
                      
                      20,000,000
                      
                      
                      22,317,363
                      
                      
                      25,508,756
                      
                      
                      25,542,702Diluted
                      
                      
                      20,887,240
                      
                      
                      23,055,110
                      
                      
                      26,203,207
                      
                      
                      26,164,6282003Operating
                          revenues (1)
                      
                      $
                      108,516
                      
                      $
                      121,964
                      
                      $
                      127,642
                      
                      $
                      134,158Operating
                          income
                      
                      
                      16,581
                      
                      
                      24,841
                      
                      
                      20,297
                      
                      
                      20,992Net
                          income
                      
                      
                      7,107
                      
                      
                      12,019
                      
                      
                      8,595
                      
                      
                      8,417Net
                          income available for common
                        stockholders
                      
                      
                      7,017
                      
                      
                      11,940
                      
                      
                      8,594
                      
                      
                      8,417Net
                          income available for common stockholders per share:Basic
                      
                      $
                      0.35
                      
                      $
                      0.60
                      
                      $
                      0.43
                      
                      $
                      0.42Diluted
                      
                      $
                      0.34
                      
                      $
                      0.57
                      
                      $
                      0.41
                      
                      $
                      0.40Weighted
                          average number of shares outstanding:Basic
                      
                      
                      20,000,000
                      
                      
                      20,000,000
                      
                      
                      20,000,000
                      
                      
                      20,000,000Diluted
                      
                      
                      20,826,841
                      
                      
                      20,826,563
                      
                      
                      20,821,534
                      
                      
                      20,841,415
  (1)  Includes
                in the second quarter of 2003, $6,000 received from America West
                in connection
                with the termination of our code-share agreement with them.
 **New
              Accounting Standards**
  In
              December 2004, the Financial Accounting Standards Board issued
              SFAS
              No. 123(R), Share-Based Payment, as a replacement of SFAS No. 123,
              Accounting for Stock-Based Compensation, and APB Opinion No. 25,
              Accounting
              for Stock Issued to Employees, was rescinded. This statement requires
              compensation costs related to share-based payment transactions to be
              recognized
              in the financial statements. With limited exceptions, the amount of
              compensation
              cost will be measured based upon the grant date fair value of the equity
              or
              liability issued. In addition, liability awards will be remeasured
              each
              reporting period and compensation costs will be recognized over the
              period that
              an employee provides service in exchange for the award. This statement
              is
              effective for public companies as of the first annual reporting period
              beginning
              after June 15, 2005. We have not yet completed our assessment
              of the impact
              of this statement on our financial condition and results of operations.
  -44-
 **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
              are 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, 2004, 0.4% of our total long-term debt was variable rate
              debt,
              compared to 0.3% at December 31, 2003. For illustrative purposes only,
              we have
              estimated the impact of market risk using a hypothetical increase in
              interest
              rates of one percentage point for both our variable rate long-term
              debt and cash
              and securities. Based on this hypothetical assumption, we would have
              incurred an
              additional $15,000 in interest expense for the year ended December 31,
              2004. As a result of this hypothetical assumption, we believe we could
              fund
              interest rate increases on our variable rate long-term debt with the
              increased
              amounts of interest income. We do not believe we have significant exposure
              to
              the changing interest rates on our fixed-rate, long-term debt instruments,
              which
              represented 99.6% of our total long-term debt at December 31, 2004,
              and 99.7% of
              our total long-term debt at December 31, 2003.
  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 with American,
              US Airways,
              Delta and United, our reimbursement rates will be adjusted higher or
              lower to
              reflect any changes in our aircraft rental rates.
  In
              anticipation of financing the purchase of regional jet aircraft on
              firm order
              with the manufacturer, we entered into eight treasury lock agreements
              in
              April 2004 with notional amounts totaling $253,500,000 and a
              weighted
              average interest rate of 4.23% with expiration dates from July 2004
              through
              March 2005. In addition, we entered into six treasury lock agreements
              in
              August 2004 with notional amounts totaling $120,000,000 and
              a weighted
              average interest rate of 4.8% with expiration dates from September 2004
              through June 2005. Management designated the treasury lock agreements
              as a
              cash flow hedge of a forecasted transaction. The treasury lock agreements
              will
              be settled at each respective settlement date which are expected to
              be the
              purchase dates of the respective aircraft. We settled seven agreements
              during
              2004 and the net amount paid was approximately $3,000,000. Any amount
              paid or
              received on the settlement date will be amortized or accreted to interest
              expense over the term of the respective aircraft debt.
  Equity
              Price Risk
  The
              exercise
              of certain of the warrants that have been issued to Delta could result
              in
              dilution of our common stock, since the exercise price is less than
              the price of
              our common stock at the time of our initial public offering.
  We
              incurred a
              deferred charge for the Delta warrants of approximately $5,760,000
              in the second
              quarter of 2004, based upon an option pricing model that considers
              continuous
              dividend yield and dilution using an initial public offering price
              of $13.00; an
              estimated dividend yield; a risk-free interest rate commensurate with
              the
              warrant term; volatility of 40%; and an expected life of ten years.
              The
              deferred charge will be amortized over the term of the Delta code-share
              agreement. In December 2004, we and Delta agreed to reduce the
              amount of
              all warrants by 45%, which reduced the deferred warrant charge and
              warrant
              equity by approximately $6,756,000. In addition, in December 2004,
              we agreed to
              issue to Delta a warrant to purchase 960,000 shares of our common stock
              in
              connection with Delta entering into a code-share agreement with Republic
              Airline. The deferred warrant charges, excluding charges with respect
              to the
              warrants issued in December 2004, will be amortized over the
              term of the
              Delta code-share agreement, as amended, resulting in an annual non-cash
              charge
              of approximately $334,000. The deferred warrant charge for the 960,000
              warrants
              issued in December 2004 will be amortized over the term of the Delta
              code-share
              agreement as amended and will result in an annual non-cash charge of
              approximately $97,000 in 2005 and approximately $380,000 each year,
              thereafter.
              The amortization charge is recorded as a reduction of operating revenue
              as
              aircraft are placed into service.
  -45-
  ****ITEM
            8. FINANCIAL**STATEMENTS AND SUPPLEMENTARY
            DATA**
  **REPUBLIC
                      AIRWAYS HOLDINGS INC. AND SUBSIDIARIES****INDEX
                      TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS**Report of Independent Registered Public
                    Accounting
                    Firm
                  47Consolidated Balance Sheets as of December
                    31, 2004
                    and 2003
                  48Consolidated Statements of Income ( restated
                    ) for
                    the years ended December 31, 2004. 2003 and 2002
                  49Consolidated Statements of Stockholders'
                    Equity and Comprehensive Income for the years ended December
                    31,
                    2004. 2003 and 2002
                  50Consolidated Statements of Cash
                    Flows for
                    the years ended December 31, 2004. 2003 and 2002
                  51Notes to Consolidated Financial Statements
                  52
   -46-
 REPORT
            OF INDEPENDENT REGISTERED
 PUBLIC
            ACCOUNTING FIRM
 
 
  
 We
              have
              audited the accompanying consolidated balance sheets of Republic Airways
              Holdings Inc. and subsidiaries (the "Company") as of December 31,
              2004
              and 2003, 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, 2004. These consolidated
              financial statements are the responsibility of the Company's management.
              Our
              responsibility is to express an opinion on these consolidated financial
              statements based on our audits.
  We
              conducted
              our audits in accordance with 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. The Company is not required
              to
              have, nor were we engaged to perform, an audit of its internal control
              over
              financial reporting. Our audit includes consideration of internal control
              over
              financial reporting as a basis for designing audit procedures that
              are
              appropriate in the circumstances, but not for the purpose of expressing
              an
              opinion on the effectiveness of the Company’s internal control over financial
              reporting. Accordingly, we express no such opinion. An audit also includes
              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, as well as evaluating the
              overall
              financial statement presentation. We believe that our audits provide
              a
              reasonable basis for our opinion.
  In
              our
              opinion, such consolidated financial statements present fairly, in
              all material
              respects, the financial position of Republic Airways Holdings Inc.
              and
              subsidiaries as of December 31, 2004 and 2003, and the results
              of their
              operations and their cash flows for each of the three years in the
              period ended
              December 31, 2004 in conformity with accounting principles generally
              accepted in the United States of America.
  As
              discussed in paragraph eleven of Note 1 to the consolidated
              financial
              statements, substantially all of the Company's revenue is derived from
              code-share agreements with US Airways, Inc., Delta Air Lines, Inc.,
              AMR Corp.,
              the parent of American Airlines, Inc., and United Air Lines, Inc.
 
      -47-
 
 REPUBLIC
            AIRWAYS HOLDINGS INC.
 CONSOLIDATED
            BALANCE SHEETS
 AS
            OF DECEMBER 31, 2004 AND 2003
 (In
            thousands, except share and per share
            amounts)
 
 **2004**
                  
                  **2003****ASSETS**Current
                      Assets:Cash
                      and cash
                      equivalents
                  
                  $
                  46,220
                  
                  $
                  22,535Receivables—net
                      of allowance for doubtful accounts of $3,869 and $819,
                      respectively
                  
                  
                  6,385
                  
                  
                  15,848Inventories-net
                  
                  
                  18,234
                  
                  
                  12,283Prepaid
                      expenses
                      and other current assets
                  
                  
                  4,630
                  
                  
                  4,011Restricted
                      cash
                  
                  
                  1,203
                  
                  
                  1,205Deferred
                      income
                      taxes
                  
                  
                  6,428
                  
                  
                  8,497Total
                      current
                      assets
                  
                  
                  83,100
                  
                  
                  64,379Aircraft
                      and other equipment—net
                  
                  
                  984,512
                  
                  
                  549,009Other
                      assets
                  
                  
                  90,873
                  
                  
                  43,060Goodwill
                  
                  
                  13,335
                  
                  
                  13,335Total
                  
                  $
                  1,171,820
                  
                  $
                  669,783**LIABILITIES
                      AND STOCKHOLDERS' EQUITY**Current
                      Liabilities:Current
                      portion
                      of long-term debt
                  
                  $
                  46,986
                  
                  $
                  25,232Subordinated
                      notes payable to affiliate
                  
                  
                  
                  
                  
                  23,174Accounts
                      payable
                  
                  
                  12,100
                  
                  
                  9,122Fair
                      value of
                      interest rate hedge
                  
                  
                  4,012Accrued
                      liabilities
                  
                  
                  53,385
                  
                  
                  44,034Total
                      current
                      liabilities
                  
                  
                  116,483
                  
                  
                  101,562Long-term
                      debt—less current portion
                  
                  
                  803,883
                  
                  
                  437,740Deferred
                      credits
                  
                  
                  19,847
                  
                  
                  19,541Deferred
                      income taxes
                  
                  
                  56,956
                  
                  
                  38,534Total
                      liabilities
                  
                  
                  997,169
                  
                  
                  597,377Commitments
                      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; 75,000,000 shares authorized;
                      20,000,000 and 25,558,756 shares issued and outstanding,
                      respectively
                  
                  
                  26
                  
                  
                  20Additional
                      paid-in capital
                  
                  
                  87,120
                  
                  
                  23,072Warrants
                  
                  
                  8,574
                  
                  
                  5,067Accumulated
                      other
                      comprehensive loss
                  
                  
                  (4,168
                  )Accumulated
                      earnings
                  
                  
                  83,099
                  
                  
                  44,247Total
                      stockholders' equity
                  
                  
                  174,651
                  
                  
                  72,406Total
                  
                  $
                  1,171,820
                  
                  $
                  669,783
  
 -48-
 REPUBLIC
            AIRWAYS HOLDINGS INC.
 CONSOLIDATED
            STATEMENTS OF INCOME
 FOR
            THE YEARS ENDED DECEMBER 31, 2004, 2003, AND
            2002
 (In
            thousands, except per share amounts)
  **2004**
                  
