Republic Airways (RJET) 10-Q 2010 Q3 Quarterly report

 UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED September 30, 2010

OR

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM TO

COMMISSION FILE NUMBER: 000-49697

REPUBLIC AIRWAYS HOLDINGS INC.

(Exact name of registrant as specified in its charter)

DELAWARE	06-1449146
(State or other jurisdiction of	(I.R.S. Employer Identification Number)
incorporation or organization)

8909 Purdue Road, Suite 300, Indianapolis, Indiana 46268

(Address of principal executive offices) (Zip Code)

(317) 484-6000

(Registrant’s telephone number, including area code)

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or 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.

þ Yes  ¨ No

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

¨  Yes    ¨ No

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

 Large accelerated filer ¨  Accelerated filer þ Non-accelerated filer ¨  Smaller reporting company ¨

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

¨  Yes    þ No

Number of shares of Common Stock outstanding as of the close of business on November 8, 2010:  34,373,023.

TABLE OF CONTENTS

	Part I - Financial Information
Item 1.	Financial Statements:
	Condensed Consolidated Balance Sheets as of September 30, 2010 (Unaudited) and December 31, 2009	3
	Condensed Consolidated Statements of Operations (Unaudited) for the Three and Nine Months Ended September 30, 2010 and 2009	4
	Condensed Consolidated Statements of Cash Flows (Unaudited) for the Nine Months Ended September 30, 2010 and 2009	5
	Notes to Condensed Consolidated Financial Statements (Unaudited)	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	11
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	23
Item 4.	Controls and Procedures	23
	Part II - Other Information
Item 1A.	Risk Factors	24
Item 6.	Exhibits	24
	Signatures	25
Exhibit 10.67*    Purchase Agreement COM 0190-10, by and between Embraer - Empresa Brasileira de Aeronáutica S.A. and Republic Airline Inc., dated as of November 3, 2010.
Exhibit 10.68*    Letter Agreement COM 0191-10, by and between Embraer - Empresa Brasileira de Aeronáutica S.A. and Republic Airline Inc., dated as of November 3, 2010.
Exhibit 31.1 Certification by Chief Executive Officer
Exhibit 31.2  Certification by Chief Financial Officer
Exhibit 32.1  Certification by Chief Executive Officer
Exhibit 32.2  Certification by Chief Financial Officer

* A request for confidential treatment was filed for certain portions of the indicated document. Certain portions have been omitted and filed separately with the Commission as required by Rule 24b-2 of the Commission.

All other items of this report are inapplicable

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PART I. FINANCIAL INFORMATION

Item 1: Financial Statements

REPUBLIC AIRWAYS HOLDINGS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share amounts)

	September 30,			December 31,
	2010			2009
Assets	(Unaudited)
Current Assets:
Cash and cash equivalents	$	199,031		$	157,532
Restricted cash		191,382			192,700
Receivables—net of allowance for doubtful accounts of $1,323 and $743, respectively		74,097			69,510
Inventories—net		87,986			81,391
Prepaid expenses and other current assets		62,211			42,568
Assets held for sale		77,847			25,649
Deferred income taxes		21,023			21,023
Total current assets		713,577			590,373
Aircraft and other equipment—net		3,179,440			3,418,160
Maintenance deposits		145,991			143,868
Other intangible assets—net		147,804			166,025
Other assets		160,166			132,046
Total	$	4,346,978		$	4,450,472
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt	$	299,111		$	243,259
Accounts payable		110,674			106,178
Air traffic liability		208,859			138,242
Deferred frequent flyer revenue		50,999			46,213
Accrued liabilities		198,676			211,632
Total current liabilities		868,319			745,524
Long-term debt—less current portion		2,333,504			2,546,160
Deferred frequent flyer revenue		104,035			108,545
Deferred credits and other non current liabilities		104,557			97,788
Deferred income taxes		427,822			434,575
Total liabilities		3,838,237			3,932,592
Commitments and contingencies
Stockholders' Equity:
Preferred stock, $.001 par value; 5,000,000 shares authorized; no shares issued or outstanding      outstanding		-			-
Common stock, $.001 par value; one vote per share;150,000,000 shares authorized;
44,071,324 and 43,931,116 shares issued and 34,318,528 and 34,598,683
shares outstanding, respectively		44			44
Additional paid-in capital		302,407			299,257
Treasury stock, 9,333,266 and 9,332,433 shares at cost, respectively		(181,827	)		(181,820	)
Accumulated other comprehensive loss		(1,897	)		(2,172	)
Accumulated earnings		390,014			402,571
Total stockholders' equity		508,741			517,880
Total	$	4,346,978		$	4,450,472

See accompanying notes to the condensed consolidated financial statements (unaudited).

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REPUBLIC AIRWAYS HOLDINGS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

(In thousands, except per share amounts)

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2010			2009			2010			2009
OPERATING REVENUES:
Fixed-fee service	$	261,648		$	281,415		$	772,834		$	913,524
Passenger service		429,939			64,876			1,170,448			70,388
Cargo and other		20,278			13,336			60,579			20,982
Total operating revenues		711,865			359,627			2,003,861			1,004,894
OPERATING EXPENSES:
Wages and benefits		143,953			76,864			423,876			207,446
Aircraft fuel		153,968			39,477			458,553			100,179
Landing fees and airport rents		46,205			20,026			129,444			55,434
Aircraft and engine rent		60,687			33,592			182,309			95,400
Maintenance and repair		68,778			58,852			190,057			151,487
Insurance and taxes		11,791			6,648			33,559			19,930
Depreciation and amortization		50,775			38,398			153,113			112,002
Promotion and sales		35,056			5,341			103,368			5,341
Goodwill impairment		-			-			-			13,335
Other impairment charges		-			-			11,473			-
Other		67,630			43,834			221,549			109,340
Total operating expenses		638,843			323,032			1,907,301			869,894
OPERATING INCOME		73,022			36,595			96,560			135,000
OTHER INCOME (EXPENSE):
Interest expense		(38,213	)		(34,862	)		(115,839	)		(105,246	)
Other—net		323			2,779			753			10,418
Total other expense		(37,890	)		(32,083	)		(115,086	)		(94,828	)
INCOME(LOSS) BEFORE INCOME TAXES		35,132			4,512			(18,526	)		40,172
INCOME TAX EXPENSE(BENEFIT)		13,845			1,864			(5,969	)		23,894
NET INCOME(LOSS)		21,287			2,648			(12,557	)		16,278
Add: Net loss attributable to noncontrolling interest in		-			(623	)		-			(3,270	)
Mokulele Flight Service Inc.
NET INCOME(LOSS) OF THE COMPANY	$	21,287		$	3,271		$	(12,557	)	$	19,548
NET INCOME(LOSS) PER COMMON SHARE - BASIC	$	0.62		$	0.09		$	(0.37	)	$	0.57
NET INCOME(LOSS) PER COMMON SHARE - DILUTED	$	0.58		$	0.09		$	(0.37	)	$	0.57

See accompanying notes to the condensed consolidated financial statements (unaudited).

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REPUBLIC AIRWAYS HOLDINGS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(In thousands)

	Nine Months Ended
	September 30,
	2010			2009
NET CASH FROM OPERATING ACTIVITIES	$	166,466		$	133,519
INVESTING ACTIVITIES:
Purchase of aircraft and other equipment		(28,365	)		(28,448	)
Proceeds from sale of aircraft and other equipment		73,935			72,708
Aircraft deposits		(22,150	)		(4,000	)
Aircraft deposits returned		-			7,405
Fundings of notes receivable		-			(61,025	)
Acquisition of new business, net of cash acquired		-			(2,463	)
Other, net		15,599			(3,740	)
NET CASH FROM INVESTING ACTIVITIES		39,019			(19,563	)
FINANCING ACTIVITIES:
Payments on debt		(156,853	)		(100,302	)
Proceeds from debt issuance		54,735			-
Payments on early extinguishment of debt		(60,045	)		(56,772	)
Payments of debt issue costs		(1,816	)		(1,013	)
Other equity transactions		(7	)		-
NET CASH FROM FINANCING ACTIVITIES		(163,986	)		(158,087	)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		41,499			(44,131	)
CASH AND CASH EQUIVALENTS—Beginning of period		157,532			129,656
CASH AND CASH EQUIVALENTS—End of period	$	199,031		$	85,525
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
CASH PAID FOR INTEREST AND INCOME TAXES:
Interest paid	$	105,096		$	99,595
Income taxes paid		568			417
NON-CASH INVESTING & FINANCING TRANSACTIONS:
Aircraft, inventories, and other equipment purchased through financing arrangements from manufacturer		16,434			64,187
Parts, training and lease credits from aircraft manufacturer		(16,630	)		(15,706	)
Liabilities assumed in Mokulele transaction		-			9,300
Conversion of Mokulele note to equity		-			3,000
Liabilities assumed in Midwest business acquisition		-			184,558
Convertible debt issued in business acquisition		-			25,000

See accompanying notes to the condensed consolidated financial statements (unaudited).

