form10_q.htm

-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Bl48saUVp3doqcGS+WrzvTaZJjx552qDtlr1kghkZL4MiwkN7SqnAqgY8DFR4obz hfsLJgIFAmSoH7t1UZoAcw== 0001159154-08-000055.txt : 20081104 0001159154-08-000055.hdr.sgml : 20081104 20081104170553 ACCESSION NUMBER: 0001159154-08-000055 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 12 CONFORMED PERIOD OF REPORT: 20081104 FILED AS OF DATE: 20081104 DATE AS OF CHANGE: 20081104 FILER: COMPANY DATA: COMPANY CONFORMED NAME: REPUBLIC AIRWAYS HOLDINGS INC CENTRAL INDEX KEY: 0001159154 STANDARD INDUSTRIAL CLASSIFICATION: AIR TRANSPORTATION, SCHEDULED [4512] IRS NUMBER: 061449146 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-49697 FILM NUMBER: 081161551 BUSINESS ADDRESS: STREET 1: 8909 PURDUE ROAD STREET 2: SUITE 300 CITY: INDIANAPOLIS STATE: IN ZIP: 46268 BUSINESS PHONE: 317-484-6000 MAIL ADDRESS: STREET 1: 8909 PURDUE ROAD STREET 2: SUITE 300 CITY: INDIANAPOLIS STATE: IN ZIP: 46268 10-Q 1 form10_q.htm FORM 10Q FOR REPUBLIC AIRWAYS HOLDINGS DATED SEPTEMBER 30, 2008 form10_q.htm

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, 2008

¨	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. x Yes o No

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

Large accelerated filer o

Accelerated filer x

Non-accelerated filer o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) oYes x No

Number of shares of Common Stock outstanding as of the close of business on November 4, 2008: 34,169,683

TABLE OF CONTENTS

	Part I - Financial Information
Item 1.	Financial Statements:	3

	Condensed Consolidated Balance Sheets as of September 30, 2008 (Unaudited) and December 31, 2007	3

	Condensed Consolidated Statements of Income (Unaudited) for the Three and Nine Months Ended September 30, 2008 and 2007	4

	Condensed Consolidated Statements of Cash Flows (Unaudited) for the Nine Months Ended September 30, 2008 and 2007	5

	Notes to Condensed Consolidated Financial Statements (Unaudited)	6

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	9

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	12

Item 4.	Controls and Procedures	12

	Part II - Other Information
Item 1A.	Risk Factors	13

Item 6.	Exhibits	13

	Signatures	14

Exhibit 10.1	Airline Services Agreement, among Midwest Airlines, Inc., Republic Airline Inc., Midwest Air Group, Inc. (in a limited capacity) and Republic Airways Holdings Inc. (in a limited capacity), dated September 3, 2008.

Exhibit 10.2	Airline Services Agreement, by and between Shuttle America Corporation and Mokulele Flight Service, Inc., dated as of October 8, 2008.

Exhibit 10.3	Credit Agreement, by and between US Airways, Inc. and Republic Airways Holdings Inc., dated as of October 20, 2008.

Exhibit 10.4(d)	Amendment to the Amended and Restated Air Services Agreement, by and between AMR Corporation and Chautauqua Airlines, Inc., dated as of October 23, 2008.

Exhibit 10.39(v)	Amendment No. 22 to Purchase Agreement DCT-014/2004, by and between Embraer-Empresa Brasileira de Aeronautica S.A. and Republic Airways Holdings Inc., dated as of September 5, 2008.

Exhibit 10.40(o)	Amendment No. 15 to Letter Agreement DCT-015/2004, by and between Embraer-Empresa Brasileira de Aeronautica S.A. and Republic Airways Holdings Inc., dated as of September 5, 2008.

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

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,
	2008			2007
	(Unaudited)
ASSETS
Current Assets:
Cash and cash equivalents	$	134,184		$	164,004
Receivables—net of allowance for doubtful accounts of $2,090 and $897, respectively		31,151			27,585
Notes receivable		27,798			—
Inventories—net		50,696			43,424
Prepaid expenses and other current assets		12,146			9,928
Assets held for sale		110,263			—
Restricted cash		4,744			1,226
Deferred income taxes		6,849			7,510

Total current assets		377,831			253,677
Aircraft and other equipment—net		2,525,739			2,308,726
Intangible and other assets		185,330			197,340
Goodwill		13,335			13,335

Total	$	3,102,235		$	2,773,078

LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt	$	207,519		$	131,700
Accounts payable		24,750			35,201
Accrued liabilities		143,301			109,792

Total current liabilities		375,570			276,693
Long-term debt—less current portion		1,955,338			1,781,880
Deferred credits and other non current liabilities		91,795			104,115
Deferred income taxes		223,379			184,304

Total liabilities		2,646,082			2,346,992
Commitments and contingencies
Stockholders' Equity:
Preferred stock, $.001 par value; 5,000,000 shares authorized; no shares issued or outstanding
Common stock, $.001 par value; one vote per share; 150,000,000 shares authorized; 43,489,616 and 43,474,466 shares issued and 34,169,683 and 36,407,572 shares outstanding, respectively		43			43
Additional paid-in capital		296,521			293,127
Treasury stock, 9,319,933 and 7,066,894, respectively, at cost		(181,646	)		(142,411	)
Accumulated other comprehensive loss		(2,697	)		(3,009	)
Accumulated earnings		343,932			278,336

Total stockholders' equity		456,153			426,086

Total	$	3,102,235		$	2,773,078

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

-3-

REPUBLIC AIRWAYS HOLDINGS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

(In thousands, except per share amounts)

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2008			2007			2008			2007
OPERATING REVENUES:
Regional airline services	$	381,121		$	325,974		$	1,127,681		$	926,861
Charter revenue and ground handling		1,486			905			3,676			5,025
Other		2,641			3,203			9,147			8,952

Total operating revenues		385,248			330,082			1,140,504			940,838

OPERATING EXPENSES:
Wages and benefits		61,898			58,187			190,627			163,685
Aircraft fuel		97,613			71,682			279,974			216,815
Landing fees		15,340			14,140			45,085			39,376
Aircraft and engine rent		33,422			33,706			101,319			91,037
Maintenance and repair		45,630			36,115			124,723			95,601
Insurance and taxes		6,255			5,567			18,295			14,216
Depreciation and amortization		35,666			27,061			99,149			77,729
Other		29,220			26,197			89,553			75,577

Total operating expenses		325,044			272,655			948,725			774,036

OPERATING INCOME		60,204			57,427			191,779			166,802

OTHER INCOME (EXPENSE):
Interest expense		(33,762	)		(26,903	)		(96,572	)		(78,435	)
Other income		1,280			3,108			11,167			9,030

Total other income (expense)		(32,482	)		(23,795	)		(85,405	)		(69,405	)

INCOME BEFORE INCOME TAXES		27,722			33,632			106,374			97,397

INCOME TAX EXPENSE		10,715			13,462			40,786			38,906

NET INCOME	$	17,007		$	20,170		$	65,588		$	58,491

BASIC NET INCOME PER COMMON SHARE	$	0.50		$	0.50		$	1.87		$	1.41

DILUTED NET INCOME PER COMMON SHARE	$	0.50		$	0.49		$	1.86		$	1.38

See accompanying notes to 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,
	2008			2007
NET CASH FROM OPERATING ACTIVITIES	$	190,310		$	200,539

INVESTING ACTIVITIES:
Purchase of aircraft and other equipment		(85,551	)		(58,411	)
Proceeds from sale of spare aircraft and other equipment		19,011			11,756
Aircraft deposits and other		(20,883	)		(33,182	)
Aircraft deposits returned		49,866			39,903
Change in restricted cash		(3,518	)		(3,526	)
Notes receivable		(27,798	)		—

NET CASH FROM INVESTING ACTIVITIES		(68,873	)		(43,460	)

FINANCING ACTIVITIES:
Payments on short/long-term debt		(114,721	)		(66,985	)
Proceeds from exercise of stock options		161			8,000
Payments of debt issue costs		(3,248	)		(5,185	)
Proceeds on settlement of interest rate swaps		5,785			—
Purchase of treasury stock		(39,234	)		(105,318	)

NET CASH FROM FINANCING ACTIVITIES		(151,257	)		(169,488	)

NET CHANGE IN CASH AND CASH EQUIVALENTS		(29,820	)		(12,409	)

CASH AND CASH EQUIVALENTS—Beginning of period		164,004			195,528
CASH AND CASH EQUIVALENTS—End of period	$	134,184		$	183,119

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
CASH PAID FOR INTEREST AND INCOME TAXES:
Interest paid	$	91,707		$	76,160
Income taxes paid		221			1,349

NON-CASH INVESTING & FINANCING TRANSACTIONS:
Aircraft, inventories, and other equipment purchased through financing arrangements from manufacturer		363,997			284,323
Parts, training and lease credits from aircraft manufacturer		(10,260	)		(7,980	)
Fair value of warrants surrendered by Delta Air Lines		—			49,103
Engine received and other spare parts to be financed or paid		—			4,961

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

-5-

REPUBLIC AIRWAYS HOLDINGS INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(In thousands, except share and per share amounts)

1. Basis of Presentation

The unaudited condensed consolidated financial statements of Republic Airways Holdings Inc. and its subsidiaries (the “Company”) as of September 30, 2008 and December 31, 2007 and for the three and nine months ended September 30, 2008 and 2007 included herein have been prepared, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (SEC). The subsidiaries include Chautauqua Airlines, Inc. (“Chautauqua Airlines”), Republic Airline Inc. (“Republic Airline”) and Shuttle America Corporation (“Shuttle America”). Certain information and disclosures normally included in the consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the following disclosures are adequate to make the information presented not misleading. These unaudited condensed consolidated financial statements reflect all adjustments that, in the opinion of management, 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, 2008 are not necessarily indicative of the results that may be expected for the year ending December 31, 2008. The unaudited condensed consolidated 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, 2007 filed with the SEC on February 21, 2008.

Revenue Recognition

Under the Company’s code-share agreements, the Company is reimbursed an amount per aircraft designed to compensate the Company for certain aircraft ownership costs. In accordance with Emerging Issues Task Force No. 01-08, Determining Whether an Arrangement Contains a Lease, the Company has concluded that a component of its revenue under the agreement discussed above is rental income, inasmuch as the agreement identifies the “right of use” of a specific type and number of aircraft over a stated period of time. The amounts deemed to be rental income during the three and nine months ended September 30, 2008 and 2007 were $87,273 and $79,650, and $265,776 and $189,670 respectively, and have been included in regional airline services revenue in the Company’s condensed consolidated statements of income.

New Accounting Standards

In March 2008, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 161, Disclosures about Derivative Instruments and Hedging Activities—an amendment of FASB Statement No. 133 (SFAS 161). SFAS 161 requires qualitative disclosures about objectives and strategies for using derivatives, quantitative disclosures about fair value amounts of and gains and losses on derivative instruments, and disclosures about credit-risk-related contingent features in derivative agreements. SFAS 161 also requires entities to disclose additional information about the amounts and location of derivatives located within the financial statements, how the provisions of SFAS 133 has been applied, and the impact that hedges have on an entity’s financial position, financial performance, and cash flows. SFAS 161 is effective for fiscal years and interim periods beginning after November 15, 2008, with early application encouraged. The Company does not believe the adoption of SFAS 161 will have a material impact to its financial position, results of operations, and cash flows, however, additional disclosures may be required to the footnotes.

In June 2008, the FASB issued FSP No. EITF 03-6-1, Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities (“EITF 03-6-1”). EITF 03-6-1 addresses whether instruments granted in share-based payment transactions are participating securities prior to vesting and, therefore, need to be included in the earnings allocation under the two-class method of calculating earnings per share. EITF 03-6-1, which is applied retrospectively, is effective for the Company beginning January 1, 2009. The Company is currently evaluating the potential impact of EITF 03-6-1 on its consolidated financial statements.

Frontier Bankruptcy

In April 2008, Frontier Airlines Holdings, Inc. ("Frontier") and its subsidiaries Frontier Airlines, Inc. and Lynx Aviation, Inc. (collectively, the "Debtors") filed voluntary petitions for reorganization under Chapter 11 of the United States Bankruptcy Code (the "Bankruptcy Code"), in the United States Bankruptcy Court for the Southern District of New York (the "Court"). The Debtors continue to operate their business as "debtors-in possession" under the jurisdiction of the Court and in accordance with the applicable provisions of the Bankruptcy Code and orders of the Court. The Company operated 12 E170 aircraft under a code-share agreement with Frontier. The agreement covered a total of 17 E170 aircraft through December 2019. The Company and Frontier negotiated an agreement that resulted in the orderly wind-down of the 12 E170 aircraft during the three months ended June 30, 2008. The Company intends to file a damage claim arising out of Frontier’s rejection of the code-share agreement. The ultimate amount of the Company’s claim will be determined in the future by the Court. At this time the Company cannot estimate the recovery value, if any, of the ultimate allowable claim. As of September 30, 2008, the Company fully reserved all pre-petition amounts due from Frontier, which total $676. As of September 30, 2008, the Company had removed all 12 E170 aircraft from service with Frontier. These 12 E170 aircraft will transition to the Company’s Midwest Airlines, Inc. (“Midwest”) code-share agreement, which was signed on September 3, 2008.

On August 4, 2008, the Company agreed to participate with two other creditors in providing a debtor-in-possession (DIP) firm financing commitment of $30,000 to Frontier. The Company funded its portion of this commitment of $12,500 on August 8, 2008. The note is collateralized by certain assets of Frontier and bears interest at 16% and is due on April 30, 2009. Any additional funding is at the sole discretion of the Company and the two other creditors.