                  **2003**
                  
                  **2002****(As
                      Restated,****See
                      Note18)**
                  
                  
                  **(As
                      Restated,****SeeNote18)**
                  
                  
                  **(As
                      Restated,****SeeNote18)****OPERATING
                      REVENUES:**Passenger
                  
                  $
                  636,389
                  
                  $
                  479,343
                  
                  $
                  353,209Contract
                      termination fee
                  
                  
                  
                  
                  
                  6,000Other
                  
                  
                  9,935
                  
                  
                  6,937
                  
                  
                  2,988Total
                      operating
                      revenues
                  
                  
                  646,324
                  
                  
                  492,280
                  
                  
                  356,197**OPERATING
                      EXPENSES:**Wages
                      and
                      benefits
                  
                  
                  112,305
                  
                  
                  86,949
                  
                  
                  63,572Aircraft
                      fuel
                  
                  
                  174,208
                  
                  
                  106,840
                  
                  
                  64,869Passenger
                      fees
                      and commissions
                  
                  
                  2,939
                  
                  
                  6,254
                  
                  
                  7,925Landing
                      fees
                  
                  
                  24,201
                  
                  
                  19,098
                  
                  
                  13,053Aircraft
                      and
                      engine rent
                  
                  
                  74,514
                  
                  
                  67,350
                  
                  
                  64,991Maintenance
                      and
                      repair
                  
                  
                  70,290
                  
                  
                  53,475
                  
                  
                  43,441Insurance
                      and
                      taxes
                  
                  
                  13,186
                  
                  
                  12,859
                  
                  
                  17,103Depreciation
                      and
                      amortization
                  
                  
                  34,412
                  
                  
                  23,873
                  
                  
                  12,032Impairment loss and accrued aircraft return
                      costs
                  
                  
                  1,441
                  
                  
                  2,756
                  
                  
                  7,196Other
                  
                  
                  47,483
                  
                  
                  30,115
                  
                  
                  32,444Total
                      operating
                      expenses
                  
                  
                  554,979
                  
                  
                  409,569
                  
                  
                  326,626OPERATING
                      INCOME
                  
                  
                  91,345
                  
                  
                  82,711
                  
                  
                  29,571OTHER
                      INCOME (EXPENSE):Interest
                      expense:Non-related
                      party
                  
                  
                  (27,812
                  )
                  
                  (21,183
                  )
                  
                  (10,913
                  )Related
                      party
                  
                  
                  (652
                  )
                  
                  (1,606
                  )
                  
                  (1,955
                  )Other
                      income:Non-related
                      party
                  
                  
                  518
                  
                  
                  195
                  
                  
                  382Related
                      party
                  
                  
                  
                  
                  
                  
                  
                  
                  144Total
                      other
                      income (expense)
                  
                  
                  (27,946
                  )
                  
                  (22,594
                  )
                  
                  (12,342
                  )INCOME
                      BEFORE INCOME TAXES
                  
                  
                  63,399
                  
                  
                  60,177
                  
                  
                  17,229INCOME
                      TAX EXPENSE
                  
                  
                  24,547
                  
                  
                  23,979
                  
                  
                  9,540NET
                      INCOME
                  
                  
                  38,852
                  
                  
                  36,138
                  
                  
                  7,689Preferred
                      stock dividends
                  
                  
                  
                  
                  
                  (170
                  )
                  
                  (413
                  )Net
                      income available
                    for
                      common stockholders
                  
                  $
                  38,852
                  
                  $
                  35,968
                  
                  $
                  7,276Basic
                      net income available for common stockholders per
                      share
                  
                  $
                  1.66
                  
                  $
                  1.80
                  
                  $
                  0.36Diluted
                      net income available for common stockholders per
                      share
                  
                  $
                  1.62
                  
                  $
                  1.73
                  
                  $
                  0.35
   
 -49-
 
 
 REPUBLIC
            AIRWAYS HOLDINGS INC.
 CONSOLIDATED
            STATEMENTS OF STOCKHOLDERS' EQUITY AND
            COMPREHENSIVE INCOME
 FOR
            THE YEARS ENDED DECEMBER 31, 2004, 2003, AND
            2002
 (In
            thousands)
 
 **Other
                      Comprehensive Income(Loss)**
                  
                  **Common
                      Stock**
                  
                  **Additional
                      Paid-In Capital**
                  
                  **Warrants**
                  
                  **Accumulated
                      Other Comprehensive
                      Loss**
                  
                  **Accumulated
                       Earnings**
                  
                  **Total**Balance
                      at January 1, 2002
                  
                  
                  
                  
                  $
                  20
                  
                  $
                  9,996
                  
                  
                  
                  
                  
                  
                  
                  $
                  1,003
                  
                  $
                  11,019Stock
                      compensation expense
                  
                  
                  
                  
                  
                  
                  
                  $
                  213
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  $
                  213Dividends
                      on redeemable preferred stock of subsidiary
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  $
                  (413
                  )
                  
                  (413
                  )Warrants
                      issued
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  $
                  3,480
                  
                  
                  
                  
                  
                  
                  
                  
                  3,480Capital contribution
                  
                  
                  
                  
                  
                  
                  
                  
                  9,282
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  9,282Net
                      income
                  
                  $
                  7,689
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  7,689
                  
                  
                  7,689Comprehensive
                      income
                  
                  $
                  7,689Balance
                      at December 31, 2002
                  
                  
                  
                  
                  $
                  20
                  
                  
                  19,491
                  
                  
                  3,480
                  
                  
                  
                  
                  
                  8,279
                  
                  
                  31,270Stock
                      compensation expense
                  
                  
                  
                  
                  
                  
                  
                  
                  214
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  214Dividends
                      on redeemable preferred stock of subsidiary
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  (170
                  )
                  
                  (170
                  )Warrants
                      issued and revalued
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  1,587
                  
                  
                  
                  
                  
                  
                  
                  
                  1,587Capital
                      contribution
                  
                  $
                  
                  
                  
                  
                  
                  
                  3,367
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  3,367Net
                    Income
                  
                  
                  36,138
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  36,138
                  
                  
                  36,138Comprehensive
                      income
                  
                  $
                  36,138Balance
                      at December 31, 2003
                  
                  
                  
                  
                  
                  20
                  
                  
                  23,072
                  
                  
                  5,067
                  
                  
                  
                  
                  
                  44,247
                  
                  
                  72,406Stock
                      compensation expense
                  
                  
                  
                  
                  
                  
                  
                  
                  214
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  214Common
                      stock offering, net
                  
                  
                  
                  
                  
                  5
                  
                  
                  58,167
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  58,172Exercise
                      of employee stock options
                  
                  
                  
                  
                  
                  1
                  
                  
                  1,717
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  1,718Warrants
                      issued
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  10,263
                  
                  
                  
                  
                  
                  
                  
                  
                  10,263Warrants
                      surrendered
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  (6,756
                  )
                  
                  
                  
                  
                  
                  
                  
                  (6,756
                  )Capital Contribution
                  
                  
                  
                  
                  
                  
                  
                  
                  3,950
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  3,950Net
                      income
                  
                  $
                  38,852
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  38,852
                  
                  
                  38,852Unrealized
                      losses on derivative instruments, net of
                      tax,
                  
                  
                  (4,168
                  )
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  $
                  (4,168
                  )
                  
                  
                  
                  
                  (4,168
                  )Comprehensive
                      income
                  
                  $
                  34,684BALANCE—December
                      31, 2004
                  
                  
                  
                  
                  $
                  26
                  
                  $
                  87,120
                  
                  $
                  8,574
                  
                  $
                  (4,168
                  )
                  $
                  83,099
                  
                  $
                  174,651
   
 -50-
 
 REPUBLIC
            AIRWAYS HOLDINGS INC.
 CONSOLIDATED
            STATEMENTS OF CASH FLOWS
 FOR
            THE YEARS ENDED DECEMBER 31, 2004, 2003 and
            2002
 (In
            thousands)
 
 **2004**
                  
                  **2003**
                  
                  **2002**OPERATING
                      ACTIVITIES:Net
                      income
                  
                  $
                  38,852
                  
                  $
                  36,138
                  
                  $
                  7,689Adjustments
                      to reconcile net income to net cash from operating
                      activities:Depreciation
                      and
                      amortization
                  
                  
                  34,412
                  
                  
                  23,873
                  
                  
                  12,032Debt issue costs and other amortization
                  
                  
                  1,928
                  
                  
                  1,968
                  
                  
                  339Warrant amortization
                  
                  
                  800
                  
                  
                  359
                  
                  
                  9Loss on aircraft and other equipment
                      disposals
                  
                  
                  1,151
                  
                  
                  1,079
                  
                  
                  193Impairment
                      loss
                      and accruel aircraft return costs
                  
                  
                  1,441
                  
                  
                  2,756
                  
                  
                  7,196Amortization
                      of
                      deferred credits
                  
                  
                  (1,285
                  )
                  
                  (1,249
                  )
                  
                  (1,132
                  )Stock
                      compensation expense
                  
                  
                  214
                  
                  
                  214
                  
                  
                  213Deferred
                      income
                      taxes
                  
                  
                  24,027
                  
                  
                  23,742
                  
                  
                  14,025Changes
                      in certain assets and liabilities:Receivables
                  
                  
                  10,480
                  
                  
                  (7,124
                  )
                  
                  (481)Inventories
                  
                  
                  (2,683
                  )
                  
                  (2
                  )
                  
                  715Prepaid
                      expenses
                      and other current assets
                  
                  
                  (1,022
                  )
                  
                  1,057
                  
                  
                  (1,115
                  )Accounts
                      payable
                  
                  
                  1,963
                  
                  
                  (4,405
                  )
                  
                  4,209Accrued
                      liabilities
                  
                  
                  11,370
                  
                  
                  14,937
                  
                  
                  1,805Other
                      assets
                  
                  
                  (4,821
                  )
                  
                  (1,716
                  )
                  
                  (2,987
                  )Net
                      Cash from
                      operating activities
                  
                  
                  116,827
                  
                  
                  91,627
                  
                  
                  42,710INVESTING
                      ACTIVITIES:Purchase
                      of
                      aircraft and other equipment
                  
                  
                  (64,361
                  )
                  
                  (37,071
                  )
                  
                  (25,948
                  )Proceeds
                      from
                      sale of spare aircraft equipment
                  
                  
                  699
                  
                  
                  826
                  
                  
                  5,219Aircraft
                      deposits
                      and other
                  
                  
                  (79,242
                  )
                  
                  (9,630
                  )
                  
                  (13,823
                  )Aircraft
                      deposits
                      returned
                  
                  
                  40,480
                  
                  
                  15,192Net
                      cash from
                      investing activities
                  
                  
                  (102,424
                  )
                  
                  (30,683
                  )
                  
                  (34,552
                  )FINANCING
                      ACTIVITIES:Revolving
                      credit
                      facility—net
                  
                  
                  
                  
                  
                  
                  
                  
                  (7,044
                  )Payments
                      on
                      short/long-term debt
                  
                  
                  (26,947
                  )
                  
                  (39,129
                  )
                  
                  (7,114
                  )Proceeds
                      from
                      short/long-term debt
                  
                  
                  3,213
                  
                  
                  
                  
                  
                  2,118Repayment
                      of
                      subordinated note payable to affiliate (Wexford)
                  
                  
                  (43,672
                  )
                  
                  (37,559)
                  
                  
                  (22,832)Proceeds from
                    Capital Contribution (Wexford)
                  
                  
                  3,950
                  
                  
                  3,367
                  
                  
                  9,282Proceeds from
                    subordinated notes payable from affiliate (Wexford)
                  
                  
                  20,390
                  
                  
                  35,566
                  
                  
                  26,906Proceeds
                      from
                      common stock offering, net
                  
                  
                  58,172Payments
                      on
                      redemption of redeemable preferred stock of subsidiary
                  
                  
                  
                  
                  
                  (5,368
                  )Payments on settlement of treasury locks
                  
                  
                  (3,562
                  )Proceeds on settlement of treasury locks
                  
                  
                  593Proceeds from exercise of stock options
                  
                  
                  978Debt
                      issue
                      costs
                  
                  
                  (3,835
                  )
                  
                  (1,968
                  )
                  
                  (3,918
                  )Other
                  
                  
                  2
                  
                  
                  (2)
                  
                  
                  (2,145
                  )Net
                      cash from
                      financing activities
                  
                  
                  9,282
                  
                  
                  (45,093
                  )
                  
                  (4,747
                  )Net
                      changes in cash and cash equivalents
                  
                  
                  23,685
                  
                  
                  15,851
                  
                  
                  3,411CASH
                      AND CASH EQUIVALENTS AT BEGINNING OF YEAR
                  
                  
                  22,535
                  
                  
                  6,684
                  
                  
                  3,273CASH
                      AND CASH EQUIVALENTS AT END OF YEAR
                  
                  $
                  46,220
                  
                  $
                  22,535
                  
                  $
                  6,684
    -51-
 
 **REPUBLIC
              AIRWAYS HOLDINGS INC. AND SUBSIDIARIES**
 **NOTES
              TO CONSOLIDATED FINANCIAL STATEMENTS**
 **FOR
              THE YEARS ENDED DECEMBER 31, 2004, 2003, and 2002**
 **(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. 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”).
              Republic Airline received its air carrier operating certificate
              in August
              2005. (See Note 17.)
 