5

REPUBLIC AIRWAYS HOLDINGS INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

1. Organization and Business 

The accompanying financial statements of Republic Airways Holdings Inc. (“Republic” or the “Company”) have been prepared in accordance with generally accepted accounting principles for interim financial information and pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. These financial statements include the accounts of Republic and its wholly-owned subsidiaries including Frontier Airlines Holdings, Inc. (“Frontier”), Chautauqua Airlines, Inc. (“Chautauqua”), Republic Airline Inc. (“Republic Airline”), Shuttle America Corporation (“Shuttle America”), and Midwest Air Group, Inc. (“Midwest”).  Unless the context indicates otherwise, the terms “the Company,” “we,” “us,” or “our,” refer to Republic Airways Holdings Inc. and our subsidiaries.  

In the opinion of management, these financial statements reflect all adjustments that are necessary to present fairly the results of operations for the interim periods presented. All adjustments are of a normal recurring nature, unless otherwise disclosed. The results of operations for the three and nine months ended September 30, 2010 are not necessarily indicative of the results that may be expected for the year ending December 31, 2010. These financial statements should be read in conjunction with the Company’s audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2009, filed March 16, 2010.

As of September 30, 2010, the Company’s operating airline subsidiaries offered scheduled passenger service on 1,594 flights daily to 126 cities in 45 states, Canada, Mexico, and Costa Rica under branded operations as Frontier and Midwest, and through fixed-fee code-share agreements with AMR Corp., the parent of American Airlines, Inc. (“American”), Continental Airlines, Inc. (“Continental”), Delta Air Lines, Inc. (“Delta”), United Air Lines, Inc. (“United”), and US Airways, Inc. (“US Airways”) (collectively referred to as “Partners”).

The Company acquired Midwest and Frontier on July 31, 2009 and October 1, 2009, respectively.  The acquisitions provided the Company additional revenue diversity from its traditional fixed-fee services and allowed it to expand operations into branded passenger service.  The purchase price paid was allocated to the tangible and identifiable intangible assets acquired and liabilities assumed from Midwest and Frontier based on their estimated fair values as of the closing dates. The Company has finalized its evaluation of the fair value of the air traffic liability, the deferred frequent flyer revenue, and the income tax implications of these transactions, and there were no adjustments to the purchase price allocation during the current quarter.

On February 4, 2010, the Company announced its intention to wind-down the operations of Lynx Airlines, Inc. (“Lynx”).  The Company recorded approximately $11.6 million of lease termination costs during the nine months ended September 30, 2010.  Additional lease return costs will be accrued ratably over the remaining lease term while the aircraft are operating once such costs are probable and reasonably estimable. The closure of Lynx, which is expected to occur in April 2011, will result in the reduction or reallocation of approximately 175 positions; accordingly, the Company recorded approximately $1.1 million of severance related charges for the nine months ended September 30, 2010.  The remaining six owned Lynx Q400 aircraft were reduced to the lower of carrying value or estimated fair value less cost to sell and classified as held for sale, as the aircraft are removed from service.

During 2010, the Company entered into agreements to lease seven A320 aircraft for six years from the date of delivery.  These aircraft will be delivered between January 2011 and June 2011.

In July 2010, the Company signed a letter of intent to acquire 24 new E190 aircraft with the option to convert any of the aircraft in the order to the larger E195 model. The letter of intent is subject to final documentation, including final commercial terms.  Under the agreement, deliveries would begin in mid 2011.  On November 5, 2010, the Company announced it had placed a firm order for 6 E190 aircraft with Embraer for delivery in 2011 starting in August.  The Company also has conditional firm orders for 18 E190 or E195 aircraft.  Both aircraft types would be configured with STRETCH seating.  These aircraft will be used to replace smaller regional jets in the Company as well as provide flexibility for growth at Frontier through 2013.

In October 2010, the Company entered into agreements to lease three A319 aircraft for eight years from the date of delivery.  These aircraft will be delivered between October and November 2010 and are expected to enter revenue service for Frontier between February and April 2011.

2. Summary of Significant Accounting Policies

Revenue Recognition – Under the Company’s fixed-fee code-share agreements, the Company is reimbursed an amount per aircraft designed to compensate the Company for certain aircraft ownership costs.  The Company has concluded that a component of its fixed-fee service revenue under the agreement discussed above is rental income, inasmuch as the agreement identifies the “right of use” of a specific type and number of aircraft over a stated period of time. The amounts deemed to be rental income during the three months ended September 30, 2010 and 2009 were $79.2 million and $88.8 million.  The amounts deemed to be rental income during the nine months ended September 30, 2010 and 2009 were $238.2 million and $273.7 million, respectively, and have been included in fixed-fee service revenues in the Company’s condensed consolidated statements of operations.

6

Assets Held for Sale – Assets held for sale at September 30, 2010, consist of six Q400 grounded aircraft, flight equipment and spare aircraft parts recorded at the lower of carrying value or their estimated fair value less cost to sell.  In the current year, we sold certain Midwest grounded aircraft, two A318s, and one ERJ170 aircraft for total consideration of $68.5 million.  The Company recorded a loss of approximately $1.0 million and used $60.0 million in proceeds to reduce the related debt secured by these aircraft.

Stockholders’ Equity - The following summarizes the activity of the stockholders’ equity accounts for the period from December 31, 2009 through September 30, 2010.  Additional paid-in capital increased from $299.3 million to $302.4 million due to $3.1 million of stock compensation expense.  Accumulated other comprehensive loss decreased to $1.9 million from $2.2 million due to the reclassification adjustment for loss realized on derivatives, net of tax.  Accumulated earnings decreased from $402.6 million to $390.0 million based on current year to date net loss.  

Net Income (Loss) Per Common Share – The following table is based on the weighted average number of shares outstanding during the period. The following is a reconciliation of the weighted average common shares for the basic and diluted per share computations:

	Three Months Ended				Nine Months Ended
	September 30,		September 30,		September 30,			September 30,
	2010		2009		2010			2009
Basic and diluted income(loss) per share:
Net income(loss) available to common stockholders (000)	$	21,287	$	3,271	$	(12,557	)	$	19,548
Plus income effect of assumed-conversion interest on 8.0%
convertible debt		310		-		-			-
Income (loss) after assumed conversion (000)	$	21,597	$	3,271	$	(12,557	)	$	19,548
Weighted average common shares outstanding		34,318,275		34,448,683		34,294,939			34,448,683
Effect of dilutive securities:
Stock options		111,618		80,007		-			13,109
Convertible debt		2,500,000		-		-			-
Shares used to computed diluted earnings per share		36,929,893		34,528,690		34,294,939			34,461,792
Basic income(loss) per share	$	0.62	$	0.09	$	(0.37	)	$	0.57
Diluted income(loss) per share	$	0.58	$	0.09	$	(0.37	)	$	0.57

The Company excluded 5,003,199 and 4,000,179 of employee stock options from the calculation of diluted net income per share due to their anti-dilutive impact for the three months ended September 30, 2010 and 2009.  The Company excluded 5,293,199 and 4,020,179, of employee stock options from the calculation of diluted net income per share due to their anti-dilutive impact for the nine months ended September 30, 2010 and 2009.  The convertible note payable has a $25.0 million face value and is convertible in whole or in part up to 2,500,000 shares of the Company’s common stock.  The convertible note payable was anti-dilutive for the nine months ended September 30, 2010, given that the Company was in a net loss position.

Fair Value Measurements - ASC Topic 820, “Fair Value Measurements and Disclosures” requires disclosures about how fair value is determined for assets and liabilities and a hierarchy for which these assets and liabilities must be grouped is established.  The Topic establishes a three-tier fair value hierarchy which prioritizes the inputs used in measuring fair value as follows:

Level 1	quoted prices (unadjusted) in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date.
Level 2	quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.
Level 3	unobservable inputs for the asset or liability.