Midwest Airlines Agreement

On September 3, 2008, the Company entered into a fixed fee code-share agreement with Midwest. The key commercial terms of the Company’s agreement include (i) Midwest will purchase all capacity at predetermined rates and will directly pay or reimburse the Company for industry standard pass-through costs; (ii) the first aircraft will be placed into service on October 1, 2008 and the last aircraft on November 15, 2008; (iii) the agreement has a term of ten years. However, at Midwest’s option, and at any time prior to June 1, 2010, Midwest can elect to convert the agreement into a long-term aircraft lease. The 12 E170 aircraft would be leased from the Company for the remaining duration of the agreement and operated on the Midwest operating certificate; (iv) all fuel will be purchased directly by Midwest and will not be charged back to the Company; (v) on September 3, 2008, the Company funded a one-year term loan to Midwest in the amount of $15,000, with interest at 10.25% which is payable monthly. On October 29, 2008, the Company funded an additional loan of $10,000, based on Midwest’s achievement of certain milestones as determined by the Company; the loans are collateralized by certain assets of Midwest and the loans are generally senior to the other lender’s security position

United Air Lines, Inc.

On July 3, 2008, the Company received notice dated July 1, 2008, from United Air Lines, Inc. (“United”), that United was exercising its right to terminate the United Express Agreement that provides for the Company to operate seven E145 aircraft. The termination will be effective December 31, 2009. The agreement to operate 38 E170 aircraft is unaffected by United's termination letter. There are no early termination provisions in the United E170 agreement.

Delta Air Lines, Inc.

On July 28, 2008, the Company entered into a letter agreement with Delta Air Lines, Inc. (“Delta”) to remove the final 11 E135 aircraft from the Delta Connection program effective September 30, 2008. The aircraft were originally scheduled to be removed between November 2008 and April 2009. All 11 E135 and an additional spare E135 aircraft are under agreement to be sold between October 2008 and April 2009 at a specified price, and the Company has classified these aircraft as held for sale at their current estimated sales price less costs to sell.

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2. Risk Management

Included in accumulated other comprehensive loss, net of tax, are amounts paid or received on settled cash flow hedges related to the Company’s financing of aircraft. The Company reclassifies such amounts to interest expense over the term of the respective aircraft debt. The Company reclassified $156 and $165, and $521 and $550 to interest expense during the three and nine month periods ended September 30, 2008 and 2007, respectively.

In March 2008, in anticipation of financing the purchase of regional jet aircraft on firm order with the manufacturer, the Company entered into twenty-one interest rate swap agreements with notional amounts totaling $420,000 and a weighted average interest rate of 4.3%. The swap agreements were forecasted to terminate at each respective settlement date, which approximated the anticipated delivery date of the respective aircraft through February 2009. Management accounted for the interest rate swaps as investments in derivative instruments, as defined in SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, as amended (SFAS 133). These contracts were not designated as either a cash flow or fair value hedge under SFAS 133 guidelines. As of and for the three months ended March 31, 2008, the Company had an unrealized loss of ($3,924) that was recorded to Other—net in the statement of income. In April 2008, the Company terminated the interest rate swap agreements early, which resulted in a net gain for the six months ended June 30, 2008 and proceeds of $5,785. Accordingly, the Company recorded a gain on settlement of $9,709 included in Other—net in its statement of income for the three months ended June 30, 2008.

3. Net Income Per Common Share

Net income per common share 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,
	2008		2007	2008		2007

Weighted-average common shares outstanding for basic net income available for common shareholders per share		34,169,104	40,582,516		35,083,855	41,501,934

Effect of dilutive employee stock options, restricted stock and warrants		0	285,896		112,561	813,020

Adjusted weighted-average common shares outstanding and assumed conversions for diluted net income available for common shareholders per share		34,169,104	40,868,412		35,196,416	42,314,954

The Company excluded 2,688,168 and 1,768,458, and 1,853,709 and 1,366,167, respectively, of employee stock options from the calculation of diluted net income per share due to their anti-dilutive impact for the three and nine months ended September 30, 2008 and 2007.

4. Treasury Stock

In December 2007, the Company’s Board of Directors authorized the purchase of up to $100,000 of the Company’s common stock. The shares will be purchased on the open market or through privately-negotiated transactions from time-to-time during the twelve month period following the authorization. Under the authorization, the timing and amount of purchase would be based upon market conditions, securities law limitations and other factors. The stock buy-back program does not obligate the Company to acquire any specific number of shares in any period, and may be modified, suspended, extended or discontinued at any time without prior notice. During the nine month period ended September 30, 2008, pursuant to this authorization, the Company purchased 2,253,039 shares on the open market at a weighted average stock price of $17.41 for total consideration of $39,234. At September 30, 2008, the amount remaining under this authorization was $59,353.

5. Debt

During the nine months ended September 30, 2008, the Company obtained 18 aircraft, all of which were debt-financed. The debt was obtained from banks and the aircraft manufacturer for terms of 5 to 15 years at interest rates ranging from 5.00% to 6.12%. The total debt incurred for the 18 aircraft was $363,997.

The Company’s revolving credit agreement with a bank expires March 31, 2009. The Company’s revolving credit agreement contains restrictive covenants that require, among other things, that the Company maintain a certain fixed charge coverage ratio, a debt to earnings leverage ratio, a liquidity covenant and the company must maintain unrestricted cash and cash equivalents of not less than $100,000. The Company was in compliance with the covenants at September 30, 2008. As of September 30, 2008 and December 31, 2007, the Company had no outstanding borrowings under this agreement with the bank.

6. Commitments and Contingencies

As of September 30, 2008, the Company has 11 E175 regional jets on firm order. The current total list price for these 11 regional jets is $385,770 which are scheduled for delivery between October 2008 and February 2009. The Company has a commitment to obtain financing for all but three of these aircraft and believes it will be able to obtain financing on the remaining aircraft; The Company also has a commitment to acquire 9 spare aircraft engines with a current list price totaling approximately $40,500. These commitments are subject to customary closing conditions.

During the nine months ended September 30, 2008, the Company made aircraft deposits in accordance with the aircraft commitments of $20,883. The aircraft deposits are included in other assets. All payments were made from cash generated from operations.

7. Fair Value Measurements

In September 2006, FASB issued SFAS No. 157, Fair Value Measurements (SFAS 157). SFAS 157 defines fair value, establishes a framework for measuring fair value, and expands disclosures about the use of fair value measurements in accordance with generally accepted accounting principles. The Company adopted the provisions of SFAS effective January 1, 2008. Although the adoption of SFAS 157 did not materially affect the consolidated financial statements, the Company is now required to provide additional disclosures as part of its financial statements.

SFAS 157 establishes a three-tier fair value hierarchy, which prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1), inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly (Level 2), and the lowest priority to unobservable inputs (Level 3). In some cases, the inputs used to measure fair value might fall in different levels of the fair value hierarchy. The level in the fair value hierarchy within which the fair value measurement in its entirety falls shall be determined based on the lowest level input that is significant to the fair value measurement in its entirety. Assessing the significance of a particular input to the fair value measurement in its entirety requires judgment, considering factors specific to the asset or liability.

During the three and nine month periods ended September 30, 2008, the Company held certain assets that were required to be measured at fair value on a recurring basis. These included the Company’s investment in derivative instruments (interest rate swaps) and certain other investments. As discussed in Note 2, the Company settled these agreements for proceeds of $5,785 in April 2008. As of September 30, 2008, the Company did not hold any assets required to be measured at fair value on a recurring basis.

The Company’s certain other investments consist of equity securities that are publicly traded and for which market prices are readily available. The Company liquidated its entire holdings in these securities during the nine months ended September 30, 2008.

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8. Impairment Review

In assessing the recoverability of goodwill and other intangible assets, the Company makes a determination of the fair value of its business. Fair value is determined using a combination of an income approach, which estimates fair value based upon projections of future revenues, expenses, and cash flows discounted to their present value, and a market approach, which estimates fair value using market multiples of various financial measures compared to a set of comparable public companies in the regional airline industry. An impairment loss will generally be recognized when the carrying amount of the net assets of the business exceeds its estimated fair value.

The valuation methodology and underlying financial information included in the Company’s determination of fair value require significant judgments to be made by management. These judgments include, but are not limited to, long term projections of future financial performance and the selection of appropriate discount rates used to determine the present value of future cash flows. Changes in such estimates or the application of alternative assumptions could produce significantly different results.

During the quarter ended September 30, 2008, due primarily to the disparity between the Company’s market capitalization and the carrying value of its stockholders’ equity and Frontier’s bankruptcy (as discussed in Note 1), the Company performed an interim assessment of the recoverability of its goodwill in accordance with SFAS No. 142, Goodwill and Other Intangible Assets. Based on the results of this analysis, the Company concluded that its goodwill was not considered impaired as of September 30, 2008.

In addition to assessing the recoverability of its goodwill, the Company determined it was necessary to evaluate whether any long-lived assets (primarily aircraft and related spare engines and spare parts) were impaired as of September 30, 2008. The Company’s analysis of its long-lived assets was performed in accordance with SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets. For purposes of testing the long-lived assets for impairment as of September 30, 2008, the Company determined whether the carrying amount of its long-lived assets was recoverable by comparing the carrying amounts to the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the assets. If the carrying value of the assets exceeded the expected cash flows, the Company would estimate the fair value of these assets to determine whether an impairment existed. The estimated undiscounted cash flows were dependent on a number of critical management assumptions including estimates of future aircraft utilization, estimated sublease rates and other relevant assumptions, changes in such estimates or the application of alternative assumptions could produce significantly different results. Based on the results of this analysis, the Company concluded none of the assets were impaired as of September 30, 2008.

Due to the volatility of our common stock in conjunction with the price of fuel, tight credit markets, continued capacity reductions by mainline carriers, the uncertain economic environment, as well as other uncertainties, the Company can provide no assurance that a material impairment charge will not occur in a future period. The Company will continue to monitor circumstances and events in future periods to determine whether additional asset impairment testing is warranted.

9. Subsequent Events

On October 10, 2008, the Company entered into an airline services agreement with Mokulele Flight Service, Inc. (“Mokulele”). Pursuant to the agreement, the Company will operate 4 E170 aircraft. Mokulele will purchase all capacity for these aircraft at predetermined rates and will directly pre-pay or reimburse the Company for industry standard pass-through costs, including fuel. The first two aircraft are expected to be placed into service on November 19, 2008, with an additional two aircraft planned to enter revenue service during the spring of 2009. The agreement has a term of ten years from the date of the first aircraft delivery. The Company will provide an $8,000 line of credit to Mokulele at 10% interest, which can be converted, at the Company’s option, to up to 45% of the common stock of Mokulele.

On October 20, 2008, the Company entered into a loan agreement with US Airways to provide up to $35,000 in two tranches. The first tranche of $10,000 was funded on October 20, 2008. At US Airways’ option, and subject to certain other conditions, the second tranche of $25,000 may be funded in the first quarter 2009. Interest on the loan is at the three-month LIBOR rate plus a margin and is to be paid quarterly, with the principal amounts to be repaid between October 2009 and October 2011.

On October 23, 2008, the Company reached an agreement with AMR Corporation (“American”), to amend its airline services agreement. Key commercial terms of the amendment include: (i) the reduction of aircraft operating under the agreement, as of June 2009, from 15 to 13 E140 regional jets. The two aircraft removed will continue to be reimbursed by American as spare aircraft unless Chautauqua otherwise sells, subleases or places the aircraft. (ii) a reduction of approximately 3% of the reimbursement rates received by Chautauqua for its services performed under the agreement, effective April 1, 2009; and (iii) an extension of the date on which American may early terminate the agreement by three years, from March 2009 to March 2012.

On October 29, 2008, the Company funded the additional $10,000 available to Midwest.

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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. 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 the Company’s beliefs, expectations, hopes or intentions regarding future events. Words such as "expects," "intends," "believes," "anticipates," "should," "likely" and similar expressions 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

Republic Airways Holdings Inc., (“the Company”) is a Delaware holding company organized in 1996 that owns Chautauqua Airlines, Inc., (“Chautauqua Airlines”), Republic Airline Inc. (“Republic Airline”) and Shuttle America Corporation (“Shuttle America”). As of September 30, 2008, we offered scheduled passenger service on approximately 1,190 flights daily to 115 cities in 34 states, Canada, Mexico and Jamaica 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”), United Air Lines, Inc. (“United”), and Continental Airlines, Inc. (“Continental”). As of September 30, 20008, we provide our five partners with regional jet service, operating as AmericanConnection, Continental Express, Delta Connection, US Airways Express, or United Express including service out of their hubs and focus cities in Atlanta, Boston, Denver, Chicago, Cincinnati, Cleveland, Columbus, Houston, Indianapolis, New York, Philadelphia, Pittsburgh, St. Louis and Washington, D.C. (Dulles and National).

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 more than 70-seats.

We have long-term, fixed-fee regional jet code-share agreements with each of our partners that are subject to our maintaining specified performance levels. Pursuant to these fixed-fee agreements, which provide for minimum aircraft utilization at fixed rates, we are authorized to use our partners' two-character flight designation codes to identify our flights and fares in our partners' computer reservation systems, to paint our aircraft in the style of our partners, to use their service marks and to market ourselves as a carrier for our partners. In addition, in connection with a marketing agreement among Delta, Continental and Northwest Airlines, certain of the routes that we fly using Delta's and Continental’s flight designator codes are also flown under Northwest's designator code. Our fixed-fee agreements eliminate our exposure to fluctuations in fuel prices, fare competition and passenger volumes. Our development of relationships with multiple major airlines has enabled us to reduce our dependence on any single airline, allocate our overhead more efficiently among our partners and reduce the cost of our services to our partners.

For the nine months ended September 30, 2008, Delta accounted for approximately 32% of the Company’s regional airline services revenue, United accounted for approximately 23%, US Airways accounted for approximately 19%, Continental accounted for approximately 13%, American accounted for approximately 11% and Frontier Airlines Inc. (“Frontier”) accounted for 2%. The Company commenced operations for Frontier in March 2007 and ceased operating for Frontier in June 2008.