 Effective
              May
              6, 2005, Republic entered into a stock purchase agreement (the “Agreement”) with
              Shuttle America and Shuttle Acquisition LLC (“Shuttle LLC”), pursuant to which
              the Company acquired all of the issued and outstanding common stock
              of Shuttle
              America from Shuttle 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 Shuttle America totaling approximately
              $679.
              Because Republic and Shuttle America are commonly controlled by Wexford
              Capital
              LLC (“Wexford”), the acquisition was accounted for in a manner similar to
              pooling of interests. The consolidated financial statements give retroactive
              effect to the merger of Republic and Shuttle America since they were
              under
              common control during the periods presented.
  The
              Company
              operates as an air carrier providing scheduled passenger and air freight
              service
              as US Airways Express, American Connection, Delta Connection and United
              Express
              under code-share agreements with US Airways, Inc. ("US Airways"),
              AMR
              Corporation ("American"), Delta Air Lines, Inc. ("Delta") and
              United Air
              Lines, Inc. (“United”), respectively. The Company has a code-share
              agreement with US Airways and offers 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
              in St.
              Louis, Missouri. The code-share agreement with Delta offers passenger
              and air
              freight service from Delta's hub and focus airports in Orlando and
              Fort
              Lauderdale, Florida. Under the code-share agreement with United, the
              Company offers passengers and air freight service from United’s hub
              airports in Chicago, Illinois and Washington D.C.
 
 Under
              the US
              Airways code-share agreement, which expires in 2013, the
              Company provides service to designated areas utilizing jet aircraft.
              The US
              Airways code-share agreement with the Company, as amended, allows the
              Company to
              operate up to thirty-five but not less than twenty 50 seat regional
              jets on a
              fixed-fee basis with reimbursement of certain pass-through costs. As
              of
              December 31, 2004, the Company has thirty-five
              regional jets
              dedicated to US Airways' service.
 
 Under
              the
              American code-share agreement, which expires in 2013, the
              Company provides regional jet service on a fixed-fee basis with
              reimbursement of certain pass-through costs and allows the the
              Company to operate fifteen regional jets. The agreement may
              be terminated
              by American without cause at any time after September 30, 2008
              with
              180 days notice. As of December 31, 2004, the Company
              has fifteen
              regional jets dedicated to American service.
 
 The
              Company
              started regional jet service for Delta in November 2002. The
              thirty-seven
              50 seat regional jets code-share agreement with Delta, as amended,
              which expires
              in 2016, is on a fixed-fee basis with reimbursement of certain pass-through
              costs and provides for thirty-nine aircraft to be placed into service.
              The
              agreement may be partially or completely terminated by Delta with or
              without
              cause at any time after November 2009 with 180 days notice.
              As of
              December 31, 2004, the Company has thirty-nine
              regional jets
              dedicated to Delta service. In January 2005, the Company and Delta
              entered into
              a code-share agreement whereby the Company will operate 16 ERJ-170’s for Delta.
              This agreement expires in 2019 and be terminated by Delta with or without
              cause
              at any time after 2013.
 
 The
              Company previously provided regional jet service for America
              West and in
              February 2003 the Company and America West agreed
              to terminate
              their code-share agreement. The code-share agreement with America West
              commenced
              in August 2001 and was on a fixed-fee basis with reimbursement of certain
              pass-through costs. Pursuant to the termination of the code-share
              agreement, the Company and America West agreed to remove
              the twelve
              aircraft from service during April, May and June 2003 and America
              West
              paid the Company a contract termination fee of $6,000
              as the aircraft
              were taken out of service. The Company amended the Delta
              code-share
              agreement on February 7, 2003 to utilize these twelve
              aircraft.
 
 The
              Company's
              previous pro-rate code-share agreement with US Airways was terminated
              in October
              2004. The code-share agreement with US Airways allowed the Company
              to operate
              Saab 340 turbo-prop aircraft under a pro-rate arrangement, for which
              the Company
              received an allocated portion of the passengers’ fare and paid for all of the
              costs of transporting the passengers. In 2004 the Company transitioned
              the Saab
              340 turbo-prop aircraft in service with US Airways to United.
 
 In
              February 2004, the Company entered into separate code-share
              agreements with
              United to operate nine 50 seat regional jets, twenty-three 70 seat
              regional jets
              and ten turroprop aircraft. The regional jet agreements
              expire in 2014
              and the turboprop agreement expires in 2005. The 50 seat regional jet
              agreement
              may be terminated with or without cause by United upon 18 months
              prior
              written notice after December 31, 2007.  As of December
              31, 2004,
              eleven of the twenty-three 90 seat regional jets are in operation and
              are being
              operated by Chautauqua. They will be transferred to Republic Airline
              and Shuttle
              America.
  The
              code-share agreements provide the Company with a nonexclusive license
              to the
              code-share partners' trademarks, as well as general air carrier support
              services, and contain provisions relating to the size and use of aircraft,
              insurance and service requirements. Under certain code-share agreements,
              the
              code-share partners are required to provide reservation systems, ground
              handling
              and other services to the Company. The Company may receive operating
              performance
              incentives from the code-share partners based on several metrics of
              customer
              service. The Company may also be liable to the code-share partners
              for operating
              performance penalties if customer service metrics are less than specified
              minimum levels.
  -52-
 he
              following sets forth the revenue and accounts receivable (as a percentage
              of
              revenue and net receivables) information for the code-share partners:
 **US
                        Airways**
                    
                    **American**
                    
                    **Delta**
                    
                    **United**
                    
                    **America**
                      **West**Revenues
                        for the years ended:December
                        31, 2004
                    
                    
                    38
                    %
                    
                    16
                    %
                    
                    36
                    %
                    
                    10
                    %December
                        31, 2003
                    
                    
                    43
                    
                    
                    21
                    
                    
                    29
                    
                    
                    
                    
                    
                    7
                    %December
                        31, 2002
                    
                    
                    57
                    
                    
                    28
                    
                    
                    1
                    
                    
                    
                    
                    
                    13Receivables
                        as of:December
                        31, 2004
                    
                    
                    31
                    
                    
                    37
                    
                    
                    6
                    
                    
                    2December
                        31, 2003
                    
                    
                    47
                    
                    
                    14
                    
                    
                    10
 Substantially
              all of the Company's revenue is derived from agreements with its code-share
              partners. US Airways filed a petition for Chapter 11 bankruptcy protection
              on
              September 12, 2004. On March 15, 2005, US Airways assumed the
              Company’s
              code-share agreement, and United is attempting to reorganize its business
              under
              Chapter 11 of the bankruptcy code. The Company continues to operate
              its normal
              flight schedules with US Airways and United. ( See Note 17).
 
 Delta
              has
              recently reported operating losses primarily due to an uncompetitive
              cost
              structure and announced that if it fails to achieve a competitive cost
              structure
              it will need to restructure through bankruptcy. In December 2004, the
              Company
              agreed to reduce its compensation level on the ERJ-145 fleet by 3%
              through May
              2016. (See Notes 11 and 17).
 
 Termination
              of the US Airways, American, Delta or United regional jet code-share
              agreements
              could have a material adverse effect on the Company's financial position,
              results of operations and cash flows. Contingency plans have been developed
              to
              address potential outcomes of the US Airways and United bankruptcy
              proceedings.
 
 In
              connection
              with the US Airways bankruptcy filing, the Company recorded an allowance
              for
              doubtful accounts for pre-petition receivables due from US Airways
              of $3,200 in
              2004.
  -53-
 **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, Shuttle America and Republic
              Airline. All
              significant intercompany accounts and transactions are eliminated in
              consolidation.
 
 ***Risk
              Management*** —The
              Company accounts for derivatives in accordance with SFAS No. 133, *Accounting
              for Derivative Instruments and Hedging Activities,* as
              amended and interpreted *.* Fuel
              swaps were not designated as hedging instruments and, accordingly,
              were carried
              at fair value in prepaid expenses and other current assets or accrued
              liabilities with gains and losses recorded in other income. Other income
              for the
              year ended December 31, 2002 includes a gain of $228, for fuel
              swap
              agreements. The Company did not enter into any fuel swap agreements
              during the
              years ended December 31, 2004 and 2003.
 
 In
              anticipation of financing the purchase of regional jet aircraft on
              firm order
              with the manufacturer, the Company entered into fourteen treasury lock
              agreements in 2004 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 will be settled
              at each
              respective settlement date, which are expected to be the purchase dates
              of the
              respective aircraft. The Company settled seven agreements during the
              year ended
              December 31, 2004 and the net amount paid was $2,969 and was recorded
              in
              accumulated other comprehensive loss, net of tax. Of this amount, the
              Company
              reclassified $21 and expects to reclassify $198 to interest expense
              for the year
              ended December 31, 2004 and the year ending December 31, 2005, respectively.
              Amounts paid or received on the settlement dates are recorded to accumulated
              other comprehensive income and amortized or accreted to interest expense
              over
              the terms of the respective aircraft debt. As of December 31, 2004,
              the fair
              value of the unsettled treasury locks was a liability of $4,012 based
              on quoted
              market values.
  ***Cash
              and Cash
              Equivalents*** —Cash
              equivalents consist of short-term, highly liquid investments with maturities
              of
              three months or less when purchased. Substantially all of our cash
              is on hand
              with one bank.
 *Supplemental
              Cash
              Flow Information:*
 
 **Years
                      Ended December 31,****2004**
                  
                  **2003**
                  
                  **2002**CASH
                      PAID (REFUNDED) FOR INTEREST AND INCOME TAXES:Interest—net
                      of
                      amount capitalized
                  
                  $
                  27,073
                  
                  $
                  18,862
                  
                  $
                  10,780Income
                      taxes paid
                      (refunded)
                  
                  
                  380
                  
                  
                  (607
                  )
                  
                  (3,418
                  )NON-CASH
                      TRANSACTIONS:Deferred
                      credits
                  
                  
                  662
                  
                  
                  650
                  
                  
                  1,200Conversion
                      of
                      accrued interest to subordinated note payable to affiliate
                  
                  
                  107
                  
                  
                  1,512
                  
                  
                  1,997Preferred
                      stock
                      dividends declared
                  
                  
                  
                  
                  
                  170
                  
                  
                  413Aircraft,
                      inventories, and other equipment purchased through financing
                      arrangements
                  
                  
                  411,631
                  
                  
                  241,690
                  
                  
                  156,080Warrants
                      issued
                  
                  
                  10,263
                  
                  
                  1,587
                  
                  
                  3,480Warrants surrendered
                  
                  
                  (6,756
                  )Aircraft
                      options
                      purchased through financing arrangements
                  
                  
                  
                  
                  
                  
                  
                  
                  768Fair
                      value of
                      interest rate hedge
                  
                  
                  (4,012
                  )
 
 -54-
 ***Inventories*** consist
              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, 2004 and 2003 this reserve was $1,500 and $1,500
              respectively.
 