Aircraft Fuel Derivatives – Recurring - The Company’s derivative contracts are privately negotiated contracts and are not exchange traded.   Fair value measurements based on level 2 inputs are estimated with option pricing models that employ observable and certain unobservable inputs.  Inputs to the valuation models include contractual terms, market prices, yield curves, fuel price curves and measures of volatility, among others.   The fair value of fuel hedging derivatives of $1.3 million is recorded in prepaid expenses and other current assets in the consolidated balance sheets at September 30, 2010. The Company does not hold or issue any derivative financial instruments for speculative trading purposes.  The Company chose not to designate these derivatives as hedges, and, as such, realized and unrealized mark-to-market adjustments are included in aircraft fuel expense in the consolidated statements of operations.

7

Tradename Intangible – Nonrecurring – as a result of the Company’s decision to unify its brand names, the Company announced its intent to discontinue the use of the tradename Midwest Airlines. During the three month period ended March 31, 2010, the Company fully impaired the value of the Midwest Airlines tradename intangible of $7.6 million to its fair value of zero based on level 3 inputs.  The estimates of fair value represent the Company’s best estimate based on industry trends and reference to market rates and transactions.  See Note 5.

New Accounting Pronouncements –

In July 2010, the FASB issued Accounting Standards Update (ASU) No. 2010-20, Receivables (Topic 310): Disclosures about the Credit Quality of Financing Receivables and the Allowance for Credit Losses. ASU 2010-20 requires that more information be disclosed about the credit quality of a company’s loans and the allowance for loan losses held against those loans. A company will need to disaggregate new and existing disclosure based on how it develops its allowance for loan losses and how it manages credit exposures. Existing disclosures to be presented on a disaggregated basis include a rollforward of the allowance for loan losses, the related recorded investment in such loans, the nonaccrual status of loans, and impaired loans. Additional disclosure is also required about the credit quality indicators of loans by class at the end of the reporting period, the aging of past due loans, information about troubled debt restructurings, and significant purchases and sales of loans during the reporting period by class. For public companies, ASU 2010-20 requires certain disclosures as of the end of a reporting period effective for periods ending on or after December 15, 2010. Other required disclosures about activity that occurs during a reporting period are effective for periods beginning on or after December 15, 2010. Management is currently evaluating the impact that the ASU will have on its consolidated financial statements.

In January 2010, the FASB issued an amendment to the Fair Value Measurements and Disclosures topic of the ASC. This amendment requires disclosures about transfers into and out of Levels 1 and 2 and separate disclosures about purchases, sales, issuances, and settlements relating to Level 3 measurements. It also clarifies existing fair value disclosures about the level of disaggregation and about inputs and valuation techniques used to measure fair value. This amendment is effective for periods beginning after December 15, 2009, except for the requirement to provide the Level 3 activity of purchases, sales, issuances, and settlements, which will be effective for fiscal years beginning after December 15, 2010. Accordingly, the Company has adopted this amendment in the current year by adding additional disclosures, except for the additional Level 3 requirements which will be adopted in fiscal year 2011.

In October 2009, the FASB issued guidance that changes the accounting for revenue arrangements with multiple deliverables. The guidance requires an entity to allocate consideration at the inception of an arrangement to all of its deliverables based on their relative selling prices and eliminates the use of the residual method of allocation.  The guidance establishes a hierarchy for determining the selling price of a deliverable, based on vendor-specific objective evidence, third-party evidence or estimated selling price.   In addition, this guidance expands required disclosures related to a vendor’s multiple-deliverable revenue arrangements. The guidance will be effective for the Company prospectively for revenue arrangements entered into or materially modified on or after January 1, 2011, with early adoption permitted. Management has elected not to early adopt this guidance and is currently evaluating the impact that this change will have on its consolidated financial statements.

 3.  Debt

During the nine months ended September 30, 2010, the Company entered into a credit agreement and borrowed $22.9 million which is secured by certain equipment and accrues interest at a rate of LIBOR plus a margin.   Payments of $2.1 million are due quarterly and began in April 2010, with the final balance outstanding payment due on October 31, 2012.  In addition, the Company debt financed other equipment increasing the Company’s debt balances by an additional $31.8 million.

During the nine months ended September 30, 2010, we sold certain Midwest grounded aircraft, two A318s, and one ERJ170 aircraft for consideration of $68.5 million.  The Company used $60.0 million of proceeds received from sale of aircraft to reduce the related debt secured by these aircraft.   At September 30, 2010 the Company has classified $57.2 million of debt as current related to Q400 aircraft which are currently held for sale.

We are required to comply with certain financial covenants under certain of our financing arrangements.  We are required to maintain a certain level of minimum unrestricted cash and maintain certain cash flow and working capital covenants.  As of September 30, 2010, we were in compliance with all our covenants.

8

4. Commitments and Contingencies

During the nine months ended September 30, 2010, the Company entered into a purchase agreement with Bombardier for the purchase of 40 CS300 aircraft and the option to purchase up to an additional 40 aircraft with delivery beginning in the second quarter of 2015.  In connection with the purchase agreement, the Company also signed an exclusive 15-year maintenance contract with Pratt & Whitney for support of the aircraft engines and agreed to purchase six spare engines.  The combination of these agreements increases our outstanding purchase commitments by approximately $2.84 billion in the periods beyond March 15, 2015.

During 2010, the Company entered into agreements to lease seven A320 aircraft for six years from the date of delivery.  These aircraft will be delivered between January 2011 and June 2011.  The total lease commitment for the lease term is $160.3 million with payments being made on a monthly basis.

In October 2010, the Company entered into agreements to lease three A319 aircraft for eight years from the date of delivery.  These aircraft will be delivered between October and November 2010 and are expected to enter revenue service for Frontier between February and April 2011.  The total lease commitment for the lease term is $80.6 million with payments being made on a monthly basis.

In November 2010, the Company announced a firm order for six E190 jets and a conditional firm order for 18 E190 or 195 jets.  The six aircraft will be delivered between August and December 2011.  The total commitment for the six firm ordered aircraft is $27.0 million and the total commitment for all aircraft is $111.4 million.

5. Asset Impairment

The Company announced publicly on April 13, 2010, that Frontier Airlines was selected as the name for its consolidated branded network.  As a result, the Midwest tradename intangible was fully impaired and certain other assets related to the Midwest brand and aircraft liveries were written down to their fair values.  These impairments totaled $11.5 million in the first quarter and are included in other impairment charges in the Statements of Operations.

6. Segment Reporting

Generally accepted accounting principles require disclosures related to components of a company for which separate financial information is available to and regularly evaluated by the company’s chief operating decision maker (“CODM”) when deciding how to allocate resources and in assessing performance.

The Company has identified three reportable segments, fixed-fee service, branded passenger service, and other.

Financial information as of and for the three and nine months ended September 30, 2010 and 2009 for the Company’s reportable segments is as follows (in thousands):

9

Three Months Ended	Fixed-
September 30, 2010	fee		Branded			Other			Total
Total operating revenue  (1)	$	261,661	$	445,834		$	4,370		$	711,865
Aircraft fuel		16,730		137,238			-			153,968
Depreciation and amortization		31,376		18,129			1,270			50,775
Income (loss) before income taxes		22,721		11,551			860			35,132
Total assets		2,709,721		1,427,250			210,007			4,346,978
Total debt		1,760,451		799,226			72,938			2,632,615
Three Months Ended	Fixed-
September 30, 2009	fee		Branded (2)			Other			Total
Total operating revenue  (1)	$	281,415	$	73,892		$	4,320		$	359,627
Aircraft fuel		37,420		2,015			42			39,477
Depreciation and amortization		32,479		4,366			1,553			38,398
Income (loss) before income taxes		19,218		(15,907	)		1,202			4,513
Goodwill		-		84,143			-			84,143
Total assets		2,727,725		544,027			139,886			3,411,638
Total debt		2,105,548		98,416			25,167			2,229,131
Nine Months Ended	Fixed-
September 30, 2010	fee		Branded			Other			Total
Total operating revenue  (1)	$	772,895	$	1,216,604		$	14,362		$	2,003,861
Aircraft fuel		50,225		408,301			27			458,553
Depreciation and amortization		93,335		54,362			5,416			153,113
Goodwill and other impairment charges		-		11,473			-			11,473
Income (loss) before income taxes		55,160		(73,120	)		(566	)		(18,526	)
Total assets		2,709,721		1,427,250			210,007			4,346,978
Total debt		1,760,451		799,226			72,938			2,632,615
Nine Months Ended	Fixed-
September 30, 2009	fee		Branded (2)			Other			Total
Total operating revenue  (1)	$	913,524	$	79,404		$	11,966		$	1,004,894
Aircraft fuel		98,012		2,015			152			100,179
Depreciation and amortization		101,564		5,309			5,129			112,002
Goodwill impairment		13,335		-			-			13,335
Income (loss) before income taxes		64,016		(21,495	)		(2,349	)		40,172
Goodwill		-		84,143			-			84,143
Total assets		2,727,725		544,027			139,886			3,411,638
Total debt		2,105,548		98,416			25,167			2,229,131

(1)  Fixed-fee and Branded segment revenues include cargo and other revenues attributable to these segments

(2)  Branded amounts for the three months and nine months ended September 30, 2009 only include operations from Mokulele and Midwest.