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

	Three Months Ended September 30,						Nine Months Ended September 30,
	Increase/(Decrease)						Increase/(Decrease)
	2008		2008-2007		2007		2008		2008-2007		2007

Regional airline services revenue, excluding fuel (000)	283,508		11.5	%	254,292		847,707		19.4	%	710,046
Passengers carried	4,884,439		10.1	%	4,435,108		14,418,453		22.0	%	11,820,385
Revenue passenger miles (000) (1)	2,456,925		4.8	%	2,343,771		7,394,022		18.3	%	6,248,072
Available seat miles (000) (2)	3,290,132		8.2	%	3,039,510		9,957,376		20.1	%	8,293,452
Passenger load factor (3)	74.7	%	(2.4	pp)	77.1	%	74.3	%	(1.0	pp)	75.3	%
Cost per available seat mile, including interest expense (cents)(4)	10.91		10.6	%	9.86		10.50		2.2	%	10.27
Fuel cost per available seat mile (cents)	2.97		25.8	%	2.36		2.81		7.7	%	2.61
Cost per available seat mile, excluding fuel expense (cents)	7.94		5.9	%	7.50		7.69		0.4	%	7.66
Operating aircraft at period end:
37-50 seat regional jets	114		(3.4	%)	118		114		(3.4	%)	118
70+ seat regional jets	119		28.0	%	93		119		28.0	%	93
Block hours (5)	183,293		3.8	%	176,623		565,208		14.8	%	492,241
Departures	107,072		6.9	%	100,168		321,268		16.2	%	276,532
Average daily utilization of each aircraft (hours)(6)	10.0		(2.9	%)	10.3		10.2		(1.0	%)	10.3
Average aircraft stage length (miles)	496		(5.2	%)	523		508		(2.7	%)	522

(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)	Hours from takeoff to landing, including taxi time.
(6)	Average number of hours per day that an aircraft flown in revenue service is operated (from gate departure to gate arrival).

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Results of Operations

Three Months Ended September 30, 2008 Compared to Three Months Ended September 30, 2007

Net income decreased by 15.7%, or $3.2 million, to $17.0 million in 2008 compared to $20.2 million in 2007. The decrease in net income is due primarily to costs associated with aircraft previously operated by Frontier, which were not in service during the third quarter of 2008.

Operating revenue increased by 16.7%, or $55.2 million, to $385.2 million in 2008 compared to $330.1 million in 2007. The increase was due mainly to a $25.9 million increase in the cost of fuel, a direct reimbursement under the fixed fee agreement with our partners, from the prior year’s third quarter. Also, during the quarter, the Company recognized approximately $7.9 million of deferred revenue related to the removal of the E135 fleet from Delta. The remaining increase in revenue is due to an 8.2% increase in ASMs and a 3.8% increase in block hours.

Total operating and interest expenses increased by 19.8% or $59.2 million, to $358.8 million in 2008 compared to $299.6 million in 2007 due to a $25.9 million increase in the cost of fuel, a charge of approximately $7.4 million of expense to value the E135 assets as available for sale and to accrue an estimate of future return costs for the aircraft, and the increase in flight operations. The unit cost on total operating and interest expenses, excluding fuel charges, increased from 7.5¢ in 2007 to 7.9¢ in 2008. Factors relating to the change in operating expenses are discussed below.

	Operating Expenses per ASM in cents
	Three Months Ended September 30,				Nine Months Ended September 30,
	2008		2007		2008		2007

Wages and benefits		1.88		1.91		1.91		1.97
Aircraft fuel		2.97		2.36		2.81		2.61
Landing fees		0.47		0.47		0.45		0.47
Aircraft and engine rent		1.02		1.11		1.02		1.10
Maintenance and repair		1.39		1.19		1.25		1.15
Insurance and taxes		0.19		0.18		0.18		0.17
Depreciation and amortization		1.08		0.89		1.00		0.94
Other		0.89		0.86		0.90		0.91
Total operating expenses		9.88		8.97		9.53		9.32

Interest expense		1.03		0.89		0.97		0.95

Total operating expenses and interest expense		10.91		9.86		10.50		10.27

Total operating expenses and interest expense less fuel		7.94		7.50		7.69		7.66

Wages and benefits increased by 6.4%, or $3.7 million, to $61.9 million for 2008 compared to $58.2 million for 2007. The increase was due mainly to a $2.9 million increase in flight crew and maintenance operations wage expense to support the increase in regional jet operations and a $0.3 million increase in related employee benefit costs resulting from increased costs for employee welfare programs. We recorded stock based compensation expense of $0.9 million in 2008 compared to $0.7 million in 2007. The cost per available seat mile remained unchanged at 1.9¢.

Aircraft fuel expense increased 36.2%, or $25.9 million, to $97.6 million for 2008 compared to $71.7 million for 2007 due to a 60% increase in the average price per gallon from $2.47 in 2007 to $3.94 in 2008, partially offset by a 15% decrease in the amount of gallons consumed. Beginning in 2007, we did not record fuel expense and the related revenue for an increasing portion of the United operations, due to United paying for fuel directly at certain airports. We also do not pay for or record fuel expense and the related revenue for Continental, Frontier, or US Airways operations. The unit cost increased from 2.4¢ in 2007 to 3.0¢ in 2008.

Landing fees increased by 8.5%, or $1.2 million, to $15.3 million in 2008 compared to $14.1 million in 2007. The increase is due mainly to a 7% 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 decreased by 0.8%, or $0.3 million, to $33.4 million in 2008 compared to $33.7 million in 2007 due to the return of two E135 aircraft to the lessors in June and July of 2008. The unit cost decreased from 1.1¢ in 2007 to 1.0¢ in 2008.

Maintenance and repair expenses increased 26.3%, or $9.5 million, to $45.6 million in 2008 compared to $36.1 million for 2007. During the quarter $3.3 million of expense was incurred for the replacement of life limited parts on engines. This was the first quarter in which this expense has been incurred. The increase in block hours on the EJets (70-86 seats) of 17% led to a $2.4 million increase in 70-seat long-term maintenance contract expenses. Additionally, heavy maintenance, or c-check expenses increased by $0.9 million and repair expenses on parts not under warranty or included under long term contracts increased $1.3 million. The unit cost increased from 1.2¢ in 2007 to 1.4¢ in 2008.

Insurance and taxes increased 12.4% or $0.7 million to $6.3 million in 2008 compared to $5.6 million in 2007. The increase was mainly due to a $0.6 million increase in property taxes. Our fixed-fee agreements provide for a direct reimbursement of insurance and property taxes. The unit cost remained unchanged at 0.2¢.

Depreciation and amortization increased 31.8%, or $8.6 million, to $35.7 million in 2008 compared to $27.1 million in 2007 due mainly to $6.5 million of additional depreciation on 26 EJet aircraft purchased since September 30, 2007. Additionally, $1.8 million of accelerated depreciation was recorded during the third quarter of 2008 on 12 E135 aircraft to adjust the residual values of the assets prior to classifying them as held for sale. The unit cost increased from 0.9¢ in 2007 to 1.1¢ in 2008.

Other expenses increased 11.5%, or $3.0 million, to $29.2 million in 2008 from $26.2 million in 2007, due primarily to $4.6 million of accrued return costs for E135 aircraft, offset partially by a $1.4 million decrease in crew training costs. The unit cost remained unchanged at 0.9¢.

Interest expense increased 25.5% or $6.9 million, to $33.8 million in 2008 from $26.9 million in 2007 primarily due to interest on debt related to the purchase of 26 regional jet aircraft since September 30, 2007. The weighted average interest rate was 6.3% in 2008 and 6.2% in 2007. The unit cost increased from 0.9¢ in 2007 to 1.0¢ in 2008.

We incurred income tax expense of $10.7 million during 2008, compared to $13.5 million in 2007. The effective tax rate for 2008 of 38.7% is higher than the statutory rate due to state income taxes and non-deductible meals and entertainment expense, primarily for our flight crews.

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Nine Months Ended September 30, 2008 Compared to Nine Months Ended September 30, 2007

Net income increased by 12.1%, or $7.1 million, to $65.6 million in 2008 compared to $58.5 million in 2007. The increase in net income is primarily due to the increased level of fixed-fee operations in 2008.

Operating revenue increased by 21.2%, or $0.20 billion, to $1.14 billion in 2008 compared to $0.94 billion in 2007. The increase was due primarily to fixed-fee revenue earned from 26 additional regional jets that were added to revenue service since September 30, 2007.

Total operating and interest expenses increased by 22.6% or $0.19 billion, to $1.05 billion in 2008 compared to $0.85 billion in 2007 due primarily to the increase in flight operations. The unit cost on total operating and interest expenses, excluding fuel charges, remained unchanged at 7.7¢. Factors relating to the change in operating expenses are discussed below.

Wages and benefits increased by 16.5%, or $26.9 million, to $190.6 million for 2008 compared to $163.7 million for 2007. The increase was due mainly to an $18.5 million increase in flight crew and maintenance operations wage expense to support the increase in regional jet operations and a $4.9 million increase in related employee benefit costs resulting from the additional wage expense and increased costs for employee welfare programs. We recorded stock based compensation expense of $3.2 million in 2008 compared to $1.9 million in 2007. The cost per available seat mile decreased from 2.0¢ in 2007 to 1.9¢ in 2008.

Aircraft fuel expense increased 29.1%, or $63.2 million, to $280.0 million for 2008 compared to $216.8 million for 2007 due to a 53% increase in the average price per gallon from $2.30 in 2007 to $3.52 in 2008. This increase was partially offset by a 16% decrease in the amount of gallons consumed. Beginning in January 2007, we did not record fuel expense and the related revenue for an increasing portion of the United operations, due to United paying for fuel directly at certain airports. We also do not pay for or record fuel expense and the related revenue for Continental, Frontier, or US Airways operations. The unit cost increased from 2.6¢ in 2007 to 2.8¢ in 2008.

Landing fees increased by 14.5%, or $5.7 million, to $45.1 million in 2008 compared to $39.4 million in 2007. The increase was due primarily to 16% more departures. The unit cost remained unchanged at 0.5¢.

Aircraft and engine rent increased by 11.3%, or $10.3 million, to $101.3 million in 2008 compared to $91.0 million in 2007 due mainly to a $9.8 million increase in aircraft rents for 23 aircraft that were leased during the first three quarters of 2007 and leases on additional spare engines, partially offset by the purchase of 5 previously leased regional jets in the third quarter of 2007. The unit cost decreased from 1.1¢ in 2007 to 1.0¢ in 2008.

Maintenance and repair expenses increased by 30.5%, or $29.1 million, to $124.7 million in 2008 compared to $95.6 million for 2007. The increase is due mainly to the increased level of operations which produced a $5.0 million increase in 50-seat aircraft in long-term maintenance agreement expenses and a $9.9 million increase in 70-seat long-term maintenance agreement expenses. Additionally, repair expenses on parts not under warranty or included under long term contracts increased $3.9 million. Also, in 2008, $3.3 million of expense was incurred for the replacement of life limited parts on engines. The unit cost increased from 1.2¢ in 2007 to 1.3¢ in 2008.

Insurance and taxes increased 28.7%, or $4.1 million to $18.3 million in 2008 compared to $14.2 million in 2007. The increase was mainly due to a $2.8 million increase in property taxes combined with the increase in operations. Our fixed-fee agreements provide for a direct reimbursement of insurance and property taxes. The unit cost remained unchanged at 0.2¢.

Depreciation and amortization increased 27.6%, or $21.4 million, to $99.1 million in 2008 compared to $77.7 million in 2007 due mainly to $18.1 million of additional depreciation on 26 regional jet aircraft purchased since September 30, 2007. Additionally $1.8 million of accelerted depreciation was recorded during the third quarter of 2008 on 12 E135 aircraft to adjust the residual values of the assets prior to classifying them as held for sale. The unit cost increased from 0.9¢ in 2007 to 1.0¢ in 2008.

Other expenses increased 18.5%, or $14.0 million, to $89.6 million in 2008 from $75.6 million in 2007, due primarily to a $5.1 million increase in flight crew travel expenses and $6.7 million of accrued return costs for E135 in 2008. Additionally, passenger service costs and administrative expenses to support the increased regional jet operations increased by $1.8 million. The unit cost remained unchanged at 0.9¢.

Interest expense increased 23.1% or $18.1 million, to $96.6 million in 2008 from $78.4 million in 2007 primarily due to interest on debt related to the purchase of 26 additional regional jet aircraft since September 30, 2007. The weighted average interest rate was 6.3% in 2008 and 6.2% in 2007. The unit cost increased from 0.9¢ in 2007 to 1.0¢ in 2008.

We incurred income tax expense of $40.8 million during 2008, compared to $38.9 million in 2007. The effective tax rate for 2008 of 38.3% is higher than the statutory rate due to state income taxes and non-deductible meals and entertainment expense, primarily for our flight crews.

Liquidity and Capital Resources

As of September 30, 2008, the Company had $134.2 million in cash and cash equivalents and a working capital surplus of $2.3 million. During the nine months ended September 30, 2008, the Company obtained 18 aircraft that were debt-financed. The total debt incurred for the eighteen purchased aircraft was $364.0 million.

Net cash provided by operating activities was $190.3 million for the nine months ended September 30, 2008 a decrease of ($10.2) million over the same period in the prior year. During the nine months ended September 30, 2007 the Company’s receipt of the Delta pre-petition claim of $44.6 million was included in its cash provided by operating activities.

Net cash used by investing activities was $(68.9) million for the nine months ended September 30, 2008. The net cash used by investing activities consists of the down payments made to purchase 18 regional jet aircraft and the purchase of aircraft related equipment, offset by deposits returned for delivered aircraft, proceeds from sale of equipment totaling ($41.1). In addition, the Company also funded loans of ($15.0) million and ($12.8) million, to Midwest and Frontier, respectively.