 ***Aircraft
              and
              Other Equipment*** is
              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, and 10 years for
              turboprops.
              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 $1,692, $434 and $263 of interest for the years ended
              December 31, 2004, 2003 and 2002, respectively.
 
 ***Restricted
              Cash*** consists
              of restricted amounts for satisfying future debt and lease payments.
 
 ***Debt
              Issue
              Costs*** are
              capitalized and included in 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 $8,048 and $4,957,
              are included
              in other assets in the consolidated balance sheets as of December 31,
              2004
              and 2003, respectively.
 
 ***Goodwill*** is
              accounted for in accordance with SFAS No. 142, *Goodwill
              and Other Intangible Assets,* and ** management
              makes ** annual
              assessments of impairment. The carrying value of goodwill was reviewed
              by
              management on January 1 (the annual assessment date) and it was concluded
              that
              no asset impairment existed as of December 31, 2004 or 2003.
 
 ***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.
              Certain long-lived assets held for sale are recorded at estimated fair
              value
              less costs to sell.
 
 ***Long-Term
              Debt*** —The
              fair
              value of the Company’s long-term debt is based on the quoted marked prices for
              the same debt of similar issues.
 
 ***Deferred
              Credits*** consist
              of credits for parts and training from the aircraft and engine manufacturers
              and
              deferred gains from the sale and leaseback of aircraft and spare jet
              engines.
              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.
 
 ***Comprehensive
              Income—*** Republic
              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. Republic had accumulated other
              comprehensive
              loss relating to treasury lock agreements of $4,168, net of tax, at
              December 31,
              2004. There were no other comprehensive income components for the years
              ended
              December 31, 2003 or 2002.
 
 ***Income
              Taxes*** *—* Republic
              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 Repair*** is
              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 accrued 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, we estimate
              operating costs for certain “pass through” costs and record revenue based on
              these estimates. Actual results could differ from those estimates.
 
 ***Revenue
              Recognition—*** Revenues
              are recognized in the period the service is provided. The Company
              recognizes revenues and expenses in accordance with the terms of the
              fixed fee
              code-share agreements, which includes pass-through costs. The Company
              recognizes
              an allocated portion of passengers' fares under its pro-rate code-share
              agreements and records as expense the full cost of providing such service.
 
 ***Warrants—*** Equity
              instruments issued to code-share partners are recorded on the measurement
              date
              as deferred charges and credits to stockholders’ equity. Warrants surrendered
              are recorded at fair value on the measurement date as reductions to
              deferred
              warrant charges and stockholders’ equity. The deferred charges for warrants are
              amortized as a reduction of passenger revenue over the terms of the
              code-share
              agreements.
 
 ***Stock
              Compensation—*** the
              Company applies Accounting Principles Board Opinion No. 25, *Accounting
              for Stock Issued to Employees,* and
              related interpretations in accounting for stock options. No compensation
              expense
              is recorded for stock options with exercise prices equal to
              or greater than
              the fair market value on the grant date. Warrants issued to non-employees
              are
              accounted for under SFAS No. 123, *Accounting
              for Stock-Based Compensation* 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.
 
 **SFAS
              No. 148,**  *Accounting
              for Stock-Based Compensation—Transition and Disclosure—an Amendment of FASB
              Statement No. 123, Accounting for Stock-Based Compensation* ,
              requires disclosing the effects on net income available for common
              stockholders
              and net income available for common stockholders per share under the
              fair value
              method for all outstanding and unvested stock awards. SFAS No. 148
              disclosure requirements, including the effect on net income available
              for common
              stockholders and net income available for common stockholders per share,
              if the
              fair value based method had been applied to all outstanding and unvested
              stock
              awards in each period, are as follows:
 -55-
 **For
                      the years ended December
                      31,****2004**
                  
                  
                  **2003**
                  
                  
                  **2002**Net
                      income available for common stockholders, as
                      reported
                  
                  $
                  38,852
                  
                  $
                  35,968
                  
                  $
                  7,276Add:
                      Stock-based employee compensation expense determined under
                      the intrinsic value based method, net of tax
                  
                  
                  129
                  
                  
                  128
                  
                  
                  128Deduct:
                      Stock-based employee compensation expense determined
                      under the fair value based method, net of tax
                  
                  
                  (327
                  )
                  
                  (338
                  )
                  
                  (458
                  )Pro
                      forma net income available for common
                    stockholders
                  
                  $
                  38,654
                  
                  $
                  35,758
                  
                  $
                  6,946Pro
                      forma net income available for common stockholders per
                      share:Basic
                  
                  $
                  1.66
                  
                  $
                  1.79
                  
                  $
                  0.35Diluted
                  
                  $
                  1.62
                  
                  $
                  1.72
                  
                  $
                  0.33
 
 
 
 *Net
            Income Available for Common Stockholders Per Share*
 
 
 
 **For
                      the Years Ended December
                      31,****2004**
                  
                  **2003**
                  
                  **2002**Weighted-average
                      common shares outstanding for basic net income
                      available for common stockholders per share
                  
                  
                  23,349,613
                  
                  
                  20,000,000
                  
                  
                  20,000,000Effect
                      of dilutive employee stock options
                  
                  
                  557,150
                  
                  
                  841,415
                  
                  
                  832,750Adjusted
                      weighted-average common shares outstanding and assumed
                      conversions for diluted net income available for common stockholders
                      per
                      share
                  
                  
                  23,906,763
                  
                  
                  20,841,415
                  
                  
                  20,832,750
 
 Employee
              stock options and warrants of 2,927,400, 2,640,000 and 1,620,000 are
              not
              included in the calculation of diluted net income available for common
              stockholder per share due to their anti-dilutive impact for the years
              ended
              December 31, 2004, 2003 and 2002, respectively.
 
 ***Segment
              Information*** —The
              Company has one operating segment for the scheduled transportation
              of passengers
              and air freight under code-share agreements.
 
 ***New
              Accounting Standards—*** In
              December 2004, SFAS No. 123(R), *Share-Based
              Payment* ,
              a
              replacement of SFAS No. 123, *Accounting
              for Stock-Based Compensation* ,
              and a
              rescission of APB Opinion No. 25, *Accounting
              for Stock Issued to Employees* ,
              was
              issued. This statement requires compensation costs related to share-based
              payment transactions to be recognized in the financial statements.
              With limited
              exceptions, the amount of compensation cost will be measured based
              upon the
              grant date fair value of the equity or liability issued. In addition,
              liability
              awards will be remeasured each reporting period and compensation costs
              will be
              recognized over the period that an employee provides service in exchange
              for the
              award. This statement is effective for public companies as of the first
              annual
              reporting period beginning after June 15, 2005. The Company
              has not yet
              completed its assessment of the impact of this statement on its financial
              condition and results of operations.
 -56-
 **3.
              AIRCRAFT AND OTHER EQUIPMENT**
 
 At
              December 31, 2004, the Company has a fleet of 129 aircraft,
              including
              sixty-eight 50-seat Embraer 145 regional jets, fifteen 44-seat Embraer
              140
              regional  jets, seventeen 37-seat Embraer 135 regional jets,
              eleven 70 seat
              Embraer 170 regional jets and eighteen 30-seat Saab 340
              aircraft. The Company owns five Saab 340
              aircraft, one of
              which is currently held for sale and recorded in prepaid and other
              current
              assets, twenty-five Embraer 145 regional jets, eleven Embraer 140 regional
              jets,
              fifteen Embraer 135 regional jets, eleven Embraer 170 regional jets
              and leases
              the other aircraft under operating lease agreements (see Note 8).
 
 Aircraft
              and
              other equipment, excluding aircraft and other equipment held for sale,
              consist
              of the following as of December 31:
 **2004**
                  
                  **2003**Aircraft
                  
                  $
                  993,913
                  
                  $
                  544,199Flight
                      equipment
                  
                  
                  53,054
                  
                  
                  38,866Furniture
                      and equipment
                  
                  
                  3,694
                  
                  
                  2,352Leasehold
                      improvements
                  
                  
                  8,180
                  
                  
                  4,887Total
                      aircraft and other equipment
                  
                  
                  1,058,841
                  
                  
                  590,304Less
                      accumulated depreciation and amortization
                  
                  
                  (74,329)
                  
                  
                  (41,295)Aircraft
                      and other equipment—Net
                  
                  $
                  984,512
                  
                  $
                  549,009
 
 Aircraft
              and
              other equipment depreciation and amortization expense for the years
              ended
              December 31, 2004, 2003 and 2002 was $34,412, $23,873, and $12,032
              respectively.
 **4.
              OTHER ASSETS**
 
 Other
            assets consist of the following
            as of December 31:
 
 **2004**
                  
                  
                  **2003**Prepaid
                      aircraft rent
                  
                  $
                  20,744
                  
                  $
                  18,847Aircraft
                      deposits
                  
                  
                  47,428
                  
                  
                  6,838Deferred
                      warrant charge, net (see Note 11)
                  
                  
                  7,407
                  
                  
                  4,700Debt
                      issue costs, net
                  
                  
                  8,048
                  
                  
                  4,957Restricted
                      cash—lease agreement
                  
                  
                  
                  
                  
                  1,500Other
                  
                  
                  7,246
                  
                  
                  6,218$
                  90,873
                  
                  $
                  43,060
 
  -57-
 **5.
            ACCRUED LIABILITIES**
 
 Accrued
            liabilities consist of the
            following as of December 31:
  **2004**
                  
                  **2003**Accrued
                      wages, benefits and related taxes
                  
                  $
                  9,623
                  
                  $
                  8,247Accrued
                      maintenance
                  
                  
                  11,822
                  
                  
                  7,687Accrued
                      aircraft return costs (see Note 15)
                  
                  
                  4,599
                  
                  
                  5,253Accrued
                      property taxes
                  
                  
                  2,004
                  
                  
                  2,201Accrued
                      interest payable to non-affiliates
                  
                  
                  6,726
                  
                  
                  4,105Accrued
                      interest payable to affiliates
                  
                  
                  
                  
                  
                  963Accrued
                      liabilities to code-share partners
                  
                  
                  8,808
                  
                  
                  4,553Other
                  
                  
                  9,803
                  
                  
                  11,025Total
                      accrued liabilities
                  
                  $
                  53,385
                  
                  $
                  44,034
  **6.
              DEBT**
 Debt
            consists
            of the following as of December 31:
 
 **2004**
                  
                  
                  **2003**Revolving
                      credit facility with Bank of America Business Capital
                      (the "Bank"), maximum of $25,000 available (including outstanding
                      letters
                      of credit), subject to 70% of the net book value of spare rotable
                      parts
                      and 40% 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 2.0% to 2.75% or the Bank's base rate (which is generally
                      equivalent
                      to the prime rate) plus spreads ranging from 0.25% to 0.75%.
                      The weighted
                      average interest rates for the years ended December 31, 2004,
                      2003 and
                      2002 were 4.2%, 4.5%, and 5.1%, respectively. Fees are payable
                      at 0.375%
                      on the unused revolver amount. The credit facility expires
                      on March 31,
                      2006 and is collateralized by all of Chautauqua's assets, excluding
                      the
                      owned aircraft and engines.
                  