7. Subsequent Events

On November 2, 2010, the Company entered into a third amended and restated employment agreement with each of Bryan K. Bedford, Chairman, President and Chief Executive Officer, and Wayne C. Heller, Executive Vice President and Chief Operating Officer.

On November 3, 2010, it was announced that Hal Cooper, Executive Vice President, Chief Financial Officer, will be retiring in the first quarter of 2011.

On November 5, 2010, it was announced that the Company made a firm order for six Embraer 190 jets and a conditional firm order for 18 Embraer 190 or 195 jets.

10

On November 8, 2010, it was announced that the Company was commencing an offering to raise $150.0 million. We will use the net proceeds from the sale of securities for general corporate purposes, including among other possible uses, the repayment of debt or lease obligations, capital expenditures and working capital.

Item 2: Management’s Discussion and Analysis of Financial Condition and Results of Operations

In addition to historical information, this Quarterly Report on Form 10-Q contains forward-looking statements. Republic Airways Holdings Inc. (the “Company”) may, from time to time, make written or oral forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements encompass our beliefs, expectations, hopes or intentions regarding future events. Words such as “may,” “will,” “should,” “expect,” “plan,” “intend,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” or “continue,” the negative of such terms or other terminology are used to identify forward-looking statements.  All forward-looking statements included in this release are made as of the date hereof and are based on information available to the Company as of such date. The Company assumes no obligation to update any forward-looking statement. Actual results may vary, and may vary materially, from those anticipated, estimated, projected or expected for a number of reasons, including, among others, the risks discussed in our Annual Report on Form 10-K and our other filings made with the Securities and Exchange Commission, which discussions are incorporated into this Quarterly Report on Form 10-Q by reference. As used herein, "unit cost" means operating cost per Available Seat Mile (ASM).

Overview

We are a Delaware holding company that offers scheduled passenger services through our wholly-owned operating subsidiaries including Frontier Holdings, Inc. (“Frontier”), Chautauqua Airlines, Inc. (“Chautauqua”), Republic Airline Inc. (“Republic Airline”), and Shuttle America Corporation (“Shuttle America”).  The Company acquired Midwest and Frontier on July 31, 2009 and October 1, 2009, respectively.  The acquisitions provided the Company additional revenue diversity from its traditional fixed-fee services and allowed it to expand operations into branded passenger service.  Unless the context indicates otherwise, the terms “the Company,” “we,” “us,” or “our,” refer to Republic Airways Holdings Inc. and our subsidiaries.   

As of September 30, 2010, our operating subsidiaries offered scheduled passenger service on 1,594 flights daily to 126 cities in 45 states, Canada, Mexico, and Costa Rica under branded operations as Frontier and Midwest, and through fixed-fee code-share agreements with AMR Corp., the parent of American Airlines, Inc. (“American”), Continental Airlines, Inc. (“Continental”), Delta Air Lines, Inc. (“Delta”),  United Air Lines, Inc. (“United”), and US Airways, Inc. (“US Airways”) (collectively referred to as our “Partners”).

Our branded network has a regional focus in Milwaukee, Kansas City, and Denver.  The branded passenger service operation exposes us to changes in passenger demand, fare competition and fluctuations in fuel prices.  We are currently the largest carrier in Milwaukee and the second largest carrier in Denver.  The branded network has a significant base of frequent flyer members and strong support in the hub cities. 

Fleet transition

On February 4, 2010, the Company announced its intention to wind-down the operations of Lynx Airlines, Inc. (“Lynx”).  The Company recorded approximately $11.6 million of lease termination costs during the nine months ended September 30, 2010.  Additional lease return costs will be accrued ratably over the remaining lease term while the aircraft are operating once such costs are probable and reasonably estimable.  The closure of Lynx, which is expected to occur in April 2011, will result in the reduction or reallocation of approximately 175 positions; accordingly, the Company recorded approximately $1.1 million of severance related charges for the nine months ended September 30, 2010.  The remaining six owned Lynx Q400 aircraft were reduced to the lower of carrying value or estimated fair value less cost to sell and classified as held for sale, as the aircraft are removed from service.

During the nine months ended September 30, 2010 the Company took delivery of three A320 aircraft and four E190 aircraft previously purchased from US Airways. The Company removed six Q400 aircraft and the final seven CRJ-200 aircraft from service, sold two A318 aircraft and one ERJ170 aircraft, and returned three Q400 aircraft and one A318 aircraft to the lessor, bringing our total operational fleet to 277 aircraft at September 30, 2010 from 290 aircraft at December 31, 2009.  The seven new aircraft were placed into service in our Frontier operation.  The Q400 aircraft and the A318 aircraft were removed from our Frontier operation and will be returned to the lessor or sold.  The other eight aircraft were removed from fixed-fee service and were returned to the lessor or sold.

We have firm orders for fifteen A320 aircraft that have scheduled delivery dates beginning in January 2011 and continuing through November 2014.  Seven of the fifteen A320 aircraft will be leased and are expected to enter revenue service with Frontier between January and July 2011.  In addition we have commitments to purchase 40 CS300 jets and the option to purchase up to an additional 40 aircraft.  In connection with the CS300 purchase agreement, we also signed an exclusive 15-year maintenance contract with Pratt & Whitney for support of the aircraft engines.

11

In July 2010, the Company signed a letter of intent to acquire 24 new E190 aircraft with the option to convert any of the aircraft in the order to the larger E195 model. The letter of intent is subject to final documentation, including final commercial terms.  Under the agreement, deliveries would begin in mid 2011.  On November 5, 2010, the Company announced it had placed a firm order for 6 E190 aircraft with Embraer for delivery in 2011 starting in August.  The Company also has conditional firm orders for 18 E190 or E195 aircraft.  Both aircraft types would be configured with STRETCH seating.  These aircraft will be used to replace smaller regional jets in the Company as well as provide flexibility for growth at Frontier through 2013.

In October 2010, the Company entered into agreements to lease three A319 aircraft for eight years from the date of delivery.  These aircraft will be delivered between October and November 2010 and are expected to enter revenue service for Frontier between February and April 2011.

Results of Operations

Three Months Ended September 30, 2010 Compared to Three Months Ended September 30, 2009

The following table sets forth fixed-fee operational statistics and the percentage-of-change for the periods identified below:

Operating Highlights - Fixed-Fee	Three Months Ended September 30,
	2010			2009			Change
Fixed-fee service revenues, excluding fuel ($000) (1)		244,918			265,899			(7.9	%)
Passengers carried		4,636,672			4,881,571			(5.0	%)
Revenue passenger miles (000) (2)		2,285,299			2,510,784			(9.0	%)
Available seat miles ("ASM") (000) (3)		2,955,620			3,242,019			(8.8	%)
Passenger load factor (4)		77.3	%		77.4	%	-0.1 pts
Cost per ASM (cents) (5) (6)		8.08			8.09			(0.1	%)
Cost per ASM, including interest expense
and excluding fuel expense (cents) (6)		7.52			7.61			(1.2	%)
Operating aircraft at period end:
37-50 seat jets		64			79			(19.0	%)
70-86 seat jets		113			113			-
Block hours (8)		153,506			165,428			(7.2	%)
Departures		93,273			97,897			(4.7	%)
Average daily utilization of each
aircraft (hours) (9)		10.2			9.8			4.1	%
Average length of aircraft flight (miles)		476			500			(4.8	%)
Average seat density		67			66			1.5	%

12

The following table sets forth branded passenger service operational statistics for the period identified below:

	Three Months Ended September 30,
Operating Highlights - Branded	2010				2009 (10)		Change
Total revenues ($000)		445,834			73,892			503.4	%
Passengers carried		4,065,352			669,901			506.9	%
Revenue passenger miles (000) (2)		3,494,871			450,437			675.9	%
Available seat miles ("ASM") (000) (3)		3,997,183			575,785			594.2	%
Passenger load factor (4)		87.4	%		78.2	%	9.2 pts
Total revenue per available seat mile (cents)		11.15			12.83			(13.1	%)
Passenger revenue per ASM (cents)		10.76			11.27			(4.4	%)
Cost per ASM (cents) (5) (6) (7)		10.60			14.78			(28.3	%)
Fuel cost per ASM (cents) (7)		3.43			4.14			(17.1	%)
Cost per ASM, excluding fuel expense (cents) (6)		7.17			10.64			(32.6	%)
Gallons consumed		58,967,933			9,930,214			493.8	%
Average cost per gallon (7)	$	2.32		$	2.13			8.6	%
Operating aircraft at period end:
37-50 seat jets		13			12			8.3	%
70-99 seat jets		36			25			44.0	%
120+ seat jets		51			-		NM
Block hours (8)		97,977			23,346			319.7	%
Departures		47,961			15,422			211.0	%
Average daily utilization of each		11.0			10.0			10.0	%
aircraft (hours) (9)
Average length of aircraft flight (miles)		827			551			50.1	%
Average seat density		101			68			48.5	%

(1)	Fixed-fee service revenues exclude cargo and other revenues.
(2)	Revenue passenger miles are the number of scheduled miles flown by revenue passengers.
(3)	Available seat miles are the number of seats available for passengers multiplied by the number of scheduled miles those seats are flown.
(4)	Revenue passenger miles divided by available seat miles.
(5)	Total operating and interest expenses divided by available seat miles.
(6)	Costs (in all periods) exclude impairments and other expenses not attributable to either fixed-fee or branded segments.  Total operating and interest expenses excluding goodwill impairment and other impairment charges is not a calculation based on accounting principles generally accepted in the United States of America and should not be considered as an alternative to total operating expenses.   Cost per available seat mile utilizing this measurement is included as it is a measurement recognized by the investing public relative to the airline industry.
(7)	Excludes mark-to-market fuel hedge adjustment of $0.2 million for the three months ended September 30, 2010.
(8)	Hours from takeoff to landing, including taxi time.
(9)	Average number of hours per day that an aircraft flown in revenue service is operated (from gate departure to gate arrival).
(10)	Branded statistics consist of the operations of Mokulele beginning in April 2009 and Midwest beginning in August 2009.

13

The following table sets forth information regarding the Company’s revenues and expenses for the three months ended September 30, 2010 and 2009. Individual expense components are also expressed in cents per available seat mile (“ASM”).

Consolidated Results of Operations	Three Months Ended September 30,
	2010						2009
	Amounts			Cents			Amounts			Cents
	(in thousands)			per ASM			(in thousands)			per ASM
OPERATING REVENUES:
Fixed-fee service	$	261,648					$	281,415
Passenger service		429,939						64,876
Cargo and other		20,278						13,336
Total operating revenues		711,865						359,627
OPERATING EXPENSES:
Wages and benefits		143,953			2.07			76,864			2.01
Aircraft fuel		153,968			2.22			39,477			1.03
Landing fees and airport rents		46,205			0.66			20,026			0.53
Aircraft and engine rent		60,687			0.87			33,592			0.88
Maintenance and repair		68,778			0.99			58,852			1.54
Insurance and taxes		11,791			0.17			6,648			0.17
Depreciation and amortization		50,775			0.73			38,398			1.01
Promotion and sales		35,056			0.50			5,341			0.14
Other		67,630			0.98			43,834			1.15
Total operating expenses		638,843			9.19			323,032			8.46
OPERATING INCOME		73,022						36,595
OTHER INCOME (EXPENSE):
Interest expense		(38,213	)		(0.55	)		(34,862	)		(0.91	)
Other—net		323			-			2,779			0.07
Total other income (expense)		(37,890	)		(0.55	)		(32,083	)		(0.84	)
INCOME BEFORE INCOME TAXES		35,132						4,512
INCOME TAX EXPENSE		13,845						1,864
NET INCOME		21,287						2,648
Add: Net loss attributable to noncontrolling interest in
Mokulele Flight Service Inc.		-						(623	)
NET INCOME OF THE COMPANY	$	21,287					$	3,271
Total operating and interest expense	$	677,056			9.74		$	357,894			9.37
Total operating and interest expense
less fuel	$	523,088			7.52		$	318,417			8.34

14

Operating revenue in 2010 increased 97.9%, or $352.3 million, to $711.9 million from $359.6 million primarily as a result of revenues from branded airlines that were acquired during the second half of 2009.  Excluding reimbursement for fuel expense, which is a pass-through cost to our Partners, fixed-fee service revenues decreased 7.9% for 2010.  Total block hours for the fixed-fee business declined 7.2%.  We have removed 15 aircraft from our fixed-fee operations since September 30, 2009.  Seven 50-seat aircraft were removed from Continental and seven 50-seat aircraft were removed from United.  We also transitioned one aircraft previously reported in our fixed-fee business to our branded business.

Total operating and interest expenses, excluding fuel, increased $204.7 million, to $523.1 million for 2010 compared to $318.4 million during 2009 due to the acquisitions of our branded airlines, Midwest and Frontier.  The cost per available seat mile on total operating and interest expenses, excluding fuel expenses, decreased to 7.52¢ in 2010 compared to 8.34¢ in 2009.  Factors relating to the change in operating expenses are discussed below. 

Wages and benefits increased 87.3%, or $67.1 million, to $144.0 million for 2010 compared to $76.9 million for 2009 due primarily to $57.0 million of expenses at Frontier and Midwest.    The remainder of the increase was due to a shift in the mix of regional flying towards larger regional jets coupled with rising health care expenses.  The cost per available seat mile increased to 2.07¢ for 2010 compared to 2.01¢ in 2009. 

Aircraft fuel expense increased 290.0%, or $114.5 million, to $154.0 million for 2010 compared to $39.5 million for 2009 due primarily to the increase of $113.4 million of expenses at Frontier and Midwest.  The cost per gallon for fuel used in the branded operation was $2.32 in 2010.  The unit cost increased to 2.22¢ in 2010 compared to 1.03¢ in 2009.

Landing fees and airport rents increased 131.0%, or $26.2 million, to $46.2 million in 2010 compared to $20.0 million in 2009.  This was due to the acquisition of Frontier and Midwest during the prior year, which accounted for $28.3 million of additional expense in 2010.  Fixed-fee landing fees declined $1.4 million due to one of our Partners paying directly for landing fees since August 2009.  Our fixed-fee agreements provide for a direct reimbursement of landing fees.  The unit cost increased to 0.66¢ in 2010 compared to 0.53¢ in 2009.

Aircraft and engine rent increased 80.7%, or $27.1 million, to $60.7 million in 2010 compared to $33.6 million in 2009.  Expense at Frontier and Midwest was $28.3 million for the quarter.  The unit cost decreased to 0.87¢ for 2010 compared to 0.88¢ for 2009.

Maintenance and repair expenses increased 16.8%, or $9.9 million, to $68.8 million in 2010 compared to $58.9 million for 2009 due mainly to the acquisition of Frontier and Midwest.  Maintenance expense at Frontier for the quarter was $15.7 million.   Increase was offset by fewer small jet repairs of $5.7 million.  The unit cost decreased to 0.99¢ in 2010 compared to $1.54¢ in 2009.

Insurance and taxes increased 77.4%, or $5.1 million, to $11.8 million in 2010 compared to $6.6 million in 2009. Expense at Frontier and Midwest was $4.1 million for the quarter.  Our fixed-fee agreements generally provide for a direct reimbursement of insurance and property taxes.  The unit cost remained consistent at 0.17¢ for both 2010 and 2009.

Depreciation and amortization increased 32.2%, or $12.4 million, to $50.8 million in 2010 compared to $38.4 million in 2009 due mainly to $8.5 million of depreciation on assets acquired from Frontier and Midwest.  The unit cost decreased to 0.73¢ in 2010 compared to 1.01¢ in 2009.

Promotion and sales expenses increased 556.4%, or $29.8 million, to $35.1 million in 2010 compared to $5.3 million.  Expense at Frontier and Midwest was $29.7 million for the quarter.  The unit cost was 0.50¢ in 2010 compared to 0.14¢ in 2009.

Other expenses increased 54.3%, or $23.8 million, to $67.6 million in 2010 from $43.8 million in 2009.  Of the increase, $21.5 million related to expenses from Frontier and Midwest, of which $7.6 million related to the integration costs and return of aircraft.  The unit cost decreased to 0.98¢ in 2010 compared to $1.15 in 2009. 