Net cash used by financing activities was $(151.2) million for the nine months ended September 30, 2008. The net cash used by financing activities included the Company’s purchase of its common stock, scheduled debt payments and debt issuance costs payments offset by proceeds from the exercise of employee stock options and from treasury locks.

The Company currently anticipates that its available cash resources, cash generated from operations and anticipated third-party financing arrangements will be sufficient to meet its anticipated working capital and capital expenditure requirements for at least the next 12 months.

Aircraft Leases and Other Off-Balance Sheet Arrangements

The Company has significant obligations for aircraft that are classified as operating leases, and are not reflected as liabilities on its balance sheet. These leases expire beginning November 2008 through June 2023. As of September 30, 2008, the Company’s total mandatory payments under operating leases aggregated approximately $1 billion and total minimum annual aircraft rental payments for the next 12 months under all non-cancelable operating leases is approximately $123 million.

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Purchase Commitments

The Company has substantial commitments for capital expenditures, including the acquisition of new aircraft. The Company intends to finance these aircraft through long-term loans or lease arrangements, although there can be no assurance the Company will be able to do so.

As of September 30, 2008, the Company has a commitment to purchase 11 additional ERJ-170/175 regional jets. The current total list price of the 11 regional jets is approximately $386 million. During the nine months ended September 30, 2008, the Company made aircraft deposits in accordance with the aircraft commitments of $20.9 million. The Company also has a commitment to acquire 9 spare aircraft engines with a current list price of approximately $41 million. These commitments are subject to customary closing conditions.

The Company’s commercial commitments at September 30, 2008 include letters of credit totaling $12.5 million expiring within one year. The letters of credit are funded through the Company’s $15.0 million revolving credit agreement with a bank, which expires in March 2009.

The Company anticipates cash payments for interest for the year ended 2008 to be approximately $123 million, and the Company does not anticipate significant tax payments in 2008.

Impairment Review

In addition to assessing the recoverability of its goodwill, the Company determined it was necessary to evaluate whether any long-lived assets (primarily aircraft and related spare engines and spare parts) were impaired as of September 30, 2008. The Company’s analysis of its long-lived assets was performed in accordance with SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets. For purposes of testing the long-lived assets for impairment as of September 30, 2008, the Company determined whether the carrying amount of its long-lived assets was recoverable by comparing the carrying amounts to the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the assets. If the carrying value of the assets exceeded the expected cash flows, the Company would estimate the fair value of these assets to determine whether impairment existed. The estimated undiscounted cash flows were dependent on a number of critical management assumptions including estimates of future aircraft utilization, estimated sublease rates and other relevant assumptions, changes in such estimates or the application of alternative assumptions could produce significantly different results. Based on the results of this analysis, the Company concluded none of the assets were impaired as of September 30, 2008.

Item 3: Quantitative and Qualitative Disclosures About Market Risk

Interest Rates

The Company’s earnings are affected by changes in interest rates due to amount of cash and securities held. At September 30, 2008 and December 31, 2007, all of the Company’s long-term debt was fixed rate debt. We anticipate that additional debt will be at fixed rates. The Company is exposed to the impact of interest rate changes related to its future aircraft purchase commitments. In March 2008, in anticipation of financing the purchase of regional jet aircraft on firm order with the manufacturer, the Company entered into twenty-one interest rate swap agreements with notional amounts totaling $420.0 million and a weighted average interest rate of 4.3%. The swap agreements will be settled at each respective settlement date, which approximates the anticipated delivery date of the respective aircraft through February 2009. Management accounted for the interest rate swaps as investments in derivative instruments, as defined in SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, as amended (SFAS 133). As of and for the three months ended March 31, 2008, the Company had an unrealized loss of ($3,924) that was recorded to Other—net in the statement of income. In April 2008, the Company terminated the interest rate swap agreements early, which resulted in a net gain for the nine months ended September 30, 2008 and proceeds of $5,785.

Item 4: Controls and Procedures

The Company maintains “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 its 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 the Company’s management, including the 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, the Company’s 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 the Company’s management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. The Company carried out an evaluation, as of the end of the period covered by this report, under the supervision and with the participation of its management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures. Based upon their evaluation and subject to the foregoing, the Company’s Chief Executive Officer and Chief Financial Officer concluded that its disclosure controls and procedures were effective and were reasonably designed to ensure that material information is made known to them by others within the Company during the period in which this report was being prepared.

There have been no significant changes in the Company’s internal controls over financial reporting that occurred during our most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

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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, 2007 (the “10-K”) and Part II, "Item 1A. Risk Factors" in our Quarterly Report on Form 10-Q for the quarter ended September 30, 2008 (the "10-Q"), which could materially affect our business, financial condition or future results. The risks described in our 10-K and 10-Q 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.

Item 6.

Exhibits

	(a)	Exhibits

	Exhibit 10.1	Airline Services Agreement, among Midwest Airlines, Inc., Republic Airline Inc., Midwest Air Group, Inc. (in a limited capacity) and Republic Airways Holdings Inc. (in a limited capacity), dated September 3, 2008.

	Exhibit 10.2	Airline Services Agreement, by and between Shuttle America Corporation and Mokulele Flight Service, Inc., dated as of October 8, 2008.

	Exhibit 10.3	Credit Agreement, by and between US Airways, Inc. and Republic Airways Holdings Inc., dated as of October 20, 2008.

	Exhibit 10.4(d)	Amendment to the Amended and Restated Air Services Agreement, by and between AMR Corporation and Chautauqua Airlines, Inc., dated as of October 23, 2008.

	Exhibit 10.39(v)	Amendment No. 22 to Purchase Agreement DCT-014/2004, by and between Embraer-Empresa Brasileira de Aeronautica S.A. and Republic Airways Holdings Inc., dated as of September 5, 2008.

	Exhibit 10.40(o)	Amendment No. 15 to Letter Agreement DCT-015/2004, by and between Embraer-Empresa Brasileira de Aeronautica S.A. and Republic Airways Holdings Inc., dated as of September 5, 2008.

	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, 2008.

	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, 2008.

	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, 2008.

	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, 2008.

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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 4, 2008	By: /s/ Bryan K. Bedford
	Name: Bryan K. Bedford
	Title: Chairman of the Board, Chief Executive Officer and President
	(principal executive officer)



Dated: November 4, 2008	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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EX-10.1 2 exhibit10_1.htm REPUBLIC AIRLINE INC. AND MIDWEST AIRLINE SERVICES AGREEMENT exhibit10_1.htm

EXHIBIT 10.1

CONFIDENTIAL TREATMENT

REQUESTED PURSUANT TO RULE 24b-2

Certain portions of this exhibit have been omitted pursuant to a request for confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934. The omitted materials have been filed separately with the Securities and Exchange Commission.

AIRLINE SERVICES AGREEMENT

BETWEEN

MIDWEST AIRLINES, INC. AND

REPUBLIC AIRLINE, INC.

AND, IN A LIMITED CAPACITY,

MIDWEST AIR GROUP, INC.

AND REPUBLIC AIRWAYS HOLDINGS INC.

DATED AS OF SEPTEMBER 3, 2008

AIRLINE SERVICES AGREEMENT

This Airline Services Agreement (this “Agreement”), dated as of September 3, 2008 (the “Effective Date”), is between Midwest Airlines, Inc., a Wisconsin corporation (“Midwest”), Republic Airline, Inc., an Indiana corporation (“RAI”), and Midwest Air Group, Inc., a Wisconsin corporation, solely with respect to Section 10.20 herein, and, Republic Airways Holdings Inc., a Delaware corporation, solely with respect to Section 10.19 herein.

WHEREAS, Midwest wishes to purchase block hour time from RAI and RAI wishes to sell the same to Midwest on the terms and conditions contained herein;

NOW, THEREFORE, in consideration of the foregoing premises and the mutual covenants and obligations hereinafter contained, the parties agree to:

ARTICLE I

DEFINITIONS

Capitalized terms used in this Agreement (including, unless otherwise defined therein, in the Schedules, Appendices and Exhibits to this Agreement) shall have the meanings set forth in Exhibit A hereto.

ARTICLE II

AIRLINE SERVICES, SCHEDULES AND FARES

Section 2.01 Capacity Purchase. Midwest agrees to purchase the capacity of each Covered Aircraft for the period beginning on the date such aircraft is presented for service by RAI under this Agreement and ending on the last day of the Term, or as such date may be extended pursuant to Section 10.17 hereof, in each case unless such aircraft is earlier withdrawn pursuant to Article VIII, all under the terms and conditions set forth herein and for the consideration described in Article III. Subject to the terms and conditions of this Agreement and except as provided in Section 2.10(d), RAI shall provide all of the capacity of the Covered Aircraft solely to Midwest and use the Covered Aircraft solely to operate the Scheduled Flights. The Covered Aircraft may not be used by RAI for any other purpose without the express prior written consent of Midwest.

(a) Fares, Rules and Seat Inventory. Midwest shall establish and publish all fares and related tariff rules for all seats on the Covered Aircraft. RAI shall not publish any fares, tariffs, or related information for the Covered Aircraft. In addition, Midwest shall have complete control over all seat inventory and revenue management decisions for the Covered Aircraft, including overbooking levels, discount seat levels and allocation of seats among various fare buckets.

(b) Flight Schedules. Midwest shall, in its sole discretion, establish and publish all schedules for the Covered Aircraft (such scheduled flights, together with Charter Flights and ferry flights required to accommodate such scheduled flights and Charter Flights or otherwise made at Midwest’s request, referred to herein as “Scheduled Flights”), including determining the city-pairs served, frequencies, utilization and timing of scheduled arrivals and departures, and shall, in its sole discretion, make all determinations regarding the establishment and scheduling of any Charter Flights arranged by Midwest; provided that such schedules shall be subject to Reasonable Operating Constraints. RAI shall remain in sole operational control of the Covered Aircraft at all times. Subject to the notice requirement set forth in Section 4.08 regarding international service, Midwest will provide RAI with a preliminary schedule in a Standard Schedule Input Message (“SSIM”) file format 45 days prior to the first day of the month to which the preliminary schedule relates. RAI will review the proposed schedule and provide feedback to Midwest no later than 14 days following receipt of the preliminary schedule by RAI. Midwest will send RAI a Final Monthly Schedule, together with operational assumptions for the month (the “Operational Assumptions”), including without limitation the weighted average number of Covered Aircraft, estimated passengers, revenue passenger miles, departures, block hours, and flights hours, based on the Final Monthly Schedule, no later than two Business Days following receipt of RAI’s comments to the preliminary schedule. Following delivery of the Final Monthly Schedule, however, Midwest may make such adjustments to the proposed Final Monthly Schedule as it deems appropriate (subject to Reasonable Operating Constraints).

(c) Start Up Dates. The Covered Aircraft shall be placed into service under the terms and conditions of this Agreement on such dates as are provided on Exhibit B.

(d) Spare Aircraft. The Spare Aircraft constituting a Covered Aircraft shall be used by RAI solely as an operational and maintenance spare to replace Covered Aircraft that are out of service due to scheduled maintenance or to cover for other irregular operations, provided that, RAI may use the Spare Aircraft to cover flights for any other airline subject to the following conditions:

(1) The Spare Aircraft will be in a neutral livery as set forth in Exhibit C to this Agreement and configured in accordance with the Midwest specifications set forth in Exhibit C.

(2) The Spare Aircraft will be pooled with other neutral spare aircraft operated by RAI for other air carriers who have also contributed neutral spare aircraft (such other carriers, including Midwest, to be referred to as the “Pool Participants”) and will be available for use by RAI to cover flying for Pool Participants due to irregular operations, aircraft damage, or maintenance events incurred by Pool Participants. Similarly, Midwest shall have access to other neutral spares contributed by Pool Participants such that Midwest, at all times, shall have access to the same number of total aircraft as the Covered Aircraft. RAI shall give Midwest notice of its intent to use the Spare Aircraft as early as operationally possible. If necessary, Midwest will apprise RAI of its operational situation related to re-deployment of the Spare Aircraft. Notwithstanding the above, Midwest acknowledges and agrees that RAI will at all times retain operational control of the Spare Aircraft.

(3) Regardless of RAI’s use of the Spare Aircraft to cover flights of Pool Participants, the Spare Aircraft will be considered a Covered Aircraft for purposes of calculating Fixed Costs. Midwest will not be obligated to pay or reimburse RAI for any Variable Costs or Pass-Thru Costs relating to (i) the ferrying of the Spare Aircraft to and from locations necessary to cover flying for other Pool Participants, or (ii) the covered flying itself. Midwest shall pay the Variable Costs and Pass-Thru Costs in respect of Scheduled Flights operated by spare aircraft contributed by Pool Participants. Fixed Costs, Variable Costs and Pass-Thru Costs as used in this paragraph are as described on Exhibit D.

(4) Midwest will be responsible for the payment of Variable Costs and Pass-Thru Costs relating to (i) the ferrying of the neutral spare aircraft to and from the location necessary to cover for Scheduled Flights, and (ii) the covered Scheduled Flights, provided further, Midwest will not be responsible under Section 2.01 (d)(5)(i) if the neutral aircraft is being ferried to cover for flights canceled or delayed due to aircraft damage caused by RAI, its agents, contractors or employees.

Upon the request of Midwest, RAI shall consult with Midwest and use reasonable good faith efforts with respect to the use of Covered Aircraft to replace Midwest mainline aircraft in the event of maintenance or flight disruptions to such service.