                  $
                  
                  
                  $Term
                      loans with the Bank due March 2006 or upon termination of
                      the Bank credit facility, with monthly principal payments of
                      $54, and
                      interest payable monthly at the Bank's LIBOR rate plus spreads
                      ranging
                      from 2.0% to 2.75% or the Bank's base rate (which is generally
                      equivalent
                      to the prime rate) plus spreads ranging from 0.25% to 0.75%
                      (5.3% at
                      December 31, 2004). The term loans are collateralized by substantially
                      all
                      of Chautauqua's assets, except for aircraft collateralized
                      by various
                      banks and aircraft manufacturer.
                  
                  
                  3,212
                  
                  
                  1,336Promissory
                      notes with various banks and aircraft manufacturer,
                      collateralized by aircraft, bearing interest at fixed rates
                      ranging from
                      4.01% to 6.85% with semi-annual principal and interest payments
                      of $44,349
                      through 2019.
                  
                  
                  846,974
                  
                  
                  460,939Other
                  
                  
                  683
                  
                  
                  697Subordinated
                      note payable to affiliate (repaid in
                      2004).
                  
                  
                  
                  
                  
                  23,174Total
                  
                  
                  850,869
                  
                  
                  486,146Current
                      portion (including Bank term loan)
                  
                  
                  46,986
                  
                  
                  48,406Debt
                      and notes payable—Less current portion
                  
                  $
                  803,833
                  
                  $
                  437,740
  Chautauqua's
            debt agreements with the Bank contain restrictive covenants that require,
            among
            other things, that Chautauqua maintain a certain fixed charge coverage
            ratio and
            a debt to earnings leverage ratio. Chautauqua received a waiver from
            the lender
            under the revolving credit facility for non-compliance with the debt
            to earnings
            leverage ratio for the fourth quarter of 2004 and the first quarter of
            2005.
            Chautauqua has outstanding letters of credit totaling $4,782 and $2,438
            as of
            December 31, 2004 and 2003, respectively. The American code-share
            agreement
            requires a debt sinking fund for Chautauqua's required semi-annual payments.
 
  -58-
 Future
            maturities of debt are payable as follows for the years ending December 31:
 
 
 2005
                  
                  $
                  46,9862006
                  
                  
                  45,6922007
                  
                  
                  48,0752008
                  
                  
                  50,2212009
                  
                  
                  52,641Thereafter
                  
                  
                  607,254Total
                  
                  $
                  850,869
 
 During
              the
              year ended December 31, 2004, the Company acquired 24 aircraft through
              debt
              financing totaling $411,631. The debt was obtained from a bank and
              the aircraft
              manufacturer for fifteen year terms at interest rates ranging from
              4.31% to
              6.85%.
 **7.
              REDEEMABLE PREFERRED STOCK**
 Chautauqua
              had 1,000,000 authorized shares of Series A redeemable preferred
              stock at a
              par value of $.01 per share. In May 2000, 10.295828 shares of
              Series A
              redeemable preferred stock were issued with a stated value of $250
              per share in
              full satisfaction of a related party note payable and accrued interest
              thereon,
              and Chautauqua issued six shares of Series A redeemable preferred
              stock for
              cash of $1,500. At December 31, 2002, 16.295828 shares were
              issued and
              outstanding and held by a related party. The preferred stockholder
              was entitled
              to receive cumulative dividends equal to 10% per annum of the stated
              value of
              the preferred stock. The redeemable preferred stock, including accrued
              and
              unpaid dividends, was purchased and retired by Chautauqua during 2003.
 
 **8.
              COMMITMENTS**
 
 As
              of
              December 31, 2004, the Company leases 62 regional jet and turboprop
              aircraft and fourteen spare regional jet engines with varying terms
              extending
              through 2020 and terminal space, operating facilities and office equipment
              with
              terms extending through 2012. The components of rent expense for the
              years ended
              December 31 are as follows:
 **2004**
                  
                  **2003**
                  
                  **2002**Aircraft
                      and engine rent
                  
                  $
                  74,514
                  
                  $
                  67,350
                  
                  $
                  64,991Other
                  
                  
                  3,320
                  
                  
                  2,518
                  
                  
                  2,627Total
                      rent expense
                  
                  $
                  77,834
                  
                  $
                  69,868
                  
                  $
                  67,618
 
 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 $4,710 per year through January 2012. 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 a long-term maintenance agreement with an aviation equipment manufacturer
              through October 2013. 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 upon flight activity with
              engine
              manufacturers and maintenance providers through June 2012.
 
 The
              Company
              has long-term maintenance agreements for wheels and brakes through
              June 2014. The agreement has an early termination penalty, if
              the Company
              removes seller's equipment from aircraft, sells or leases aircraft
              to a third
              party or terminates the services prior to expiration of the agreement.
              The
              maximum penalty during the first two years is $675 and is reduced every
              two
              years thereafter. 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.
 
 Total
              payments under these long-term maintenance agreements were $39,982,
              $29,357, and
              $21,056 for the years ended December 31, 2004, 2003 and 2002,
              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 airframes and engines. The Company is unable to estimate the
              liability
              for these return conditions as of December 31, 2004, because
              the leases
              expire beginning in 2009. The Company will record a liability for these
              return
              conditions once the liability is estimable.
 
 -59-
 Future
              minimum payments under noncancellable operating leases are as follows
              for the
              years ending December 31:
 **Regional
                      Jet**
                    **Aircraft**
                  
                  **Other**
                  
                  **Total**2005
                  
                  $
                  69,659
                  
                  $
                  7,687
                  
                  $
                  77,3462006
                  
                  
                  69,659
                  
                  
                  4,766
                  
                  
                  74,4252007
                  
                  
                  69,443
                  
                  
                  4,577
                  
                  
                  74,0202008
                  
                  
                  69,207
                  
                  
                  4,601
                  
                  
                  73,8082009
                  
                  
                  67,646
                  
                  
                  4,604
                  
                  
                  72,250Thereafter
                  
                  
                  447,404
                  
                  
                  28,050
                  
                  
                  475,454Total
                  
                  $
                  793,018
                  
                  $
                  54,285
                  
                  $
                  847,303
  As
              of
              December 31, 2004, the Company’s Delta and United code-share agreements
              require that the Company acquire and place in service an additional
              twenty-eight
              regional jets. The current list price of these twenty-eight regional
              jets is
              $752,200. The Company has a commitment to obtain financing for twenty-four
              of
              these twenty-eight regional jets. The Company also has a commitment
              to acquire
              three spare aircraft engines. The current list price of these engines
              is
              $10,671. These commitments are subject to customary closing conditions.
  The
              Company's
              aircraft commitments, as amended, under the code-share agreements and
              firm
              orders and options with the aircraft manufacturer are shown below as
              of December
              31, 2004.
 **Commitments
                      as of**
                    **December
                      31, 2004****Delta**
                  
                  **United**
                  
                  **Total****Aircraft
                      Commitments per Code-Share
                      Agreements:**ERJ-170
                  
                  
                  16
                  
                  
                  12
                  
                  
                  28
 
 **Commitments
                      as of**
                    **December
                      31, 2004****Firm**
                  
                  **Options**
                  
                  **Total****Aircraft
                      Orders with Aircraft
                      Manufacturer:**ERJ-145
                  
                  
                  
                  
                  
                  34
                  
                  
                  34ERJ-170
                  
                  
                  28
                  
                  
                  61
                  
                  
                  89Total
                  
                  
                  28
                  
                  
                  95
                  
                  
                  123
 
 During
              the
              year ended December 31, 2004, the Company made aircraft deposits in
              accordance
              with the aircraft commitments of $38,800. Aircraft deposits are included
              in
              other assets.
  -60-
 **9.
              CONTINGENCIES**
 
 The
              Company
              is subject to certain legal and administrative actions which management
              considers routine to their business activities. As of December 31,
              2004,
              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.
 
 Under
              the
              American code-share agreement, the Company is subject to American’s scope
              restrictions. The Company paid American an aggregate of approximately
              $500
              through February 19, 2005, for operating the ERJ-170s for United
              at
              Chautauqua Airlines.  Beginning April 22, 2005, the Company
              began payments
              of approximately $1,200 per month to American for violating
              the scope
              restrictions of the code-share agreement. These payments will continue
              until the
              ERJ-170s are no longer operated by Chautauqua (See Note 17).
  As
              of
              December 31, 2004, approximately 77% of the Company's workforce
              is employed
              under union contracts. Approximately 27% of the union workforce (Chautauqua’s
              flight attendants) is under a contract that is currently amendable
              and under
              federal mediation (See note 17).
 
 **10.
              RELATED PARTY TRANSACTIONS**
 
 Fees
              are paid
              to Wexford Capital LLC for administrative functions not performed by
              the
              Company. Fees incurred were approximately $241, $268 and $327 for the
              years
              ended December 31, 2004, 2003 and 2002, respectively. In addition,
              included
              in accrued liabilities were $217 and $528 due to Wexford Capital LLC
              as of
              December 31, 2004 and 2003, respectively.
 
 Wexford
              Capital LLC provided advances to Shuttle America to finance its working
              capital
              needs. At December 31, 2003, the outstanding balance was $2,782.
 
 During
              1999,
              Chautauqua entered into an agreement with Solitair Corporation ("Solitair"),
              an
              affiliate of WexAir LLC, to purchase or lease Embraer regional jets
              from
              Solitair. Through December 31, 2002, Chautauqua had purchased
              fifteen
              aircraft and leased thirty-eight aircraft from third parties, who acquired
              the
              aircraft from Solitair. The cost per aircraft was equal to the purchase
              price
              paid by Solitair, including all direct and indirect costs and expenses
              ($191 for
              the year ended December 31, 2002) relating thereto, plus up
              to $440 per
              aircraft in 2002. Chautauqua issued a subordinated promissory note
              payable to
              Solitair in the amount of $440 for each of the eight aircraft purchased
              during
              2002. The subordinated promissory notes payable to Solitair were repaid
              in 2003
              (total of $3,520). No lease payments were paid to Solitair for the
              years ended
              December 31, 2004, 2003, or 2002.
 
 On
              April 16,
              2004, the Company made a payment of $2,800 on the subordinated note
              payable to
              our majority stockholder. The payment consisted of $1,400 for principal
              and
              $1,400 for accrued interest. In May 2004, the maturity date of the
              subordinated
              note payable to affiliate was extended to June 13, 2004. On June 2,
              2004, the
              Company fully repaid the principal balance of $19,100 of the subordinated
              note
              payable to our majority stockholder and accrued interest of $80.
 
 In
              August 2002, Solitair assigned to Chautauqua 20 options for
              aircraft to be
              purchased from Embraer. Chautauqua issued a subordinated promissory
              note payable
              to Solitair for the options. The note was repaid in January 2003.
  **11.
              CAPITAL STOCK, STOCK OPTIONS AND WARRANTS**
 
 **Common
              Stock and Capital Contributions**
 
 On
              May 15, 1998, WexAir LLC acquired 100 shares of Republic's common
              stock for
              cash of $8,133. These proceeds and the proceeds from the subordinated
              promissory
              note (see Note 10) were used by Republic to acquire the common
              stock of
              Chautauqua.
 
 In
              June 2004,
              the Company completed its initial public stock offering. The Company
              issued
              5,000,000 shares of common stock at $13 per share. The net proceeds
              provided by
              this offering were $58,172, before the repayment of debt.
 
 In
              February
              2005, the Company completed its follow-on public stock offering. The
              Company
              issued 6,900,000 shares of common stock at $12.50 per share. The net
              proceeds
              provided by this follow-on offering were approximately $80,800.
 
 In
              2004,
              2003, and 2002, Wexford made capital contributions to Shuttle America
              of $3,950,
              $3,367, and $9,282 respectively.
 