Interest expense increased 9.6%, or $3.3 million, to $38.2 million compared with $34.9 million due primarily to the acquisition of Frontier and Midwest and the related aircraft debt.  The unit cost decreased to 0.55¢ from 0.91¢ in 2009.

We recorded an income tax expense of $13.8 million or 39.4% in the current quarter compared with an income tax expense of $1.9 million or 41.3% effective tax rate in the prior year quarter.  The effective tax rate for 2010 and 2009 were higher than the statutory rate due to the effect of the state income taxes and non-deductible meals and entertainment expense, primarily for our flight crews.

15

Nine Months Ended September 30, 2010 Compared to Nine Months Ended September 30, 2009

The following table sets forth fixed-fee operational statistics and the percentage-of-change for the periods identified below:

Operating Highlights - Fixed-Fee	Nine Months Ended September 30,
	2010			2009			Change
Service revenues, excluding fuel ($000) (1)		722,609			839,473			(13.9	%)
Passengers carried		13,042,918			14,365,238			(9.2	%)
Revenue passenger miles (000) (2)		6,478,772			7,359,971			(12.0	%)
Available seat miles ("ASM") (000) (3)		8,546,288			9,930,228			(13.9	%)
Passenger load factor (4)		75.8	%		74.1	%	1.7 pts
Cost per ASM, (cents) (5) (6)		8.40			8.55			(1.8	%)
Cost per ASM, including interest expense
and excluding fuel expense (cents) (6)		7.81			7.80			0.1	%
Operating aircraft at period end:
37-50 seat jets		64			79			(19.0	%)
70-99 seat jets		113			113			-
Block hours (8)		445,769			518,255			(14.0	%)
Departures		265,875			304,905			(12.8	%)
Average daily utilization of each
aircraft (hours) (9)		9.9			9.6			3.1	%
Average length of aircraft flight (miles)		482			495			(2.6	%)
Average seat density		67			66			1.5	%

16

The following table sets forth branded passenger service operational statistics for the period identified below:

	Nine Months Ended September 30,
Operating Highlights - Branded	2010				2009 (10)		Change
Total revenues ($000)		1,216,604			79,404			1432.2	%
Passengers carried		11,167,176			757,933			1373.4	%
Revenue passenger miles (000) (2)		9,632,994			462,598			1982.4	%
Available seat miles ("ASM") (000) (3)		11,581,584			607,183			1807.4	%
Passenger load factor (4)		83.2	%		76.2	%	7.0 pts
Total revenue per available seat mile (cents)		10.50			13.08			(19.7	%)
Passenger revenue per ASM (cents)		10.11			11.59			(12.8	%)
Cost per ASM (cents) (5) (6) (7)		10.74			15.67			(31.5	%)
Fuel cost per ASM (cents) (7)		3.48			4.26			(18.3	%)
Cost per ASM, excluding fuel expense (cents) (6)		7.26			11.41			(36.4	%)
Gallons consumed		172,608,798			9,930,214			1638.2	%
Average cost per gallon (7)	$	2.33		$	2.13			9.4	%
Operating aircraft at period end:
37-50 seat jets		13			12			8.3	%
70-99 seat jets		36			25			44.0	%
120+ seat jets		51			-		NM
Block hours (8)		291,883			25,660			1037.5	%
Departures		140,593			18,695			652.0	%
Average daily utilization of each		11.1			10.0			11.0	%
aircraft (hours) (9)
Average length of aircraft flight (miles)		827			476			73.7	%
Average seat density		100			68			47.1	%

(1)	Fixed-fee service revenues exclude cargo and other revenues.
(2)	Revenue passenger miles are the number of scheduled miles flown by revenue passengers.
(3)	Available seat miles are the number of seats available for passengers multiplied by the number of scheduled miles those seats are flown.
(4)	Revenue passenger miles divided by available seat miles.
(5)	Total operating and interest expenses divided by available seat miles.
(6)	Costs (in all periods) exclude impairments and other expenses not attributable to either fixed-fee or branded segments.  Total operating and interest expenses excluding goodwill impairment and other impairment charges is not a calculation based on accounting principles generally accepted in the United States of America and should not be considered as an alternative to total operating expenses.   Cost per available seat mile utilizing this measurement is included as it is a measurement recognized by the investing public relative to the airline industry.
(7)	Excludes mark-to-market fuel hedge adjustment of $5.6 million for the nine months ended September 30, 2010.
(8)	Hours from takeoff to landing, including taxi time.
(9)	Average number of hours per day that an aircraft flown in revenue service is operated (from gate departure to gate arrival).
(10)	Branded statistics consist of the operations of Mokulele beginning in April 2009 and Midwest beginning in August 2009.

17

The following table sets forth information regarding the Company’s revenues and expenses for the nine months ended September 30, 2010 and 2009. Individual expense components are also expressed in cents per available seat mile (“ASM”).

Consolidated Results of Operations	Nine Months Ended September 30,
	2010						2009
	Amounts			Cents			Amounts			Cents
	(in thousands)			per ASM			(in thousands)			per ASM
OPERATING REVENUES:
Fixed-fee service	$	772,834					$	913,524
Passenger service		1,170,448						70,388
Cargo and other		60,579						20,982
Total operating revenues		2,003,861						1,004,894
OPERATING EXPENSES:
Wages and benefits		423,876			2.11			207,446			1.97
Aircraft fuel		458,553			2.28			100,179			0.95
Landing fees and airport rents		129,444			0.64			55,434			0.53
Aircraft and engine rent		182,309			0.91			95,400			0.91
Maintenance and repair		190,057			0.94			151,487			1.44
Insurance and taxes		33,559			0.17			19,930			0.19
Depreciation and amortization		153,113			0.76			112,002			1.06
Promotion and sales		103,368			0.51			5,341			0.05
Goodwill impairment		-			-			13,335			0.13
Other impairment charges		11,473			0.05			-			-
Other		221,549			1.11			109,340			1.03
Total operating expenses		1,907,301			9.48			869,894			8.26
OPERATING INCOME		96,560						135,000
OTHER INCOME (EXPENSE):
Interest expense		(115,839	)		(0.57	)		(105,246	)		(1.01	)
Other—net		753			-			10,418			0.10
Total other expense		(115,086	)		(0.57	)		(94,828	)		(0.91	)
INCOME(LOSS) BEFORE INCOME TAXES		(18,526	)					40,172
INCOME TAX EXPENSE(BENEFIT)		(5,969	)					23,894
NET INCOME(LOSS)		(12,557	)					16,278
Add: Net loss attributable to noncontrolling interest in
Mokulele Flight Service Inc.		-						(3,270	)
NET INCOME(LOSS) OF THE COMPANY	$	(12,557	)				$	19,548
Total operating and interest expense	$	2,023,140			10.05		$	975,140			9.26
Total operating and interest expense
less fuel, goodwill impairment,
and other impairment charges	$	1,553,115			7.72		$	861,626			8.18

18

Operating revenue in 2010 increased 99.4%, or $1.0 billion, to $2.0 billion from $1.0 billion primarily as a result of revenues from branded airlines that were acquired during the second half of 2009.  Excluding reimbursement for fuel expense, which is a pass-through cost to our Partners, fixed-fee service revenues decreased 13.9% for 2010.  Total block hours for the fixed-fee business declined 14.0%. We have removed 15 aircraft from our fixed-fee operations since September 30, 2009.  Seven 50-seat aircraft were removed from Continental and seven 50-seat aircraft were removed from United.  We also transitioned one aircraft previously reported in our fixed-fee business to our branded business.

Total operating and interest expenses, excluding fuel, goodwill impairment, and other impairment charges increased $691.5 million, to $1.55 billion for 2010 compared to $861.6 million during 2009 due primarily to the acquisitions of Frontier and Midwest airlines.  The cost per available seat mile on total operating and interest expenses, excluding fuel expenses, goodwill impairments and other impairment charges, decreased to 7.72¢ in 2010 compared to 8.18¢ in 2009.  Factors relating to the change in operating expenses are discussed below. 

Wages and benefits increased by 104.4%, or $216.5 million, to $423.9 million for 2010 compared to $207.4 million for 2009 due primarily to $190.0 million of expenses at Frontier and Midwest.    The remainder of the increase was due to a shift in the mix of regional flying towards larger regional jets coupled with rising health care expenses.  The cost per available seat mile increased to 2.11¢ for 2010 compared to 1.97¢ in 2009. 