Section 2.02 Flight-Related Revenue. RAI acknowledges and agrees that all revenues resulting from the sale and issuance of passenger tickets associated with the operation of the Covered Aircraft and all other sources of revenue associated with the operation of the Covered Aircraft, including without limitation fees related to ticket changes, unaccompanied minors, excess baggage and nonrevenue pass travel, revenues relating to the transportation of cargo or mail, and revenues associated with food, beverage, passenger entertainment, duty-free services, and guaranteed or incentive payments from airport, local or municipal authorities in connection with scheduling flights to such airport or locality, are the sole property of and shall be retained by Midwest (or, if received by RAI, shall be promptly accounted for and remitted to Midwest).

Section 2.03 Pass Travel. RAI operational personnel traveling to provide critical repair services, management personnel traveling on business, and dead heading RAI crews will be entitled to travel on flights operated by RAI or Midwest as “must ride” passengers. Commuting RAI crew members and all other RAI employees will be entitled to travel on Midwest and Midwest Connect flights at a priority category one level below the lowest category for Midwest employees and subject to the fare policies applicable to individuals traveling at that priority level. To the extent permitted by existing arrangements, Midwest employees will be entitled to (x) travel on Scheduled Flights operated by RAI under the category of travel and fare policies to which they are entitled to travel on Midwest flights, and (y) will be entitled to travel on all other RAI operated flights at a category one level below the lowest category for RAI employees.

Section 2.04 Conversion of Covered Aircraft. RAI will be responsible for all costs and expenses of preparing each Covered Aircraft for its being placed into service hereunder in accordance with the specifications and cabin configurations as required by Exhibit C; provided that Midwest will be responsible for any costs and expenses incurred in connection with any cabin re-configuration requested by Midwest.

ARTICLE III

RAI COMPENSATION

Section 3.01 Base and Incentive Compensation. For and in consideration of the aircraft and services to be provided by RAI hereunder, Midwest shall pay RAI the base and incentive compensation as provided in Exhibit D hereto, subject to the terms and conditions set forth in this Article III.

Section 3.02 Periodic Adjustment of Base Compensation. The rates under this Agreement set forth in Appendix 1 to Exhibit D hereto shall remain in effect throughout the Term of this Agreement, provided, the rates on Appendix 1 to Exhibit D hereto will be adjusted from time to time as described in Exhibit D, and, provided further, that the rates on Appendix 1 to Exhibit D designated as “Subject to Escalation” will remain in effect through December 31, 2008, and thereafter shall be adjusted on each January 1, beginning with January 1, 2009, as follows: the new rates, applicable beginning on such January 1, shall equal the rates in effect on the immediately preceding December 31 multiplied by ([*] + (Annual Change in PPI)), where PPI = the annual Producer Price Index, Commodities, Finished Goods (not seasonally adjusted), Series ID: WPUSOP3000 as published by the Bureau of Labor Statistics for January of the applicable year, provided further, annual adjustments will not decrease from the prior year and will not increase more than [*] over the prior year. Adjustments will be calculated as soon as the PPI for the prior year is published by the Bureau of Labor Statistics and the adjusted rates will be applied retroactively to the 1st day of the calendar year and paid as part of the next monthly payment.

Section 3.03 RAI Expenses. Except as provided otherwise in Section 3.04, RAI shall pay in accordance with commercially reasonable practices all expenses incurred in connection with RAI’s provision of Regional Airline Services, including expenses provided by Section 2.04 other than those expenses for which RAI is responsible at the time a Covered Aircraft is placed into service hereunder.

Section 3.04 Midwest Expenses

(a) Certain Expenses. Midwest shall incur directly those expenses relating to the Regional Airlines Services that are described in Paragraph 6 of Exhibit D.

(b) Design Changes. Midwest shall be responsible for any reasonable out-of-pocket expenses relating to interior and exterior design changes to the Covered Aircraft and other product-related changes required by Midwest, including facility-related design changes and the cost of changes in aircraft livery, in each case that occur outside of the Covered Aircraft specifications, livery and other requirements of Exhibit C to this Agreement or as otherwise specified in this Agreement.

Section 3.05 Audit Rights; Financial Information. RAI shall make available for inspection by Midwest and its outside auditors and advisors, within a reasonable period of time after Midwest makes a written request therefor, all of RAI’s books and records (including all financial and accounting records and operations reports, and records of other subsidiaries or affiliates of RAI, if any) as necessary to audit any reimbursement of Pass-Thru Costs or other expenses set forth in Paragraph 6 of Exhibit D hereto. In connection with such audit, Midwest and its outside auditors and advisors shall be entitled to make copies and notes of such information as they deem necessary and to discuss such records with RAI’s Chief Financial Officer or such other employees or agents of RAI knowledgeable about such records. Upon the reasonable written request of Midwest or its outside auditors or advisors, RAI will cooperate with Midwest and its outside auditors and advisors to permit Midwest and its outside auditors and advisors access to RAI Holding’s outside auditors for purposes of reviewing such records. In addition, RAI shall deliver or cause to be delivered to Midwest (I) as soon as available, but in any event within 90 days after the end of each fiscal year, a copy of the consolidated balance sheet of RAI Holdings, as at the end of such year, and the related consolidated statements of income and retained earnings and of cash flows of RAI Holdings for such year, setting forth in each case in comparative form the figures for the previous year, reported on by an independent certified public accountants of nationally recognized standing; and (II) as soon as available, but in any event not later than 45 days after the end of each of the first three quarterly periods of each fiscal year, the unaudited consolidated balance sheet of RAI Holdings, as at the end of such quarter, and the related unaudited consolidated statements of income and retained earnings and of cash flows of RAI Holdings for such quarter and the portion of the fiscal year through the end of such quarter, setting forth in each case in comparative form the figures for the previous year, certified by a responsible officer of RAI Holdings, as being fairly stated in all material respects (subject to normal year-end audit adjustments); provided, that no party shall be required to deliver financial statements pursuant to this sentence if such party is a reporting issuer pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, and such financial statements are timely filed with the Securities and Exchange Commission pursuant thereto. All financial statements delivered hereunder shall be complete and correct in all material respects and shall be prepared in reasonable detail and in accordance with GAAP applied consistently throughout the periods reflected therein and with prior periods (except as approved by such accountants or officer, as the case may be, and disclosed therein).

Section 3.06 Billing and Payment; Reconciliation.

(a) Billing and Payment. No later than ten calendar days prior to the beginning of the month covered by a Final Monthly Schedule and the Operational Assumptions for a given month pursuant to Section 2.01(b), RAI shall present a reasonably detailed written invoice for amounts due under this Agreement in respect of the Base Compensation for the Scheduled Flights during the month to which such Final Monthly Schedule and Operational Assumptions pertain, calculated in accordance with Paragraph 2 of Exhibit D. Midwest shall pay RAI the amount due under such invoice (the “Invoiced Amount”), subject to Midwest’s right to dispute any calculations set forth on such invoice that do not comply with the terms of this Agreement, net of amounts owed by RAI to Midwest, as follows:

(i) Thirty-four percent (34%) of the Invoiced Amount on the later of the first Business Day of the covered month or the third Business Day following receipt by Midwest of the invoice, by electronic transfer of funds to a bank account designated by RAI;

(ii) Thirty-three percent (33%) of the Invoiced Amount on the 10th calendar day of the covered month, or the next Business Day thereafter, by electronic transfer of funds to a bank account designated by RAI; and

(iii) Thirty-three percent (33%) of the Invoiced Amount on the 20th calendar day of the covered month, or the next Business Day thereafter, by electronic transfer of funds to a bank account designated by RAI.

(b) Reconciliation. Not later than 30 days following the end of each month, RAI and Midwest shall reconcile actual amounts due in respect of such month for the Fixed Cost and Variable Cost elements set forth in Appendix 1 to Exhibit D with the estimated amounts included in the Invoiced Amount for such elements for such month in accordance with the terms and conditions set forth in Exhibit D. On or before the 15th day following the end of such reconciliation period (or if such day is not a Business Day, the next Business Day), such reconciled amounts for such month to the extent applicable: (i) shall be paid by Midwest to RAI, together with any payment to be made by Midwest pursuant to Section 3.06(a)(iii) above, or (ii) shall be paid by RAI to Midwest or set off by Midwest against any other amounts owing to RAI under this Agreement.

(c) Reimbursed Costs. From time to time it is anticipated that RAI may incur certain costs and expenses in connection will the provision of Regional Airline Services under this Agreement for which RAI will be reimbursed by Midwest. These costs and expenses are indicated as “Pass-Thru Costs” on Appendix 1 to Exhibit D. RAI will pay all Pass-Thru Costs in advance, and will submit to Midwest an invoice together with all supporting documentation for all Pass-Thru Costs incurred. Midwest will reimburse RAI for all uncontested Pass-Thru Costs within five Business Days following receipt of the invoice and supporting documentation by electronic transfer of funds to a bank account designated by RAI. RAI will provide any additional supporting information and documentation to Midwest for any Pass-Thru Costs contested by Midwest at RAI’s earliest convenience. Any disputed Pass-Thru Costs not resolved within 30 days of receipt of the invoice by Midwest will be resolved in accordance with Section 10.08 of this Agreement.

* Confidential

ARTICLE IV

RAI OPERATIONS AND AGREEMENTS WITH MIDWEST

Section 4.01 Crews, Etc. RAI shall be responsible for providing all crews (flight and cabin) and maintenance personnel necessary to operate the Scheduled Flights and for all aspects (personnel and other) of dispatch control. Flight crews will be domiciled in any location deemed suitable by RAI to satisfy RAI’s staffing requirements. RAI pilots will wear neutral uniforms with RAI logo items. RAI flight attendants will wear neutral uniforms with accessories displaying approved Midwest Marks and designs. RAI flight attendants will obtain Midwest branded accessories through Midwest or its approved vendor (subject to the vendor’s approval), and will be responsible for all costs and expenses, including shipping, relating to their orders.

Section 4.02 Governmental Regulations. RAI has and shall maintain all certifications, permits, licenses, certificates, exemptions, approvals, plans, and insurance required by governmental authorities, including, without limitation, FAA, DOT and TSA, to enable RAI to perform the services required by this Agreement. All flight operations, dispatch operations and all other operations and services undertaken by RAI pursuant to this Agreement shall be conducted, operated and provided by RAI in compliance with all U.S. and foreign governmental laws, regulations and requirements, including, without limitation, those relating to airport security, the use and transportation of hazardous materials and dangerous goods, crew qualifications, crew training and crew hours, the carriage of persons with disabilities and without any violation of U.S. or foreign laws, regulations or governmental prohibitions. All Covered Aircraft shall be operated and maintained by RAI in compliance with all laws, regulations and governmental requirements, RAI’s own operations manuals and maintenance manuals and procedures, and all applicable equipment manufacturers’ manuals and instructions.

Section 4.03 Quality of Service. At all times, RAI shall provide Regional Airline Services with appropriate standards of care, but in no event lower than such standards held by Midwest as of the date of this Agreement, including, without limitation, maintaining each Covered Aircraft in clean condition (in accordance with industry standards) and acceptable (by industry standards) for scheduled passenger service. Midwest procedures, performance standards and means of measurement thereof concerning the provision of air passenger and air cargo services shall be applicable to all Regional Airline Services provided by RAI. RAI shall achieve at least the comparable quality of airline service as provided by Midwest, subject to limitations imposed by the type of aircraft used by RAI and its route network. RAI shall comply with all airline customer service commitments and policies of Midwest as of the date hereof, including without limitation the employee conduct, appearance and training policies in place as of the date hereof, and shall handle customer-related services in a professional, businesslike and courteous manner. In connection therewith, RAI shall maintain aircraft adequate staffing levels, to achieve a level of operations that routinely meet or exceed the Midwest Performance Levels as set forth in Appendix 2 to Exhibit D. RAI shall provide Midwest with timely communication regarding the status of all Scheduled Flights. At either party’s request, RAI and Midwest will meet to discuss and review RAI’s customer service and handling procedures and policies and its employees’ conduct, appearance and training standards and policies. Midwest shall give RAI not less than 15 days prior written notice of any non-safety-related breach of this Section 4.03 prior to exercising any remedy regarding such breach.

Section 4.04 Incidents or Accidents. RAI shall promptly notify Midwest of all irregularities involving a Scheduled Flight or Covered Aircraft operated by RAI, including, without limitation, aircraft accidents and incidents, which result in any damage to persons and/or property or may otherwise result in a complaint or claim by passengers or an investigation by a governmental agency or authority. RAI shall furnish to Midwest as much detail as practicable concerning such irregularities and shall cooperate with Midwest at RAI’s own expense in any appropriate investigation.

Section 4.05 Emergency Response. RAI shall adopt Midwest’s Emergency Response Plan for aircraft accidents or incidents. In the event of an accident or incident involving a Covered Aircraft or Scheduled Flight, Midwest will have the right to manage the emergency response efforts on behalf of RAI with full cooperation from RAI and if such right is exercised, RAI acknowledges and agrees that Midwest representatives will conduct all public communications, and that RAI will make no public statements, regarding such accident or incident.

Section 4.06 Safety Matters. In the event of a reasonable safety concern, Midwest shall have the right, at its own cost, to inspect, review, and observe RAI’s operations of Scheduled Flights. Notwithstanding the conduct or absence of any such review, RAI is and shall remain solely responsible for the safe operation of its aircraft and the safe provision of Regional Airline Services, including all Scheduled Flights, and nothing in this Section 4.06 or otherwise in this Agreement is intended or shall be interpreted to make Midwest responsible for such safety matters.

Section 4.07 Codeshare Terms. RAI agrees to operate all Scheduled Flights using the Midwest flight code and flight numbers assigned by Midwest, or such other flight codes and flight numbers as may be assigned by Midwest (to accommodate, for example, a Midwest alliance partner), and otherwise under the codeshare terms set forth in Exhibit E.