 At
              December
              31, 2004, approximately 5,615,000 shares of the Company’s 75,000,000 authorized
              shares were reserved for issuances under the 2002 Equity Incentive
              Plan and
              warrants. (See Note 17)
  -61-
 **Stock
              Options**
 
 In
              connection
              with employment agreements for certain key employees, Republic granted
              options
              to purchase shares of Republic's common stock. The stock options vest
              ratably
              over the term of the employment agreements (generally 48 months)
              and are
              exercisable for five years following the vesting dates. Generally,
              stock options
              are granted with exercise prices equal to market prices on the grant
              date.
              Because stock options granted in August 2001 had an exercise
              price below
              market price, compensation expense of $214, $214 and $213 was recorded
              for the
              years ended December 31, 2004, 2003 and 2002, respectively.
              In addition,
              stock options were granted in May 2004 to certain employees and non-employee
              directors, and additional shares were issued in December 2004 in connections
              with employment contract amendments. The options granted during 2004
              vest
              ratably over periods ranging from 8 months to 48 months, and the options
              are
              exercisable until 10 years from the date of grant. The following is
              a summary of
              stock option activity for stock options outstanding at the end of the
              respective
              years:
 **December 31,**
                    **2004**
                  
                  **December 31,**
                    **2003**
                  
                  **December 31,**
                    **2002****Options**
                  
                  
                  **Weighted**
                    **Average**
                    **Exercise**
                    **Price**
                  
                  
                  **Options**
                  
                  
                  **Weighted**
                    **Average**
                    **Exercise**
                    **Price**
                  
                  
                  **Options**
                  
                  
                  **Weighted**
                    **Average**
                    **Exercise**
                    **Price**Outstanding,
                      beginning of year
                  
                  
                  1,920,000
                  
                  $
                  2.13
                  
                  
                  1,920,000
                  
                  $
                  2.13
                  
                  
                  2,040,000
                  
                  $
                  2.11Granted
                  
                  
                  1,420,620
                  
                  
                  13.00Forfeited
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  120,000
                  
                  
                  1.75Exercised
                  
                  
                  558,756
                  
                  
                  1.75Outstanding,
                      end of year
                  
                  
                  2,781,864
                  
                  $
                  7.76
                  
                  
                  1,920,000
                  
                  $
                  2.13
                  
                  
                  1,920,000
                  
                  $
                  2.13Weighted
                      average remaining contractual life
                    in
                      years
                  
                  
                  6.3
                  
                  
                  
                  
                  
                  2.7
                  
                  
                  
                  
                  
                  3.7Options
                      exercisable, end of year
                  
                  
                  1,409,892
                  
                  $
                  2.72
                  
                  
                  1,872,500
                  
                  $
                  1.99
                  
                  
                  1,594,583
                  
                  $
                  1.91
  
 
 **Options
                      Outstanding**
                  
                  **Options
                      Exercisab**le**Range
                      of Exercise Prices**
                  ****
                  **Number**
                  ****
                  **Average
                      Remaining Contractual Life**
                  ****
                  **Weighted-Average
                      Exercise Price**
                  ****
                  **Number**
                  ****
                  **Weighted-Average
                      Exercise Price**$1.75
                  
                  
                  1,241,244
                  
                  
                  2.3
                  
                  $
                  1.75
                  
                  
                  1,241,244
                  
                  $
                  1.75$7.83
                  
                  
                  120,000
                  
                  
                  3.7
                  
                  $
                  7.83
                  
                  
                  101,417
                  
                  $
                  7.83$13.00
                  
                  
                  1,420,620
                  
                  
                  10.0
                  
                  $
                  13.00
                  
                  
                  67,231
                  
                  $
                  13.002,781,864
                  
                  
                  
                  
                  $
                  7.76
                  
                  
                  1,409,892
                  
                  $
                  2.72
   -62-
 **Warrants**
  In
            connection with the Delta
            code-share agreement, the Company has issued warrants to purchase shares
            of its
            common stock related to the code-share agreement.
  The
            warrants, net of amounts surrendered in December 2004, are fully vested
            and
            exercisable as follows:
  **Issued**
                  
                  **Number**
                    **of
                      Shares**
                  
                  **Exercise**
                    **Price**
                  
                  **Vesting**
                  
                  **Exercise
                      Period**June
                      2002
                  
                  
                  825,000
                  
                  $
                  12.50
                      (1
                  )
                  
                  Fully
                      Vested
                  
                  
                  Through
                      June 2012June
                      2004
                  
                  
                  825,000
                  
                  
                  12.35
                      (1
                  )
                  
                  Fully
                      Vested
                  
                  
                  Through
                      May 2014February
                      2003
                  
                  
                  396,000
                  
                  
                  13.00
                  
                  
                  Fully
                      Vested
                  
                  
                  Through
                      February 2013October
                      2003
                  
                  
                  165,000
                  
                  
                  12.35
                  
                  
                  Fully
                      Vested
                  
                  
                  Through
                      October 2013March
                      2004
                  
                  
                  264,000
                  
                  
                  12.35
                  
                  
                  Fully
                      Vested
                  
                  
                  Through
                      March 2014December
                      2004
                  
                  
                  960,000
                  
                  
                  11.60
                  
                  
                  Fully
                      Vested
                  
                  
                  Through
                      December 20143,435,000
 
   In
              December
              2004, the Company and Delta agreed to reduce the amounts of all warrants
              issued
              pursuant to the Chautauqua code-share agreement by 45%, which reduced
              deferred
              warrant charges and warrant equity by $6,756. Amortization of deferred
              warrant
              charges were $800, $359 and $9 for the years ended December 31, 2004,
              2003 and
              2002, respectively.
 
 The
              Company
              records 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.
 
 -63-
 **12.
            INCOME TAXES**
 
 
 
 **2004**
                  
                  
                  **2003**
                  
                  
                  **2002**Federal:Current
                  
                  
                  
                  
                  
                  
                  
                  $
                  (4,633
                  )Deferred
                  
                  $
                  18,941
                  
                  $
                  19,812
                  
                  
                  12,58218,941
                  
                  
                  19,812
                  
                  
                  7,949State:Current
                  
                  
                  520
                  
                  
                  237
                  
                  
                  148Deferred
                  
                  
                  5,086
                  
                  
                  3,930
                  
                  
                  1,4435,606
                  
                  
                  4,167
                  
                  
                  1,591Income
                      tax expense
                  
                  $
                  24,547
                  
                  $
                  23,979
                  
                  $
                  9,540
 
 
 
 **2004**
                  
                  **2003**
                  
                  **2002**Federal
                      income tax expense at statutory rate
                  
                  $
                  22,190
                  
                  $
                  21,041
                  
                  $
                  6,030State
                      income tax expense, net of federal benefit
                  
                  
                  3,644
                  
                  
                  2,709
                  
                  
                  1,030Other
                  
                  
                  (1,287
                  )
                  
                  229
                  
                  
                  992Discharge
                    of indebtedness
                  
                  
                  
                  
                  
                  
                  
                  
                  1,488Income
                      tax expense
                  
                  $
                  24,547
                  
                  $
                  23,979
                  
                  $
                  9,540
 
 The
            cancellation of debt payable by Shuttle America to an entity controlled
            by
            Wexford Capital LLC is taxable for income tax purposes, but contributed
            capital
            for financial reporting, and therefore, increases the 2002 effective
            tax
            rate.
  -64-
 **2004**
                  
                  
                  **2003****DEFERRED
                      TAX ASSETS**Current:Nondeductible
                      accruals
                  
                  $
                  4,553
                  
                  $
                  3,062Nondeductible
                      accrued interest
                  
                  
                  1,351
                  
                  
                  3,895Asset
                      impairment expenses
                  
                  
                  
                  
                  
                  1,150Prepaid
                      rent
                  
                  
                  524
                  
                  
                  3906,428
                  
                  
                  8,497Noncurrent:Nondeductible
                      reserves
                  
                  
                  2,920
                  
                  
                  2,920Nondeductible
                      accruals
                  
                  
                  1,868
                  
                  
                  153Treasury
                      locks
                  
                  
                  2,793Alternative
                      minimum tax credit
                  
                  
                  457
                  
                  
                  457Net
                      operating loss carryforward
                  
                  
                  142,874
                  
                  
                  61,094Prepaid
                      rent
                  
                  
                  6,284
                  
                  
                  4,680Deferred
                      credits and sale leaseback gain
                  
                  
                  7,831
                  
                  
                  7,662Valuation
                    allowance
                  
                  
                  (8,119)
                  
                  
                  (8,119)156,908
                  
                  
                  68,847Total
                      assets
                  
                  
                  163,336
                  
                  
                  77,344**DEFERRED
                      TAX LIABILITIES**Noncurrent:Accelerated
                      depreciation and fixed asset basis differences for
                      tax purposes
                  
                  
                  (213,864
                  )
                  
                  (107,381
                  )Total
                      noncurrent
                      deferred tax liability
                  
                  
                  (56,956
                  )
                  
                  (38,534
                  )Total
                      deferred tax liability
                  
                  $
                  (50,528
                  )
                  $
                  (30,037
                  )
 
 Deferred
              tax
              assets include benefits expected to be realized from the utilization
              of
              alternative minimum tax credit carryforwards of $457, which do not
              expire, and
              net operating loss carryforwards of $362,272, which begin expiring
              in 2022.
              Approximately $27,000 of net operating loss carryforwards are limited
              under
              Internal Revenue Code Section 382, and approximately $3,800 is expected
              to be
              realized prior to expiration.
  -65-
 **13.
              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 following method and assumptions are used to estimate
              the fair
              value of each class of financial instruments:
 
 ***Long-term
              debt*** —The
              fair
              value 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, 2004, the carrying value of long-term debt was
              greater than
              its fair value by approximately $67,000. ****** As
              of
              December 31, 2003 the carrying value of long-term debt approximated
              the fair
              value.
 
 ***Subordinated
              notes payable to affiliates*** —It
              is
              not practicable to estimate fair value of related party financial instruments
              because the related parties most likely have investment strategies
              and
              expectations different from unrelated third parties.
 
 **14.
              BENEFIT PLAN—401(k)**
 
 Republic
              has
              a defined contribution retirement plan covering substantially all eligible
              employees. The Company matches up to 6.0% 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 15% and after-tax contributions of up to 10%
              of their
              annual compensation. The Company's expense under this plan was $1,128,
              $540, and
              $428 for the years ended December 31, 2004, 2003 and 2002, respectively.
  **15.
              IMPAIRMENT LOSS AND ACCRUED AIRCRAFT RETURN COSTS**
  In
              connection
              with the Company’s plan to fly only regional jets under fixed fee code-share
              agreements and market conditions for turboprop aircraft in the air
              transportation industry, impairment losses of $6,400 in 2002 and $2,931
              in 2003
              were recorded to reduce the carrying values of Saab 340 aircraft and
              related
              spare parts and supplies to estimated fair values. Estimated fair value
              of Saab
              340 aircraft are based on quotations from aircraft dealers,
              less selling
              costs. Net realizable value of spare parts and supplies is based
              on
              quotations from aircraft parts manufacturers and dealers. In 2004,
              the Company
              recorded additional impairment losses of $416 on Saab 340 aircraft
              and related
              spare parts and supplies and $1,255 for intangible assets related to
              routes
              discontinued by US Airways.
 
 Pursuant
              to
              the aircraft lease agreements, the Company is required 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 decreases the accrual for actual costs incurred and adjusts
              the accrual
              for its revised estimate of expected return costs.
 