Aircraft fuel expense increased 357.7%, or $358.4 million, to $458.6 million for 2010 compared to $100.2 million for 2009 due primarily to $382.2 million of expenses at Frontier and Midwest.  The cost per gallon for fuel used in the branded operation was $2.33 in 2010.  The $23.8 million decrease in fixed-fee fuel expenses over the prior year related to American and Delta, which began paying directly for fuel in May and June 2009, respectively.  The unit cost increased to 2.28¢ in 2010 compared to 0.95¢ in 2009.

Landing fees and airport rents increased by 133.5%, or $74.0 million, to $129.4 million in 2010 compared to $55.4 million in 2009.  This was due to the acquisition of branded airlines during the prior year, which accounted for $85.4 million of expense in 2010.  Fixed-fee landing fees declined $11.5 million due to one of our Partners paying directly for landing fees since August 2009.  Our fixed-fee agreements provide for a direct reimbursement of landing fees.  The unit cost was increased to 0.64¢ in 2010 compared to 0.53¢ in 2009.

Aircraft and engine rent increased by 91.1%, or $86.9 million, to $182.3 million in 2010 compared to $95.4 million in 2009.  Expense at Frontier was $89.0 million for the nine months ended September 30, 2010.  The unit cost for 2010 and 2009 was 0.91¢.

Maintenance and repair expenses increased by 25.5%, or $38.6 million, to $190.1 million in 2010 compared to $151.5 million for 2009 due mainly to the acquisition of our branded operations.  Maintenance expense at Frontier for the nine months ended was $34.2 million.  The remaining increase is attributable to higher engine restoration costs.  The unit cost decreased to 0.94¢ in 2010 compared to 1.44¢ in 2009.

Insurance and taxes increased 68.4%, or $13.6 million, to $33.6 million in 2010 compared to $19.9 million in 2009. Expense at Frontier was $12.7 million for the nine months ended September 30, 2010.  Our fixed-fee agreements generally provide for a direct reimbursement of insurance and property taxes.  The unit cost decreased to 0.17¢ in 2010 compared to 0.19¢ in 2009.

Depreciation and amortization increased 36.7%, or $41.1 million, to $153.1 million in 2010 compared to $112.0 million in 2009 due mainly to $30.3 million of depreciation on assets at Frontier and Midwest.  Depreciation on E190 aircraft purchased from US Airways in late 2009 was $11.3 million for the nine months ended September 30, 2010.  The unit cost decreased to 0.76¢ in 2010 compared to 1.06¢ in 2009.

Promotion and sales expenses of $103.4 million were included as a result of the acquisitions of our branded airlines.  All of these expenses relate to the branded operations only.  The unit cost was 0.51¢ in 2010.

Other impairment charges of $11.5 million for the nine months ended September 30, 2010 are primarily the result of management’s decision to combine the branded operations under one name.  Trademark intangibles and other tangible assets related to the Midwest brand livery and tradename were written down to their fair values.  The unit cost was 0.05¢ in 2010.

Goodwill impairment of $13.3 million in 2009 is a result of goodwill impairment within our fixed-fee segment.  The unit cost was 0.13¢ in 2009.

Other expenses increased 102.6%, or $112.2 million, to $221.5 million in 2010 from $109.3 million in 2009.  Of the increase, $119.0 million related to expenses from our branded airlines, of which $45.8 million related to the integration of the branded business and return of aircraft.  The unit cost increased to 1.11¢ in 2010 compared to 1.03¢ in 2009. 

Interest expense increased 10.1%, or $10.6 million, to $115.8 million compared with $105.2 million due primarily to the acquisition of Frontier and Midwest and the related aircraft debt.  The unit cost decreased to 0.57¢ from 1.01¢ in 2009.

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We recorded an income tax benefit of $6.0 million or 32.2% for the nine months ended September 30, 2010, compared with an income tax expense of $23.9 million or 59.5% effective tax rate in the prior year nine months. The effective tax rate for the nine months ended September 30, 2010, was lower than the statutory rate due to non-deductible meals and entertainment expense, primarily for flight crews, reduced our income tax benefit recorded related to the loss before income taxes of $18.8 million.

Liquidity and Capital Resources

As of September 30, 2010, we had total cash of $390.4 million of which $191.4 million was unrestricted.  At September 30, 2010, we had a working capital deficit of $154.7 million.   The Company currently anticipates that its unrestricted cash on hand, the cash generated from operations, and other financings will be sufficient to meet its anticipated working capital and capital expenditure requirements for at least the next 12 months.

Working capital deficits are customary for airlines since the air traffic liability and a portion of the frequent flyer liability are classified as current liabilities.  Our liquidity depends to a large extent on the financial strength of our Partners in relation to our fixed-fee business and the number of passengers who fly in our branded passenger service, the fares they pay, our operating and capital expenditures, our financing activities, the amount of cash holdbacks imposed by our credit card processors, and the cost of fuel.  We cannot predict what the effect on our business might be from the extremely competitive environment we are operating in or from events that are beyond our control, such as volatile fuel prices, the economic recession, the global credit and liquidity crisis, weather-related disruptions, the impact of airline bankruptcies or consolidations, U.S. military actions or acts of terrorism. 

Net cash provided by operating activities was $166.5 million and $133.5 million for the nine months ended September 30, 2010 and 2009, respectively.  The $33.0 million increase in operating cash flows is primarily attributable to the acquisition of Frontier and Midwest.  The acquisitions allowed the Company to complete flights without using a code-share partner.  This increased the air traffic liability $32.0 million during the first nine months of 2010 compared to very minimal change to the air traffic liability during the same period in 2009.  The other $1.0 million were related to changes in working capital.

Net cash provided in investing activities was $39.0 million for the nine months ended September 30, 2010, compared to $19.6 million of cash used in investing activites as of September 30, 2009.  The $58.6 million increase in investing cash flows is primarily attributable to the decrease of funding supplied to airlines within the industry.

Net cash used by financing activities was $164.0 million for the nine months ended September 30, 2010 compared to $158.1 million for the nine months ended September 30, 2009.  During the first nine months of 2010, we received proceeds of $54.7 million as a result of debt financing previously unencumbered aircraft engines and other equipment.  The majority of the financings relate to the Company’s new credit agreement for $22.9 million, which is secured by certain equipment and accrues interest at a rate of LIBOR plus a margin.  The increase from the prior year relates to approximately the difference between the payments made on new debt offset by the proceeds.

Other Liquidity Initiatives

                The Company expects to receive net proceeds from this offering of approximately $102.8 million after deducting underwriting discounts and commissions and estimated transaction expenses payable by us of approximately $0.6 million (or approximately $118.3 million if the underwriters exercise their option to purchase additional shares in full), assuming a public offering per share of $9.07, which was the last reported sales price of our common stock on the NASDAQ Global Select Market on November 5, 2010.  We will use the net proceeds from this offering of the common stock for general corporate purposes, including to finance a portion of our Embraer 190 aircraft, and to bolster our liquidity position.

Aircraft Leases and Other Off-Balance Sheet Arrangements

We have significant obligations for aircraft and engines that are classified as operating leases and, therefore, are not reflected as liabilities on our balance sheet. Aircraft leases expire between 2010 and 2024. As of September 30, 2010, our total mandatory payments under operating leases for aircraft aggregated approximately $1.52 billion and total minimum annual aircraft rental payments for the next 12 months under all non-cancelable operating leases is approximately $229.7 million. 

Other non-cancelable operating leases consist of engines, terminal space, operating facilities, office space and office equipment. The leases expire through 2033. As of September 30, 2010, our total mandatory payments under other non-cancelable operating leases aggregated approximately $157.4 million. Total minimum annual other rental payments for the next 12 months are approximately $21.6 million.

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Contractual Obligations and Commercial Commitments

As of September 30, 2010, we had firm orders to purchase eight A320 aircraft that have scheduled delivery dates beginning in August 2013 and continuing through November 2014. The current total list price of the eight aircraft is $349.0 million.  Through September 30, 2010, we made aircraft deposits in accordance with the aircraft commitments of $5.5 million. We also had a commitment to acquire eight spare aircraft engines with a current list price of approximately $41.9 million.  We expect to take delivery of two engines during 2010, three engines in 2011 and the final two engines in 2012.  These commitments are subject to customary closing conditions.

During 2010, the Company entered into agreements to lease seven A320 aircraft for six years from the date of delivery.  These aircraft will be delivered between January 2011 and June 2011.  The total lease commitment for the lease term is $160.3 million with payments being made on a monthly basis.