Section 4.08 Slots and Route Authorities. Should Midwest schedule Covered Aircraft on international routes, Midwest will provide RAI notice of such intent no fewer than 150 days in advance of the intended start date. To the extent permitted under applicable laws and regulations, Midwest will obtain the necessary slots, route authorities or other approvals required for such service at its own cost and expense, provided such items may be held and controlled by Midwest. If it is required that RAI, as the operator of the Scheduled Flights, obtain the authorities and approvals, or if Midwest is prohibited from holding such authorities and approvals in its own name, RAI will use its commercially reasonable efforts to obtain all necessary licenses, permits, route authorities or slots and complete all necessary filings and registrations, and Midwest shall reimburse RAI for its reasonable costs and expenses, in order to obtain and initiate such service. During the Term, RAI will operate Scheduled Flights on these routes solely on behalf of Midwest.

Section 4.09 Use of Midwest Marks. Midwest hereby grants to RAI the non-exclusive and non-transferable rights to use the Midwest Marks as provided in, and RAI shall use the Midwest Marks, in accordance with the terms and conditions of Exhibit C.

Section 4.10 Use of RAI Marks. RAI hereby grants to Midwest the non-exclusive and non-transferable rights to use the RAI Marks as provided in, and Midwest shall use the RAI Marks, in accordance with the terms and conditions of Exhibit F.

Section 4.11 Station and Onboard Services.

(a) Station Services. It is contemplated that Midwest or its designated agents will provide all airport passenger and aircraft ground handling at all airports served by Scheduled Flights. RAI and Midwest will negotiate separate handling or catering agreements at those airports where Midwest elects, in its sole discretion, to select RAI as its handling agent pursuant to separately negotiated agreements.

(b) Onboard Services. Midwest will determine, in its sole discretion, and at its sole cost, meal/beverage service parameters and scheduling for Scheduled Flights. Midwest has right to conduct onboard service audits on Scheduled Flights to ensure service standards are being met. RAI flight attendants providing Regional Airline Services will be trained on meal and beverage service procedures, including liquor, sale of meals on board, duty-free sales and cash handling and operation of Midwest’s cashless credit card devices, and will collect all on-board revenue for liquor and duty-free sales. RAI will provide sufficient galley service ship’s equipment to operate onboard services, such as ovens, coffee makers and trash bins. Midwest will provide all, at its sole expense, liveried catering items, such as cups and napkins, and all food, liquor and other beverage items.

Section 4.12 Negative Operational Covenant. During the term of this Agreement, RAI will not enter into any contracts or agreements of any kind or type that would prohibit or restrict RAI’s ability to operate the Covered Aircraft on any city pair, segment or route requested by Midwest pursuant to the terms of this Agreement.

ARTICLE V

CERTAIN RIGHTS AND OBLIGATIONS OF MIDWEST

Section 5.01 Use of Covered Aircraft. RAI agrees that, except as described by Section 2.01(d), the Covered Aircraft may be used only to provide Regional Airline Services.

Section 5.02 Midwest Obligations. Midwest shall provide to RAI, at no cost to RAI, the following support services (either directly or by contracting with third party vendors or by contracting with RAI pursuant to a separately negotiated handling agreement):

(a) all airport passenger service and aircraft ground handling at all airports served, including without limitation:

(i)	all ticket counter and gate check-in services;

(ii)	all passenger enplaning and deplaning services, including sky cap and wheelchair services;

(iii)

aircraft loading and unloading services, including airside busing;

(iv)	passenger ticketing;

(v)	jet bridges and air stairs, including maintenance and cleaning;

(vi)	janitorial services;

(vii)

deicing services;

(viii)

aircraft towing and push back; and

(ix)	airport security services.

(b) all Midwest logo items, such as drink cups, napkins, pillows, blankets and inflight magazines;

(c) lavatory service and light aircraft cleaning (“turn cleaning”) at General Mitchell International Airport (MKE), heavy interior cleaning at all aircraft overnight locations that are not RAI maintenance locations, and, upon the written request of RAI, at other cities served by the Covered Aircraft;

(d) denied boarding amenities and travel voucher compensation certificates consistent with Midwest mainline customer service programs;

(e) customer reaccommodations due to schedule disruption;

(f) interface and all technological support necessary to ensure accurate and reliable dynamic transfer of operational data from Midwest to RAI’s system operational control center in Indianapolis, Indiana, a data interface of RAI’s ACARS to Midwest’s reservation systems, and of RAI’s system control with Midwest’s flight information data;

(g) capital expenditures for aircraft ground handling;

(h) advertising and sales programs;

(i) operations space at General Mitchell International Airport (MKE) (the “Milwaukee Operations Space”), including gates, holdrooms, and airport concourse space for offices, break rooms, parts storage, crew lounges, and flight operations, all as agreed to by the parties; and

(j) overnight hangar space for two Covered Aircraft at General Mitchell International Airport (MKE).

Section 5.03 Change of Control. Upon the occurrence of a Change of Control of either party without the prior written consent of the other party, the non-consenting party shall have the right to terminate this Agreement on 90 days prior written notice, such notice to be delivered not later than 90 days after the non-consenting party becomes aware of such Change of Control (which termination shall not be effective if the circumstances giving rise to such Change of Control shall no longer exist on the 30th day after the written notice of termination is delivered). The foregoing sentence shall not be applicable in the event of a Change of Control in which RAI takes, obtains or assumes “control” (as such term is used in the definition of “Change of Control”) of Midwest.

Section 5.04 Transfer of Assets. Neither Midwest nor RAI will enter into an agreement (or series of agreements) to sell, assign transfer or convey substantially all of its assets to any Person unless, as part of such agreement, such Person agrees to assume any and all of the seller’s rights, duties and obligations arising under this Agreement and the non-selling party consents in writing in advance to such sale, assignment, transfer or conveyance.

ARTICLE VI

INSURANCE

Section 6.01 Minimum Insurance Coverages. During the Term, in addition to any insurance required to be maintained by RAI pursuant to the terms of any aircraft lease, or by any applicable governmental or airport authority, RAI shall maintain, or cause to be maintained, in full force and effect policies of insurance with insurers of recognized reputation and responsibility, in each case to the extent available on a commercially reasonable basis, as follows:

(a) Comprehensive airline liability insurance, including bodily injury and personal injury, third party property damage, passenger liability (including passengers’ baggage and personal effects), cargo and mail legal liability, for a combined single limit of not less than [*] per occurrence (or whatever higher amount RAI may carry from time to time), limited in the case of personal injury to [*] per occurrence and in the aggregate (except with respect to passengers to whom the full policy limit applies), and War Risk liability insurance as per London form AVN.52E or current equivalent, or as provided by the Federal Aviation Administration program, with a combined single limit no less than [*] per occurrence (or whatever higher amount RAI may carry from time to time);

(b) All Risk Hull Insurance on aircraft performing services hereunder, insured on an agreed value basis with standard market deductibles, including hull war coverage as per London form LSW 555 or equivalent, or as provided by the Federal Aviation Administration program.

(c) Workers’ compensation as required by the appropriate jurisdiction and employer’s liability with a limit of not less than [*] combined single limit; and

(d) Other property and liability insurance coverages of the types and in the amounts that would be considered reasonably prudent for a business organization of RAI’s size and nature, under the insurance market conditions in effect at the time of placement, but in any event of the type and the amount that Midwest may reasonably require to prevent or minimize a disruption in the provision of Regional Airline Services resulting from a casualty or liability incident related to RAI’s operations. All coverages described in this Section 6.01 shall be placed with deductibles reasonably prudent for a business organization of RAI’s size and nature, under the insurance market conditions in effect at the time of placement.

Section 6.02 Endorsements. RAI shall cause the policies described in Section 6.01 to be duly and properly endorsed by RAI’s insurance underwriters with respect to RAI’s flights and operations as follows:

(a) with respect to liability coverage to provide that Midwest, and its directors, officers, agents, employees and other authorized representatives shall be endorsed as additional insured parties;

(b) To provide that the underwriters shall waive subrogation rights against Midwest, its directors, officers, agents, employees and other authorized representatives;

(c) with respect to liability coverage, to provide that insurance shall be primary to and without right of contribution from any other insurance which may be available to the additional insureds;

(d) To include a breach of warranty provision in favor of the additional insureds;

(e) To accept and insure RAI’s hold harmless and indemnity undertakings set forth in this Agreement, but only to the extent of the coverage afforded by the policy or policies;

(f) with respect to liability coverages to provide that the inclusion of more than one corporation, person, organization, firm or entity as Insured under the policies shall not in any way affect the rights of any such corporation, person, organization, firm or entity either as respects any claim, demand, suit, or judgment made, brought or recovered by or in favor of any other Insured, or by or in favor of any employee of such other Insured. The policy shall protect each corporation, person, organization, firm or entity in the same manner as though a separate policy had been issued to each. Nothing herein shall operate to increase the liability of the insurers as set forth in the policies beyond the amount for which the insurers would have been liable if only one person or interest had been included as an insured.

(g) To provide that such policies shall not be canceled, terminated or materially altered, changed or amended until 30 days (but seven days or such lesser period as may be available in respect of hull, war and allied perils) after written notice shall have been sent to Midwest.

Section 6.03 Evidence of Insurance Coverage. At the commencement of this Agreement, and thereafter at Midwest’s request, RAI shall furnish to Midwest evidence reasonably satisfactory to Midwest of such insurance coverage and endorsements, including certificates certifying that such insurance and endorsements are in full force and effect. Initially, this evidence shall be a certificate of insurance. If RAI fails to acquire or maintain insurance as herein, provided, Midwest may at its option secure such insurance on RAI’s behalf at RAI’s expense.

*Confidential

ARTICLE VII

INDEMNIFICATION

Section 7.01 RAI Indemnification of Midwest. RAI shall be liable for and hereby agrees to fully defend, release, discharge, indemnify and hold harmless Midwest, its directors, officers, employees and agents from and against any and all claims, demands, damages, liabilities, suits, judgments, actions, causes of action, losses, costs and expenses of any kind, character or nature whatsoever, including attorneys’ fees, costs and expenses in connection therewith and expenses of investigation and litigation thereof, which may be suffered by, accrued against, charged to, or recoverable from Midwest or its directors, officers, employees or agents, including but not limited to, any such losses, costs and expenses involving (i) death or injury (including claims of emotional distress and other non-physical injury by passengers) to any person including any of RAI’s or Midwest’s directors, officers, employees or agents, (ii) loss of, damage to, or destruction of property (including real, tangible and intangible property, and specifically including regulatory property such as route authorities, slots and other landing rights), including any loss of use of such property, and (iii) damages due to delays in any manner, in each case arising out of, connected with, or attributable to (x) any act or omission by RAI or any of its directors, officers, employees or agents relating to the provision of Regional Airline Services, (y) the performance, improper performance, or non-performance of any and all obligations to be undertaken by RAI or any of its directors, officers, employees or agents pursuant to this Agreement, or (z) the operation, non-operation, or improper operation of the Covered Aircraft or RAI’s equipment or facilities at any location, in each case excluding only claims, demands, damages, liabilities, suits, judgments, actions, causes of action, losses, costs and expenses to the extent resulting from the gross negligence or willful misconduct of Midwest or its directors, officers, agents or employees (other than gross negligence or willful misconduct imputed to such indemnified person by reason of its interest in a Covered Aircraft). RAI will use commercially reasonable efforts to cause and assure that RAI will at all times be and remain in custody and control of all aircraft, equipment, and facilities of, or operated by, RAI, and Midwest and its directors, officers, employees and agents shall not, for any reason, be deemed to be in custody or control, or a bailee, of such aircraft, equipment or facilities.

Section 7.02 Midwest Indemnification of RAI. Midwest shall be liable for and hereby agrees fully to defend, release, discharge, indemnify, and hold harmless RAI, its directors, officers, employees, and agents from and against any and all claims, demands, damages, liabilities, suits, judgments, actions, causes of action, losses, costs and expenses of any kind, character or nature whatsoever, including attorneys’ fees, costs and expenses in connection therewith and expenses of investigation and litigation thereof, which may be suffered by, accrued against, charged to, or recoverable from RAI, or its directors, officers, employees or agents, including but not limited to, any such losses, costs and expenses involving (i) death or injury (including claims of emotional distress and other non-physical injury by passengers) to any person including any of RAI’s or Midwest’s directors, officers, employees or agents, (ii) loss of, damage to, or destruction of property (including real, tangible and intangible property, and specifically including regulatory property such as route authorities, slots and other landing rights), including any loss of use of such property, and (iii) damages due to delays in any manner, in each case arising out of, connected with, or attributable to, (x) the performance, improper performance, or nonperformance of any and all obligations to be undertaken by Midwest or any of its directors, officers, employees or agents pursuant to this Agreement, (y) the operation, non-operation or improper operation of Midwest’s aircraft, equipment or facilities (excluding, for the avoidance of doubt, Covered Aircraft and any equipment or facilities leased or subleased by Midwest to RAI) at any location, in each case excluding only claims, demands, damages, liabilities, suits judgments, actions, causes of action, losses, costs and expenses to the extent resulting from the negligence or willful misconduct of RAI or its directors, officers, agents or employees.