 The
              following
              table reflects impairment costs and accrued aircraft return costs for
              the year
              ended December 31, 2002, 2003 and 2004.
 **Description****of
                          Charge**
                      
                      
                      **Reserve**
                        **at
                          J****an.****1,
                          2002**
                      
                      
                      **2002
                          Provision Charged to****Expense**
                      
                      
                      **2002****Payments**
                      
                      
                      **Reserve****at 
                          Dec.****31, 2002**
                      
                      
                      **2003
                          Provision (Adjustment) Charged to****Expense**
                      
                      
                      **2003****Payments**
                      
                      
                      **Reserve
                          at**
                        **Dec.
                          31,****2003**
                      
                      
                      **Provision**
                        **(Adjustment)**
                        **Charged
                          to**
                        **Expense**
                      
                      
                      **2004****Payments**
                      
                      
                      **Reserve at**
                        **Dec.****31,
                          2004**Aircraft
                          return costs:Costs
                          to return aircraft
                      
                      
                      6,032
                      
                      
                      796
                      
                      
                      (1,122
                      )
                      
                      5,706
                      
                      
                      (175
                      )
                      
                      (278
                      )
                      
                      5,253
                      
                      
                      (230)
                      
                      
                      (424
                      )
                      
                      4,599Impairment
                          loss
                      
                      
                      
                      
                      
                      6,400
                      
                      
                      
                      
                      
                      
                      
                      
                      2,931
                      
                      
                      
                      
                      
                      
                      
                      
                      1,671Total
                      
                      $
                      6,032
                      
                      $
                      7,196
                      
                      $
                      (1,122
                      )
                      $
                      5,706
                      
                      $
                      2,756
                      
                      $
                      (278
                      )
                      $
                      5,253
                      
                      
                      1,441
                      
                      $
                      $(424
                      )
                      $
                      4,599
  -66-
 **16.
            VALUATION AND QUALIFYING ACCOUNTS**
 
 **Description**
                    
                    **Balance
                        at**
                      **Beginning**
                      **of
                        Year**
                    
                    **Additions**
                      **Charged
                        to**
                      **Expense**
                    
                    **Deductions**
                    
                    **Balance
                        at**
                      **End**
                      **of
                        Year****Allowance
                        for doubtful accounts
                        receivables:**December
                        31, 2004
                    
                    $
                    819
                    
                    $
                    3,385(1
                    )
                    $
                    (335)(3
                    )
                    $
                    3,869December
                        31, 2003
                    
                    
                    2,231
                    
                    
                    637
                    
                    
                    (2,049)(2)
                    (3)
                    
                    819December
                        31, 2002
                    
                    
                    415
                    
                    
                    1,816(2
                    )
                    
                    
                    
                    
                    2,231
 
 (1)
                  In 2004, Chautauqua recorded an allowance for
                    doubtful
                    accounts of $3,200 because of US Airways’
                    bankruptcy.
 
 (2)
                  In 2002, Chautauqua recorded an allowance for
                    doubtful
                    accounts of $1,504 because of US Airways' bankruptcy.
                    Chautauqua
                    wrote off the receivable in 2003.
 
 (3)
                  Uncollectible accounts written off net of
                    recoveries.
  17.
              SUBSEQUENT EVENTS
 -67-
 18. 
                RESTATEMENT
    **For
                      the years ended:**
                    
                    **2004**
                    
                    **2003**
                    
                    **2002****As 
                        Previously**
                      **Reported**
                    
                    **As Restated**
                    
                    **As
                        Previously**
                      **Reported**
                    
                    **As Restated**
                    
                    **As
                        Previously**
                      **Reported**
                    
                    **As Restated**Passenger
                        revenue
                    
                    $
                    579,950
                    
                    $
                    636,389
                    
                    $
                    452,566
                    
                    $
                    479,343
                    
                    $
                    349,036
                    
                    $
                    353,209Total
                        revenue
                    
                    
                    589,885
                    
                    
                    646,324
                    
                    
                    465,503
                    
                    
                    492,280
                    
                    
                    352,024
                    
                    
                    356,197Aircraft
                        fuel expense
                    
                    
                    120,634
                    
                    
                    174,208
                    
                    
                    81,759
                    
                    
                    106,840
                    
                    
                    62,226
                    
                    
                    64,869Landing
                        fees expense
                    
                    
                    21,831
                    
                    
                    24,201
                    
                    
                    17,695
                    
                    
                    19,098
                    
                    
                    12,369
                    
                    
                    13,053Aircraft
                        and engine rent expense
                    
                    
                    74,167
                    
                    
                    74,514
                    
                    
                    67,004
                    
                    
                    67,350
                    
                    
                    64,929
                    
                    
                    64,991Insurance
                        and taxes expense
                    
                    
                    13,037
                    
                    
                    13,186
                    
                    
                    12,911
                    
                    
                    12,859
                    
                    
                    16,319
                    
                    
                    17,103Total
                        operating expenses
                    
                    $
                    498,540
                    
                    $
                    554,979
                    
                    $
                    382,792
                    
                    $
                    409,569
                    
                    $
                    322,453
                    
                    $
                    326,626
 
 ITEM
              9. CHANGES IN AND DISAGREEMENTS WITH
              ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
    **ITEM
              9A. CONTROLS****AND
              PROCEDURES**
    **ITEM
            9B. OTHER**INFORMATION
  None
  -68-
 **PART III**
   ****ITEM
            10. DIRECTORS**AND EXECUTIVE OFFICERS OF
            THE REGISTRANT**
  
  Name
                  Age
                  PositionBryan K.
                      Bedford
                  43
                  Chairman
                      of the Board, President and Chief
                      Executive OfficerRobert H.
                      Cooper
                  45
                  Executive
                      Vice President, Chief Financial Officer, Treasurer
                      and SecretaryWayne C.
                      Heller
                  46
                  Executive
                      Vice President—Chief Operating
                      Officer of ChautauquaArthur H.
                      Amron
                  48
                  DirectorLawrence
                      J. Cohen
                  49
                  DirectorCharles
                      E. Davidson
                  51
                  DirectorJoseph M.
                      Jacobs
                  51
                  DirectorDouglas J.
                      Lambert
                  47
                  DirectorMark
                      E. Landesman
                  44
                  DirectorJay L.
                      Maymudes
                  43
                  DirectorMark
                      L. Plaumann
                  49
                  Director
 
  
  
  
  
  
  -69-
 
  
  
  
  
  
  Audit
            Committee
    Code
            of Ethics
  republic-airways.net
  -70-
 Section
            16(a) Beneficial Ownership Reporting
            Compliance
  
   
  **ITEM
            11. Executive Compensation**
  
  **Name
                      and position**
                  ****
                  **Year**
                  ****
                  **Salary**
                  ****
                  **Bonus**
                  ****
                  **All
                      Other**
                    **Compensation(1)**
                  ****
                  **Long
                      Term**
                    **Compensation**
                    **Number
                      of**
                    **Options
                      Granted**Bryan K.
                      Bedford
                    Chairman, President &
                    Chief Executive Officer
                  
                  
                  2004
                    2003
                  
                  $
                  340,000
                    324,308
                  
                  $
                  463,000
                    360,000
                  
                  $
                  4,500
                    4,000
                  
                  
                  518,100
                    0Robert H.
                      Cooper
                    Executive Vice President, Chief Financial
                      Officer, Treasurer and Secretary
                  
                  
                  2004
                    2003
                  
                  
                  175,000
                    175,000
                  
                  
                  230,000
                    250,000
                  
                  
                  354,115
                    3,750
                  
                  
                  255,960
                    0Wayne C.
                      Heller
                    Executive Vice President, Chief Operating
                      Officer of Chautauqua
                  
                  
                  2004
                    2003
                  
                  
                  170,000
                    140,000
                  
                  
                  210,000
                    225,000
                  
                  
                  174,080
                    3,500
                  
                  
                  194,160
                    0
    Aggregated
            Option Values as of December 31,
            2004
 -71-
  
 ****
                  ****
                  ****
                  ****
                  **Number
                      of Securities**
                    **Underlying
                      Unexercised**
                    **Options
                      at Year End**
                  ****
                  **Value
                      of Unexercised**
                    **In-the-Money
                      Options at**
                    **Year
                      End ($)**
                  ********
                  ****
                  **Shares**
                    **Acquired**
                    **on**
                    **Exercise**
                  ****
                  **Value**
                    **Realized**
                  ****
                  **Unexercisable**
                  ****
                  **Exercisable**
                  ****
                  **Unexercisable**
                  ****
                  **Exercisable**Bryan
                      K. Bedford
                  
                  
                  341,475
                  
                  $
                  875,852
                  
                  
                  483,338
                  
                  
                  893,288
                  
                  $
                  130,501
                  
                  $
                  9,899,594Robert
                      H. Cooper
                  
                  
                  85,369
                  
                  $
                  218,965
                  
                  
                  238,965
                  
                  
                  231,626
                  
                  $
                  64,521
                  
                  $
                  2,477,138Wayne
                      C. Heller
                  
                  
                  81,912
                  
                  $
                  183,220
                  
                  
                  184,890
                  
                  
                  127,358
                  
                  $
                  49,920
                  
                  $
                  1,362,877
  Option
            Grants
  
  **Potential
                      Realizable Value at Assumed Annual Rates of
                      Stock Price Appreciation for Option Term**
                  ********
                  ****
                  **Number
                      of**
                    **Securities**
                    **Underlying**
                    **Options**
                    **Granted**
                  ****
                  **Percent
                      of**
                    **Total
                      Options**
                    **Granted
                      to**
                    **Employees
                      in**
                    **Fiscal
                      Year**
                  ****
                  **Exercise
                      Price**
                  ****
                  **Expiration
                      Date**
                  ****
                  **5%**
                  ****
                  **10%**Bryan
                      K. Bedford
                  
                  
                  518,100
                  
                  
                  38.6
                  %
                  $
                  13.00
                  
                  
                  12/27/2014
                  
                  $
                  4,236,000
                  
                  $
                  10,734,000Robert
                      H. Cooper
                  
                  
                  255,960
                  
                  
                  19.1
                  %
                  $
                  13.00
                  
                  
                  12/27/2014
                  
                  $
                  2,093,000
                  
                  $
                  5,303,000Wayne
                      C. Heller
                  
                  
                  194,160
                  
                  
                  14.5
                  %
                  $
                  13.00
                  
                  
                  12/27/2014
                  
                  $
                  1,587,000
                  
                  $
                  4,023,000
  -72-
 Employment
            Agreements
  
  
  
  Stock
            Options
  
  The
            2002 Equity Incentive Plan
  
  Type
            of Awards
  Available Shares.
  ligibility
  -73-
 Administration
  Stock
              Options
  Restricted
            Stock and Restricted Stock Units.
  Other
            Equity-Based Awards.
  Non-Employee
            Director Stock Options. 1 24 1 48 1 12
  -74-
 Adjustments
            Upon Changes in Capitalization.
  Nonassignability
  Amendment
            and Termination.
  U.S.
            Federal Income Tax Consequences.
  