During the nine months ended September 30, 2010, the Company entered into a purchase agreement with Bombardier for the purchase of 40 CS300 aircraft and the option to purchase up to an additional 40 aircraft with delivery beginning in the second quarter of 2015.  In connection with the purchase agreement, the Company also signed an exclusive 15-year maintenance contract with Pratt & Whitney for support of the aircraft engines and agreed to purchase six engines.  The combination of these agreements increases our outstanding purchase commitments by approximately $2.84 billion in the periods beyond March 15, 2015.

During the nine months ended September 30, 2010 the Company took delivery of three A 320 aircraft.  The Company entered into operating leases with payments of $12.0 million annually for each of the next five years and $81.2 million thereafter.

In October 2010, the Company entered into agreements to lease three A319 aircraft for eight years from the date of delivery.  These aircraft will be delivered between October and November 2010.  The total lease commitment for the remainder of the lease term is $80.6 million with payments being made on a monthly basis.

In November 2010, the Company announced a firm order for six E190 jets and a conditional firm order for 18 E190 or 195 jets.  The six aircraft will be delivered between August and December 2011.  The total commitment for the six firm ordered aircraft is $27.0 million and the total commitment for all aircraft is $111.4 million.

Asset Impairment

The Company announced publicly on April 13, 2010, that Frontier Airlines is the name for its consolidated branded network.  As a result, the Midwest tradename intangible was fully impaired and certain other assets related to the Midwest brand and aircraft liveries were written down to their fair values.  These impairments totaled $11.5 million and are included in other impairment charges in the Statements of Operations.

Critical Accounting Policies

Recent Accounting Pronouncements

In July 2010, the FASB issued Accounting Standards Update (ASU) No. 2010-20, Receivables (Topic 310): Disclosures about the Credit Quality of Financing Receivables and the Allowance for Credit Losses. ASU 2010-20 requires that more information be disclosed about the credit quality of a company’s loans and the allowance for loan losses held against those loans. A company will need to disaggregate new and existing disclosure based on how it develops its allowance for loan losses and how it manages credit exposures. Existing disclosures to be presented on a disaggregated basis include a rollforward of the allowance for loan losses, the related recorded investment in such loans, the nonaccrual status of loans, and impaired loans. Additional disclosure is also required about the credit quality indicators of loans by class at the end of the reporting period, the aging of past due loans, information about troubled debt restructurings, and significant purchases and sales of loans during the reporting period by class. For public companies, ASU 2010-20 requires certain disclosures as of the end of a reporting period effective for periods ending on or after December 15, 2010. Other required disclosures about activity that occurs during a reporting period are effective for periods beginning on or after December 15, 2010. Management is currently evaluating the impact that the ASU will have on its consolidated financial statements.

In January 2010, the FASB issued an amendment to the Fair Value Measurements and Disclosures topic of the ASC. This amendment requires disclosures about transfers into and out of Levels 1 and 2 and separate disclosures about purchases, sales, issuances, and settlements relating to Level 3 measurements. It also clarifies existing fair value disclosures about the level of disaggregation and about inputs and valuation techniques used to measure fair value. This amendment is effective for periods beginning after December 15, 2009, except for the requirement to provide the Level 3 activity of purchases, sales, issuances, and settlements, which will be effective for fiscal years beginning after December 15, 2010. Accordingly, the Company has adopted this amendment on January 1, 2010 by adding additional disclosures, except for the additional Level 3 requirements which will be adopted in fiscal year 2011.

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In October 2009, the FASB issued guidance that changes the accounting for revenue arrangements with multiple deliverables. The guidance requires an entity to allocate consideration at the inception of an arrangement to all of its deliverables based on their relative selling prices and eliminates the use of the residual method of allocation.  The guidance establishes a hierarchy for determining the selling price of a deliverable, based on vendor-specific objective evidence, third-party evidence or estimated selling price.   In addition, this guidance expands required disclosures related to a vendor’s multiple-deliverable revenue arrangements. The guidance will be effective for the Company prospectively for revenue arrangements entered into or materially modified on or after January 1, 2011, with early adoption permitted. Management has elected not to early adopt this guidance and is currently evaluating the impact that this change will have on its consolidated financial statements.

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Item 3: Quantitative and Qualitative Disclosures about Market Risk

Interest Rates

Our earnings can be affected by changes in interest rates due to amount of cash and cash equivalents held and variable rate debt. At September 30, 2010 and December 31, 2009, approximately $448.0 million and $506.8 million, respectively, of our outstanding debt was at variable interest rates.   A one hundred basis point change in the LIBOR rate would increase or decrease interest expense by $4.5 million.

Aircraft Fuel Price Risk

Our results of operations are materially impacted by changes in aircraft fuel prices. In an effort to manage our exposure to this risk, we periodically purchase call options on crude oil. We do not hold or issue any derivative financial instruments for trading purposes. These fuel hedges were not designated for hedge accounting, and, as such, realized and unrealized non-cash mark-to-market adjustments are included in aircraft fuel expense.  A one dollar change in the price per barrel of crude oil will increase or decrease our fuel expense by $1.4 million and $4.1 million for the three months and nine months ended September 30, 2010.  A one-cent change in the cost of each gallon of fuel would impact our pre-tax income by approximately $.6 million and $1.7 million for the three months and nine months ended September 30, 2010, based on our current fleet and aircraft fuel consumption.

Airline Industry Competition

 As mergers and other forms of industry consolidation including antitrust immunity grants take place, we might

or might not be included as a participant. Depending on which carriers combine and which assets, if any, are sold or otherwise transferred to other carriers in connection with such combinations, our competitive position relative to the post-combination carriers or other carriers that acquire such assets could be harmed. In addition, as carriers combine through traditional mergers or antitrust immunity grants, their route networks will grow and that growth will result in greater overlap with our network, which in turn could result in lower overall market share and revenues for us.

Item 4: Controls and Procedures

We maintain "disclosure controls and procedures", as such term is defined under Securities Exchange Act Rule 13a-15(e), that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures. In designing and evaluating the disclosure controls and procedures, our management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives and our management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. We have carried out an evaluation, as of the end of the period covered by this report, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based upon their evaluation and subject to the foregoing, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective.

Changes in Internal Control

Except as set forth below, during the three months ended September 30, 2010, we did not make any changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.  We are in the process of completing our integration of Midwest and Frontier.  We are currently integrating policies, processes, people, technology and operations for the combined companies.  Management will continue to evaluate our internal control over financial reporting as we execute integration activities.

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Part II. OTHER INFORMATION

Item 1A. Risk Factors

In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2009 (the “10-K”), which could materially affect our business, financial condition or future results. The risks described in our 10-K are not the only risks we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results.

Our customers may react negatively to our planned change to combine our branded businesses as our flight offerings may change.

As we move toward a unified branded operation, there may be customer dissatisfaction with the branding direction taken by us.   Additionally, customers in certain markets may not respond positively or recognize the new brand.

Item 6.

	Exhibits
(a)	Exhibits
10.67*	Purchase Agreement COM 0190-10, by and between Embraer - Empresa Brasileira de Aeronáutica S.A. and Republic Airline Inc., dated as of November 3, 2010.
10.68*	Letter Agreement COM 0191-10, by and between Embraer - Empresa Brasileira de Aeronáutica S.A. and Republic Airline Inc., dated as of November 3, 2010.
31.1	Certification by Bryan K. Bedford, Chairman of the Board, Chief Executive Officer and President of Republic Airways Holdings Inc., pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, in connection with Republic Airways Holdings Inc.’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2010.
31.2	Certification by Robert H. Cooper, Executive Vice President and Chief Financial Officer of Republic Airways Holdings Inc., pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, in connection with Republic Airways Holdings Inc.’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2010.
32.1	Certification by Bryan K. Bedford, Chairman of the Board, Chief Executive Officer and President of Republic Airways Holdings Inc., pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, in connection with Republic Airways Holdings Inc.’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2010.
32.2	Certification by Robert H. Cooper, Executive Vice President and Chief Financial Officer of Republic Airways Holdings Inc., pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, in connection with Republic Airways Holdings Inc.’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2010.

*A request for confidential treatment was filed for certain portions of the indicated document.  Confidential portions have been omitted and filed separately with the Commission as required by Rule 24b-2 of the Commission.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	REPUBLIC AIRWAYS HOLDINGS INC.
	(Registrant)
Dated: November 8, 2010	By:	/s/ Bryan K. Bedford
		Name: Bryan K. Bedford
		Title: Chairman of the Board, Chief Executive Officer and President
		(principal executive officer)
Dated: November 8, 2010	By:	/s/ Robert H. Cooper
		Name: Robert H. Cooper
		Title: Executive Vice President and Chief Financial Officer
		(principal financial and accounting officer)

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