Section 7.03 Indemnification Claims. A party entitled to indemnification (the “Indemnified Party”) from another party under the terms of this Agreement (the “Indemnifying Party”) shall provide the Indemnifying Party with prompt written notice (an “Indemnity Notice”) of any third party claim which the Indemnified Party believes gives rise to a claim for indemnity against the Indemnifying Party hereunder. The Indemnifying Party shall be entitled, if it accepts financial responsibility for the third party claim, to control the defense of or to settle any such third party claim at its own expense and by its own counsel; provided that the Indemnified Party’s prior written consent (which may not be unreasonably withheld or delayed) must be obtained prior to settling any such third party claim. The Indemnified Party shall provide the Indemnifying Party with such information as the Indemnifying Party shall reasonably request to defend any such third party claim and shall otherwise cooperate with the Indemnifying Party in the defense of any such third party claim. Except as set forth in this Section 7.03, the Indemnified Party shall not enter into any settlement or other compromise or consent to a judgment with respect to a third party claim as to which the Indemnifying Party has an indemnity obligation hereunder without the prior written consent of the Indemnifying Party (which may not be unreasonably withheld or delayed), and the entering into of any settlement or compromise or the consent to any judgment in violation of the foregoing shall constitute a waiver by the Indemnified Party of its right to indemnity hereunder to the extent the Indemnifying Party was prejudiced thereby. Any Indemnifying Party shall be subrogated to the rights of the Indemnified Party to the extent that the Indemnifying Party pays for any loss, damage or expense suffered by the Indemnified Party hereunder. If the Indemnifying Party does not accept financial responsibility for the third party claim or fails to defend against the third party claim that is the subject of an Indemnity Notice within 30 days of receiving such notice (or sooner if the nature of the third party claim so requires), or otherwise contests its obligation to indemnify the Indemnified Party in connection therewith, the Indemnified Party may, upon providing written notice to the Indemnifying Party, pay, compromise or defend such third party claim without the prior consent of the (otherwise) Indemnifying Party. In the latter event, the Indemnified Party, by proceeding to defend itself or settle the matter, does not waive any of its rights hereunder to later seek reimbursement from the Indemnifying Party.

Section 7.04 Employer’s Liability; Independent Contractors; Waiver of Control

(a) Employer’s Liability and Workers’ Compensation. Each party hereto assumes full responsibility for its employer’s and workers’ compensation liability to its respective officers, directors, employees or agents on account of injury or death resulting from or sustained in the performance of their respective service under this Agreement. Each party, with respect to its own employees, accepts full and exclusive liability for the payment of workers’ compensation and employer’s liability insurance premiums with respect to such employees, and for the payment of all taxes, contributions or other payments for unemployment compensation or old age or retirement benefits, pensions or annuities now or hereafter imposed upon employers by the government of the United States or any other governmental body, including state, local or foreign, with respect to such employees measured by the wages, salaries, compensation or other remuneration paid to such employees, or otherwise.

(b) Employees, etc., of RAI. The employees, agents, and independent contractors of RAI engaged in performing any of the services RAI is to perform pursuant to this Agreement are employees, agents, and independent contractors of RAI for all purposes, and under no circumstances will be deemed to be employees, agents or independent contractors of Midwest. In its performance under this Agreement, RAI will act, for all purposes, as an independent contractor and not as an agent for Midwest. Notwithstanding the fact that RAI has agreed to follow certain procedures, instructions and standards of service of Midwest pursuant to this Agreement, Midwest will have no supervisory power or control over any employees, agents or independent contractors engaged by RAI in connection with its performance hereunder, and all complaints or requested changes in procedures made by Midwest will, in all events, be transmitted by Midwest to RAI’s designated representative. Nothing contained in this Agreement is intended to limit or condition RAI’s control over its operations or the conduct of its business as an air carrier.

(c) Employees, etc., of Midwest. The employees, agents, and independent contractors of Midwest engaged in performing any of the services Midwest is to perform pursuant to this Agreement are employees, agents, and independent contractors of Midwest for all purposes, and under no circumstances will be deemed to be employees, agents, or independent contractors of RAI. RAI will have no supervision or control over any such Midwest employees, agents and independent contractors and any complaint or requested change in procedure made by RAI will be transmitted by RAI to Midwest’s designated representative. In its performance under this Agreement, Midwest will act, for all purposes, as an independent contractor and not as an agent for RAI.

(d) RAI Flights. The fact that RAI’s operations are conducted under Midwest’s Marks and listed under the YX designator code will not affect their status as flights operated by RAI for purposes of this Agreement or any other agreement between the parties, and RAI and Midwest agree to advise all third parties, including passengers, of this fact.

Section 7.05 Survival. The provisions of this Article VII shall survive the termination of this Agreement for a period of seven years.

ARTICLE VIII

TERM, TERMINATION AND DISPOSITION OF AIRCRAFT

Section 8.01 Term. The Term of this Agreement shall commence on and shall be effective as of the Effective Date and, unless earlier terminated for Cause or breach or pursuant to Section 8.02(d) or extended as provided herein, shall continue until September 30, 2018, as such date may be extended pursuant to Section 10.17 hereof (the “Term”).

Section 8.02 Early Termination

(a) By Midwest for Cause. Midwest shall have the right to terminate this Agreement upon written notice following the occurrence of any event that constitutes Cause. Any termination pursuant to this Section 8.02(a) shall supersede any other termination pursuant to any other provision of this Agreement (even if such other right of termination shall already have been exercised). The notice of termination provided by Midwest pursuant to this Section 8.02(a) shall designate a Termination Date (which may be any date between the date of the notice and a date no more than 120 days of the date of the notice) and will also indicate whether or not Midwest intends to submit a Wind-Down Schedule pursuant to Section 8.03(a), and the termination date set forth in the notice provided by Midwest will be the Termination Date for purposes of this Agreement (and such Termination Date pursuant to this Section 8.02(a) shall supersede any other Termination Date that may have been previously established pursuant to another termination). In the event that Midwest shall not have delivered written notice of termination pursuant to this Section 8.02(a) within 45 days after Midwest receives written notice from RAI of the occurrence of any event that constitutes Cause by RAI, then Midwest shall be conclusively deemed to have waived any right to terminate this Agreement based upon such event; provided that such waiver shall not apply to any subsequent or continuing event that constitutes Cause.

(b) By Midwest for Breach. Midwest may terminate this Agreement, upon two Business Days’ prior written notice, upon the occurrence of (A) a material breach of this Agreement by RAI as described in clause (i) below, which breach shall not have been cured within such two Business Day period, or (B) a breach by RAI of its covenant contained in Section 5.04. Midwest may also terminate this Agreement upon the occurrence of any other material breach of this Agreement by RAI, which breach shall not have been cured within 60 days after written notice of such breach is delivered by Midwest to RAI (which 60-day notice period may run concurrently with the 15-day notice period, if any, provided pursuant to Section 4.03 for non-safety-related breaches). Any termination notice provided by Midwest pursuant to this Section 8.02(b) shall specify a Termination Date that will be no more than 90 days from the date of such notice. The parties hereto agree that, without limiting the circumstances or events that may constitute a material breach, (A) each of the following shall constitute a material breach of this Agreement by RAI: (i) a reasonable and good faith determination by Midwest, using recognized standards of safety, that there is a material safety concern with the operation of any Scheduled Flights, or (ii) the grounding of the Covered Aircraft by regulatory or court order or other governmental action and (B) any cancellation or disruption of flights resulting from employees of RAI honoring any work stoppage resulting from a strike or other labor action involving employees of Midwest shall not constitute a material breach of this Agreement. In the event that Midwest shall not have delivered written notice of termination pursuant to this Section 8.02(b) within 45 days after Midwest receives written notice from RAI of any material breach of this Agreement by RAI, then Midwest shall be conclusively deemed to have waived any right to terminate this Agreement based upon such breach; provided that such waiver shall not apply to any subsequent or continuing breach.

(c) By RAI for Breach. RAI may terminate this Agreement upon (i) five Business Days prior written notice upon (A) any failure by Midwest to make any payment or payments under this Agreement and/or any payments due under any Operating Lease (as defined in part (d) below) aggregating in excess of [*], including without limitation, any payments which become due during any Wind-Down Period, but specifically excluding any amounts which are the subject of a good faith dispute between the parties, which failure shall not have been cured within five Business Days after written notice of such failure is delivered by RAI to Midwest, or (B) a breach by Midwest of its covenant contained in Section 5.04, (ii) the occurrence of any other failure by Midwest to make any payment or payments under this Agreement aggregating in excess of [*], including without limitation, any payments which become due during any Wind-Down Period, but specifically excluding any amounts which are the subject of a good faith dispute between the parties, which failure shall not have been cured within 20 days after written notice of such breach is delivered by RAI to Midwest, or (iii) the occurrence of any other material breach of this Agreement by Midwest, including without limitation, any breach during any Wind-Down Period, which breach shall not have been cured within 60 days after written notice of such breach is received by Midwest. In the event that RAI shall not have delivered written notice of termination pursuant to this Section 8.02(c) within 45 days after RAI receives written notice from Midwest of any material breach of this Agreement by Midwest, then RAI shall be conclusively deemed to have waived any right to terminate this Agreement based upon such breach; provided that such waiver shall not apply to any subsequent or continuing breach.

(d) Early Termination Option. Midwest anticipates obtaining the necessary approvals and consents to operate E170 aircraft on its own operating certificate. At such time as Midwest is successful in obtaining such certification, or at such time that Midwest is reasonably certain such certification is forthcoming, so long as Midwest is not in default of its obligations under Sections 3.01, 3.04, 3.06, 5.03 and 5.04, Midwest may elect to operate the Covered Aircraft pursuant to a long term operating lease (the “Operating Lease”) and the related agreements in the forms attached hereto as Exhibit H commencing on the Transfer Date (as described below) and continuing for a term equal to the remaining term of this Agreement with respect to such aircraft (assuming no early termination right were exercised).

(i) In connection with the transition of the Covered Aircraft as set forth above, Midwest may at its option (the “Early Termination Option”) terminate this Agreement upon 180 days prior written notice to RAI if such notice is given on or before June 1, 2010. The notice of termination provided by Midwest pursuant to this Section 8.02(d) will provide notice of the month in which each Covered Aircraft will be removed from the terms and conditions of this Agreement and leased by Midwest pursuant to an Operating Lease. In addition, Midwest will provide notice to RAI of the date (a “Transfer Date”) during the applicable month on which each Covered Aircraft will be removed from the terms and conditions of this Agreement and leased by Midwest pursuant to an Operating Lease no fewer than 60 days prior to the date such removal will occur. Notwithstanding the foregoing, (x) no more than two Covered Aircraft shall be removed from the terms of this Agreement and be made subject to Operating Leases during any month; and (y) all Covered Aircraft shall be removed from the terms of this Agreement and made subject to Operating Leases within a continuous 6 month period commencing on the first Transfer Date.

(ii) RAI will provide full cooperation and support to Midwest in connection with its efforts to obtain the certification reference above, including, without limitation, providing access to all relevant maintenance programs, task cards, manuals, materials, training programs and manuals and materials for ground, flight, inflight and maintenance operations, checklists and dispatch training and performance data. RAI will use reasonable good faith efforts to provide Midwest with the use of an EMB 170 aircraft (which shall not be a Covered Aircraft) for training purposes on terms and conditions reasonably acceptable to Midwest and RAI; provided that payments due by Midwest in consideration for such use shall be at the rates as provided in Appendix 1 to Exhibit D.

(iii) In connection with the execution and delivery of each Operating Lease, RAI shall use reasonable good faith efforts to provide Midwest with spares and maintenance support (including engine maintenance support) for the aircraft subject to such Operating Lease, including access to RAI’s total care package; provided that, RAI shall be under no obligation to provide any such support, and any such obligations agreed to by RAI shall be evidenced by a written agreement between RAI and Midwest.

(iv) RAI and Midwest shall each bear their own costs and expenses in respect of each Operating Lease; provided that Midwest shall pay all FAA counsel fees in connection with the execution and delivery of each Operating Lease.

(v) Prior to the first Transfer Date, Midwest shall execute and deliver an Operating Lease for each Covered Aircraft.

(vi) Prior to the commencement of the Operating Lease for the Spare Aircraft, RAI shall paint the Spare Aircraft in Midwest’s livery.

(e) Survival During Wind-Down Period. Notwithstanding the Termination Date indicated in any notice of termination provided by either party pursuant to this Agreement, upon any termination hereunder where a party has elected to provide a Wind-Down Schedule (or in connection with an early termination pursuant to Section 8.02(d)), the Term shall continue, and this Agreement shall survive in full force and effect, beyond the Termination Date until the end of the Wind-Down Period (or the last Transfer Date pursuant to Section 8.02(d)), if any, and the rights and obligations of the parties under this Agreement, including without limitation remedies available upon the occurrence of events constituting Cause or material breach, shall continue with respect to the Covered Aircraft until the final Covered Aircraft is withdrawn from this Agreement.

*Confidential

Section 8.03 Disposition of Aircraft during Wind-Down Period

(a) Termination by Midwest for Cause. If this Agreement is terminated pursuant to Section 8.02(a), the Covered Aircraft shall be completely withdrawn from the capacity purchase provisions of this Agreement as of the Termination Date and shall cease to be Covered Aircraft as of such date, unless the notice of termination provided by Midwest under Section 8.02(a) indicates that Midwest intends to submit a Wind-Down Schedule. In such event within 120 days of sending the notice of termination pursuant to Section 8.02(a), Midwest will provide an irrevocable Wind-Down Schedule according to which the Covered Aircraft will be withdrawn from the capacity purchase provisions of this Agreement. The Wind-Down Schedule will provide for the withdrawal of the Covered Aircraft no sooner than the Termination Date and no later than 24 months from the Termination Date. The provisions of this Section 8.03(a) shall supersede any Wind-Down Schedule delivered pursuant to any other provision of this Agreement.

(b) Termination by Midwest for Breach or Change of Control. If this Agreement is terminated by Midwest under Section 8.02(b), Section 5.03, or Section 5.04, then the Covered Aircraft shall be withdrawn from the capacity purchase provisions of this Agreement in accordance with the following terms and conditions:

(i) Within 180 days of delivery of any notice of termination, Midwest shall deliver to RAI an irrevocable written Wind-Down Schedule, providing for the withdrawal of such Covered Aircraft from the capacity purchase provisions of this Agreement, delineating the number of each aircraft to be withdrawn by month, which will not be more than [*] Covered Aircraft per month.

(ii) The Wind-Down Schedule may not provide for the withdrawal of any Covered Aircraft beyond any date more than 24 months after the Termination Date.