  
  
  
  -75-
 
  
  **Compensation
              Committee Interlocks and Insider Participation**
 
 Lawrence
              J. Cohen, Mark L Plaumann and Jay L. Maymudes constitute the Company's
              Compensation Committee. None of our executive officers serve as a member
              of the
              board of directors or compensation committee of any entity that has
              any
              executive officer serving as a member of our Board of Directors or
              Compensation
              Committee.
 **Report
              of the Compensation Committee on Executive Compensation**
  The
              Compensation Committee of our Board of Directors was formed in May
              2004 and
              currently consists of Messrs. Cohen, Plaumann and Maymudes. The Compensation
              Committee is charged with recommending to the Board of Directors the
              compensation for the Company's executives and administering the Company's
              stock
              incentive and benefit plans.
  **Plans
              on Executive Compensation**
  The
              Company and the Compensation Committee believe that executive compensation
              should be closely related to increased stockholder value. One of the
              Company's
              strengths contributing to its successes is a strong management team,
              many of
              whom have been with the Company for a number of years. The compensation
              program
              is designed to enable the Company to attract, retain and reward capable
              employees who can contribute to the continued success of the Company,
              principally by linking portions of compensation with the attainment
              of key
              business objectives. Equity participation and a strong alignment to
              stockholder's interests are key elements of the Company's compensation
              philosophy. Accordingly, the Company's executive compensation program
              is
              designed to provide competitive compensation, support the Company's
              strategic
              business goals and reflect the Company's performance.
  **The
              compensation program reflects the following principles:**
  Compensation
              should encourage increased stockholder value.
  Compensation
              programs should reflect and promote the Company's values and reward
              individuals
              for outstanding contributions toward business goals.
  Compensation
              programs should enable the Company to attract and retain highly qualified
              professionals.
  Our
              executive
              compensation is comprised of two components, base salary and incentives,
              each of
              which is intended to serve the overall compensation philosophy.
  Base
              Salary. The Company's salary levels are intended to be consistent with
              competitive pay practices and level of responsibility, with salary
              increases
              reflecting competitive trends, the overall financial performance and
              resources
              of the Company, general economic conditions as well as a number of
              factors
              relating to the particular individual, including the performance of
              the
              individual executive, and level of experience, ability and knowledge
              of the
              job.
  Incentives.
              Incentives generally consist of stock option and cash awards paid to
              the
              Company's senior management executives. Non-guaranteed portions of
              bonuses
              payable to senior executives are generally tied to the overall performance
              of
              the executive and Company.
  The
              Committee strongly believes that the compensation program should provide
              employees with an opportunity to increase their ownership and potentially
              gain
              financially from Company stock price increases. By this approach, the
              best
              interests of stockholders, executives and employees will be closely
              aligned.
              Therefore, executives and other employees are eligible to receive stock
              options,
              giving them the right to purchase shares of common stock of the Company
              at a
              specified price in the future. The grant of options is based in large
              part on a
              key employee's potential contribution to the Company's growth and profitability,
              based on the Committee's discretionary evaluation. Options are granted
              at the
              prevailing market value of the Company's common stock and will only
              have value
              if the Company's stock price increases. Generally, grants of options
              vest over a
              period of time and executives must be employed by the Company for such
              options
              to vest.
  -76-
 **Compensation
              of the Chief Executive Officer**
  As
              Chief
              Executive Officer and Chairman of the Board, Mr. Bedford is compensated
              pursuant
              to an employment agreement with a term through June 2007. This agreement
              was
              amended in December 2004 and currently provides for an annual salary
              of
              $340,000, with $170,000 of annual deferred compensation through the
              term of the
              agreement. In addition, Mr. Bedford is eligible for an annual bonus
              in such
              amounts as the board of directors may determine in its direction.
  The
              aggregate compensation of Mr. Bedford was deemed appropriate by the
              Compensation
              Committee considering the overall performance of the Company and Mr.
              Bedford.
  Members
              of the Compensation Committee
  Lawrence
              J. Cohen
  Jay
              L.
              Maymudes
  Mark
              L.
              Plaumann
 Performance
            Graph
 The
              above graph compares the performance of the Company from May 27, 2004
              through
              December 31, 2004, 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 4510-4519), including regional airlines,
              whose stocks trade on the Nasdaq, for the same period.
  -77-
 ****ITEM
            12. SECURITY**OWNERSHIP OF CERTAIN
            BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER
            MATTERS**
            
  Name
                      and Address
                  
                  Shares
                      Beneficially
                    Owned
                  
                  Percent
                      Beneficially Owned(1)WexAir
                      LLC(2)
                  
                  
                  19,308,756
                  
                  
                  59.5
                  %Bryan
                      K. Bedford(3)
                  
                  
                  1,262,812
                  
                  
                  3.8
                  %Robert
                      H. Cooper(4)
                  
                  
                  340,616
                  
                  
                  1.0
                  %Wayne
                      C. Heller(5)
                  
                  
                  220,898
                  
                  
                  *Arthur
                      H. Amron
                  
                  
                  4,163
                  
                  
                  *Charles
                      E. Davidson(6)
                  
                  
                  19,312,919
                  
                  
                  59.5
                  %Joseph
                      M. Jacobs(6)
                  
                  
                  19,312,919
                  
                  
                  59.5
                  %Douglas
                      J. Lambert(7)
                  
                  
                  4,163
                  
                  
                  *Jay
                      L. Maymudes
                  
                  
                  4,163
                  
                  
                  *Lawrence
                      J. Cohen(8)
                  
                  
                  4,163
                  
                  
                  *Mark
                      E. Landesman(9)
                  
                  
                  4,163
                  
                  
                  *Mark
                      L. Plaumann(10)
                  
                  
                  4,163
                  
                  
                  *All
                      directors and executive officers as a group (11
                      persons)(11)
                  
                  
                  21,166,386
                  
                  
                  62.5
                  %Delta
                      Air Lines, Inc.(12)
                  
                  
                  3,435,000
                  
                  
                  9.6
                  %
   -78-
               th th
           **A******
                    
                    
                    **B**
                    
                    
                    **C****Plan
                        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 comumn A).**Equity
                        compensation plans approved by security holders
                    
                    
                    6,216,864
                    
                    $
                    3.47
                    
                    
                    1,727,600Equity
                        compensation plans not approved by security
                        holdersTotal
                    
                    
                    6,216,864
                    
                    $
                    3.47
                    
                    
                    1,727,600
    -79-
 ****ITEM
            13. CERTAIN**RELATIONSHIPS AND RELATED
            TRANSACTIONS**
  Arrangements
            with Solitair Corp.
  
  
  Transactions
            with Wexford Capital LLC
  
  
  
  
  
  
  
  -80-
 ****ITEM
            14. PRINCIPAL**ACCOUNTING FEES AND
            SERVICES**
  
  Audit
            Fees.
  Audit-Related
            Fees.
  Tax
            Fees
  All
            Other
            Fees
  
  Pre-Approval
            Policies
  -81-
 ****PART
            IV****
  **ITEM
            15. EXHIBITS**,
            FINANCIAL STATEMENTS SCHEDULES
  **(a)**
                  **Documents filed as part of this
                    report:**
    **(b)**
                  **Exhibits**
   **Exhibit**
                      **No.**
                    
                    **Description**1.1
                    
                    Form
                        of Purchase Agreement.(viii)3.1
                    
                    Amended
                        and Restated Certificate of
                        Incorporation.(i)3.2
                    
                    Amended
                        and Restated Bylaws.(i)4.1
                    
                    Specimen
                        Stock Certificate.(i)10.1
                    
                    2002
                        Equity Incentive Plan.(i)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.(v)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)10.7
                    
                    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)
   -82-
 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 February 19,
                            2001.(i)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 Aeronáutica 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. and Solitair
                            Corp., and consented to by Embraer-Empresa Brasileira
                            de Aeronáutica 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 Aeronáutica 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 Aeronáutica 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 Aeronáutica S.A.
                            and Republic Airways Holdings Inc., dated as of December 18,
                            2002.(i)10.12(e)†
                        
                        Amendment
                            Number 4 to Amended and Restated Purchase Agreement
                            GCT-025/98, by and between Embraer-Empresa Brasileira
                            de Aeronáutica 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 Aeronáutica 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 between Embraer-Empresa Brasileira
                            de Aeronáutica S.A.
                            and Republic Airways Holdings Inc., dated as of October 31,
                            2003.(i)
   -83-
 10.12(h)†
                        
                        Amendment
                            Number 7 to Amended and Restated Purchase Agreement
                            GCT-025/98, by and between Embraer-Empresa Brasileira
                            de Aeronáutica 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 Aeronáutica 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 Aeronáutica 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 Aeronáutica S.A., dated as of
                            January 17, 2005.(vii)10.13†
                        
                        Amended
                            and Restated Letter Agreement GCT-026/98, by and
                            between Embraer-Empresa Brasileira de Aeronáutica 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 Aeronáutica 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 Aeronáutica 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 Aeronáutica 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 Aeronáutica 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 Airways Holdings Inc. and
                            Embraer-Empresa
                            Brasileira de Aeronáutica 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 Aeronáutica 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 Aeronáutica 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 Aeronáutica 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)10.17
                        
                        Amendment
                            No. 1 to the Term Note, dated as of March 27,
                            2002, by and between Fleet Capital Corporation and Chautauqua
                            Airlines,
                            Inc.(i)
   -84-
 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 Agência
                            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)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, Agência 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 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, Agência 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 Agência
                            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
                            June 11, 2002, by and between Chautauqua Airlines,
                            Inc. and Agência
                            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)
  -85-
  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)10.32
                          
                          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)10.34
                          
                          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)10.35
                          
                          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)10.36
                          
                          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)10.39†
                          
                          Purchase
                              Agreement DCT-014/2004, by and between Empresa
                              Brasileira de Aeronáutica 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 Aeronáutica S.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 Aeronáutica S.A. and Republic Airline Inc.,
                              dated as of dated July 8, 2004.(iii)
   -86-
 10.39(c)†
                          
                          Amendment
                              No. 3 to Purchase Agreement DCT-014/2004 between
                              Embraer-Empresa Brasileira de Aeronáutica 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 Aeronáutica 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 Aeronáutica S.A. and Republic Airline Inc.,
                              dated as of September 29, 2004.(iii)10.39(f)†
                          
                          Amendment
                              No. 6 to Purchase Agreement DCT-014/2004 between
                              Embraer-Empresa Brasileira de Aeronáutica 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 Aeronáutica S.A. and Republic Airline Inc.,
                              dated as of December 23, 2004.(viii)10.40†
                          
                          Letter
                              Agreement DCT-015/2004, by and between Republic Airline
                              Inc. and Embraer-Empresa Brasileira de Aeronáutica 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
                              Aeronáutica 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
                              Aeronáutica S.A., dated as of December 23, 2004.(viii)10.41†
                          
                          United
                              Express Agreement, by and between United Air Lines,
                              Inc.
                              and Republic Airline Inc., dated as of February 9,
                              2004.(i)10.41(a)†
                          
                          Amendment
                              No. 1 to United Express Agreement, by and between
                              United Air Lines, Inc. and Republic Airline Inc., dated
                              as of
                              February 13, 2004.(i)10.41(b)†
                          
                          Amendment
                              No. 2 to United Express Agreement, by and between
                              United Air Lines, Inc. and Republic Airline, Inc.,
                              dated as of
                              July 6, 2004.(ii)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)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.
 
 †
                    Portions
                        of the indicated document have been afforded
                        confidential treatment and have been 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.
   -87-
 SIGNATURES
 
 
 REPUBLIC
                      AIRWAYS HOLDINGS INC.(Registrant)Dated:
                      November 3, 2005
                  By:
                      /s/ Bryan K. BedfordBryan
                      K. BedfordChairman
                      of the Board, Chief Executive Officer and
                      President(principal
                      executive officer)
 
  
 **Signature**
                  **Title**
                  **Date**/s/
                    Bryan K. BedfordBryan
                      K. Bedford
                  Chairman
                      of the Board, Chief Executive Officer and President
                      (Principal Executive Officer)
                  November
                      3, 2005/s/
                    Robert H. CooperRobert
                      H. Cooper
                  Executive
                      Vice President and Chief Financial Officer (Principal
                      Financial and Accounting Officer)
                  November
                            3, 2005/s/
                    Arthur H. AmronArthur
                      H. Amron
                  Director
                  November
                            3, 2005/s/
                    Charles E. DavidsonCharles
                      E. Davidson
                  Director
                  November
                            3, 2005/s/
                    Joseph M. JacobsJoseph
                      M. Jacobs
                  Director
                  November
                            3, 2005/s/
                    Douglas J. LambertDouglas
                      J. Lambert
                  Director
                  November
                            3, 2005/s/
                    Jay L. MaymudesJay
                      L. Maymudes
                  Director
                  November
                            3, 2005/s/
                    Lawrence J. CohenLawrence
                      J. Cohen
                  Director
                  November
                            3, 2005/s/
                    Mark E. LandesmanMark
                      E. Landesman
                  Director
                  November
                            3, 2005/s/
                    Mark L. PlaumannMark
                      L. Plaumann
                  Director
                  November
                            3,
                            2005
 -88-