(c) Termination by RAI for Breach. If this Agreement is terminated by RAI under Section 8.02(c) or Section 5.03, then the Covered Aircraft shall be withdrawn from the capacity purchase provisions of this Agreement in accordance with the following terms and conditions: The notice of termination delivered by RAI to Midwest pursuant to Section 8.02(c)(i) shall be irrevocable and shall contain a Termination Date that is no more than 60 days after the date of such notice; provided that such termination notice shall be void and of no further effect automatically upon the payment by Midwest prior to such Termination Date of all unpaid amounts giving rise to the default under Section 8.02(c)(i). As of the Termination Date set forth in a notice of termination delivered pursuant to Section 8.02(c)(i), all of the Covered Aircraft shall automatically be withdrawn from the capacity purchase provisions of this Agreement and shall cease to be Covered Aircraft as of such date. The notice of termination delivered by RAI to Midwest pursuant to Section 8.02(c)(ii) shall be irrevocable and shall contain a Termination Date that is at least 10 and not more than 360 days after the date of such notice. The notice of termination delivered by RAI to Midwest pursuant to Section 8.02(c)(iii) or Section 5.03 shall be irrevocable and shall contain a Termination Date that is no fewer than 180 days after the date of such notice. Prior to the earlier of (i) two Business Days prior to the Termination Date, and (ii) the 90th day after receipt of such termination notice pursuant to Section 8.02(c)(ii), 8.02(c)(iii), or 5.03, RAI shall deliver to Midwest a Wind-Down Schedule beginning on such Termination Date; provided that no Wind-Down Period shall occur following a termination pursuant to Section 8.02(c)(ii) if Midwest shall not have cured the payment default giving rise to such termination prior to or simultaneously with its delivery of the Wind-Down Schedule to RAI. The Wind-Down Schedule may not provide for the withdrawal of any Covered Aircraft beyond any date more than 12 months after the Termination Date nor provide for the removal of more than [*] Covered Aircraft per calendar month.

(d) Termination at End of Term. If the Agreement is terminated at the end of the Term or any extension thereof (other than pursuant to Section 8.02), Midwest shall deliver to RAI a Wind-Down Schedule no fewer than 180 days prior to the end of the Term or any extension thereof. Such Wind-Down Schedule may not provide for the withdrawal of any Covered Aircraft beyond any date more than 18 months after the end of the Term or extension period nor provide for the removal of more than [*]Covered Aircraft per calendar month

(e) Other Remedies for Labor Strike and Other Circumstances. In the event of (i) the occurrence of a Labor Strike that shall have continued for at least three consecutive days or (ii) the mandatory grounding of the Covered Aircraft by the FAA, then for so long as such Labor Strike or grounding shall continue and thereafter until the Controllable Completion Factor Percentage of Scheduled Flights (calculated on a daily basis) on any day of the week equals or exceeds the Controllable Completion Factor Percentage Target Threshold of Scheduled Flights, Midwest shall not be required to pay any of the Fixed Cost elements set forth on Appendix 1 to Exhibit D. The rights set forth in this Section 8.03(e) are in addition to, and not in limitation of, any other right of Midwest arising hereunder.

(f) Punitive Damages. No party to this Agreement or any of its affiliates shall be liable to any other party hereto or any of its affiliates for claims for punitive, special or exemplary damages, arising out of or relating to this Agreement or the transactions contemplated hereby, regardless of whether a claim is based on contract, tort (including negligence), strict liability, violation of any applicable deceptive trade practices act or similar law or any other legal or equitable principle, and each party releases the others and their respective affiliates from liability for any such damages. No party shall be entitled to rescission of this Agreement as a result of breach of any other party’s representations, warranties, covenants or agreements, or for any other matter; provided, that nothing in this Section 8.03(f) shall restrict the right of any party to exercise any right to terminate this Agreement pursuant to the terms hereof.

*Confidential

ARTICLE IX

REPRESENTATIONS, WARRANTIES AND LIQUIDATED DAMAGES

Section 9.01 Representations and Warranties of RAI. RAI represents, warrants and covenants to Midwest as of the date hereof as follows:

(a) Organization and Qualification. RAI is a duly organized and validly existing corporation under the laws of the State of Indiana. RAI has the corporate power and authority to own, operate and use its assets and to provide the Regional Airline Services. RAI is duly qualified to do business as a foreign corporation under the laws of each jurisdiction that requires such qualification, except where the failure to possess such qualification would not have a material adverse effect on RAI or its ability to conduct its business, to provide Regional Airline Services, and otherwise to perform its obligations hereunder.

(b) Authority Relative to this Agreement. RAI has the corporate power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby in accordance with the terms hereof. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly authorized by all necessary corporate action on the part of RAI. This Agreement has been duly and validly executed and delivered by RAI and is, assuming due execution and delivery thereof by Midwest and that Midwest has legal power and right to enter into this Agreement, a valid and binding obligation of RAI, enforceable against RAI in accordance with its terms, except as enforcement hereof may be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws relating to or affecting the enforcement of creditors’ rights generally and legal principles of general applicability governing the availability of equitable remedies (whether considered in a proceeding in equity or at law or otherwise under applicable law).

(c) Conflicts. Neither the execution or delivery of this Agreement nor the performance by RAI of the transactions contemplated hereby will (i) violate, conflict with, or constitute a default under any of the terms of RAI’s certificate of incorporation, by-laws, or any provision of, or result in the acceleration of any obligation under, any material contract, sales commitment, license, purchase order, security agreement, mortgage, note, deed, lien, lease or other agreement to which RAI is a party or by which it or any of its properties or assets may be bound, (ii) result in the creation or imposition of any lien, charge or encumbrance in favor of any third person or entity, (iii) violate any law, statute, judgment, decree, order, rule or regulation of any governmental authority or body, or (iv) constitute any event which, after notice or lapse of time or both, would result in such violation, conflict, default, acceleration or creation or imposition of liens, charges or encumbrances.

(d) No Default. RAI is not (i) in violation of its charter or by-laws, (ii) in breach or default in any material respect, and no event has occurred which, with notice or lapse of time or both, would constitute such a breach or default, in the due performance or observance of any term, covenant or condition contained in any indenture, mortgage, deed of trust, loan agreement or other agreement or instrument to which it is a party or by which it is bound or to which any of its properties or assets is subject, or (iii) in violation of any law, ordinance, governmental rule, regulation or court decree to which it or its property or assets may be subject or has failed to obtain any material license, permit, certificate, franchise or other governmental authorization or permit necessary to the ownership of its property or to the conduct of its business, where such violation, breach, default or failure would have a material adverse effect on RAI or on its ability to provide Regional Airlines Services and otherwise perform its obligations hereunder. To the knowledge of RAI, no third party to any indenture, mortgage, deed of trust, loan agreement, lease or other agreement or instrument that is material to RAI to which RAI is a party or by which any of them are bound or to which any of their properties are subject, is in default in any material respect under any such agreement.

(e) Broker. RAI has not retained or agreed to pay any broker or finder with respect to this Agreement and the transactions contemplated hereby.

(f) Financial Statements. The financial statements (including the related notes and supporting schedules) of RAI Holdings delivered (or, if filed with the Securities and Exchange Commission, made available) to Midwest immediately prior to the date hereof fairly present in all material respects the consolidated financial position of RAI Holdings and its results of operations as of the dates and for the periods specified therein. Since the date of the latest of such financial statements, there has been no material adverse change nor any development or event involving a prospective material adverse change with respect to RAI Holdings. Such financial statements have been prepared in accordance with generally accepted accounting principles in the United States consistently applied throughout the periods involved, except to the extent disclosed therein.

(g) Insurance. RAI is insured by insurers of recognized financial responsibility against such losses and risks and in such amounts and with such deductibles as are customary in the businesses in which they are engaged. RAI has not received notice of cancellation or non-renewal of such insurance. All such insurance is outstanding and duly in force on the date hereof. RAI has no reason to believe that it will not be able to renew its existing insurance coverage as and when such coverage expires or to obtain similar coverage from similar insurers as may be necessary to continue its business at a cost that would not have a material adverse effect on RAI.

(h) No Proceedings. There are no legal or governmental proceedings pending, or investigations commenced of which RAI has received notice, in each case to which RAI is a party or of which any property or assets of RAI is the subject which, if determined adversely to RAI, would individually or in the aggregate have a material adverse effect on RAI or on RAI’s ability to provide Regional Airlines Services and otherwise perform its obligations hereunder; and to the best knowledge of RAI, no such proceedings are threatened or contemplated by governmental authorities or threatened by others.

(i) No Labor Dispute. No labor dispute with the employees of RAI exists or, to the knowledge of RAI, is imminent which would reasonably be expected to have a material adverse effect on RAI or on its ability to provide Regional Airlines Services and otherwise perform their respective obligations hereunder.

(j) Permits. RAI possesses all material certificates, authorizations and permits issued by FAA and other applicable federal, state or foreign regulatory authorities necessary to conduct their respective businesses, to provide Regional Airlines Services and otherwise to perform their respective obligations hereunder, and RAI has not received any notice of proceedings relating to the revocation or modification of any such certificate, authorization or permit which, individually or in the aggregate, if the subject of an unfavorable decision, ruling or finding, would result in a material adverse effect on RAI or on its ability to conduct its businesses, to provide Regional Airlines Services and otherwise to perform its obligations hereunder.

Section 9.02 Representations and Warranties of Midwest. Midwest represents and warrants to RAI as of the date hereof as follows:

(a) Organization and Qualification. Midwest is a duly incorporated and validly existing corporation in good standing under the laws of the State of Wisconsin.

(b) Authority Relative to this Agreement. Midwest has the corporate power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby in accordance with the terms hereof. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly authorized by all necessary corporate action on the part of Midwest. This Agreement has been duly and validly executed and delivered by Midwest and is, assuming due execution and delivery thereof by RAI and that RAI has legal power and right to enter into this Agreement, a valid and binding obligation of Midwest, enforceable against Midwest in accordance with its terms, except as enforcement hereof may be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws relating to or affecting the enforcement of creditors’ rights generally and legal principles of general applicability governing the availability of equitable remedies (whether considered in a proceeding in equity or at law or otherwise under applicable law).

(c) Conflicts; Defaults. Neither the execution or delivery of this Agreement nor the performance by Midwest of the transactions contemplated hereby will (i) violate, conflict with, or constitute a default under any of the terms of Midwest’s certificate of incorporation, by-laws, or any provision of, or result in the acceleration of any obligation under, any material contract, sales commitment, license, purchase order, security agreement, mortgage, note, deed, lien, lease or other agreement to which Midwest is a party or by which it or its properties or assets may be bound, (ii) result in the creation or imposition of any lien, charge or encumbrance in favor of any third person or entity, (iii) violate any law, statute, judgment, decree, order, rule or regulation of any governmental authority or body, or (iv) constitute any event which, after notice or lapse of time or both, would result in such violation, conflict, default, acceleration or creation or imposition of liens, charges or encumbrances.

(d) Broker. Midwest has not retained or agreed to pay any broker or finder with respect to this Agreement and the transactions contemplated hereby.

(e) No Proceedings. There are no legal or governmental proceedings pending, or investigations commenced of which Midwest has received notice, in each case to which Midwest is a party or of which any property or assets of Midwest is the subject which, if determined adversely to Midwest, would individually or in the aggregate have a material adverse effect on Midwest or on its ability to perform its obligations hereunder; and to the best knowledge of Midwest, no such proceedings are threatened or contemplated by governmental authorities or threatened by others.

(f) Financial Statements. The financial statements (including the related notes and supporting schedules) of Midwest Holdings delivered (or, if filed with the Securities and Exchange Commission, made available) to RAI immediately prior to the date hereof fairly present in all material respects the consolidated financial position of Midwest Holdings. Since the date of the latest of such financial statements, there has been no material adverse change nor any development or event involving a prospective material adverse change with respect to Midwest Holdings. Such financial statements have been prepared in accordance with generally accepted accounting principles in the United States consistently applied throughout the periods involved, except to the extent disclosed therein.

Section 9.03 Liquidated Damages. Midwest agrees that if the Agreement is terminated during the first 18 months of the Term (other than a termination by Midwest pursuant to Section 8.02(a), 8.02(b) or 8.02(d)), Midwest shall pay to RAI liquidated damages as follows: (i) if such termination occurs on or prior to the [*] day following the date of this Agreement, Midwest shall pay liquidated damages in the amount of [*]; (ii) if such termination occurs on or after the [*]day following the date of this Agreement but on or before the [*] day following the date of this Agreement, Midwest shall pay liquidated damages in the amount of [*]; and (iii) if such termination occurs on or after the [*] day following the date of this Agreement but on or before the date that is 18 months following the date of this Agreement, Midwest shall pay liquidated damages in the amount of [*]. The parties agree that the damages to be suffered by RAI in connection with any such termination shall be difficult to calculate, and that the foregoing liquidated damages are a good faith estimate of such damages, and that such liquidated damages are not intended to be a penalty. The parties further agree that the foregoing liquidated damages shall be RAI’s sole and exclusive remedies against Midwest for any damages suffered solely as a result of any such termination; provided that, the foregoing is not intended to limit or preclude RAI from making any claim for amounts otherwise due from Midwest as of the date of such termination and unpaid hereunder.

*Confidential

ARTICLE X

MISCELLANEOUS

Section 10.01 Transition Arrangements

(a) Scheduling. Subsequent to the execution of this Agreement, and prior to the inservice date of the first Covered Aircraft, RAI and Midwest shall work together to facilitate the initial monthly scheduling of Scheduled Flights.

(b) Other Setup Arrangements. Subsequent to the execution of this Agreement, and prior to the inservice date of the first Covered Aircraft, RAI and Midwest shall work together to facilitate all other relevant aspects of the commencement of RAI’s provision of Regional Airlines Services, including without limitation the provision of passenger-related and technology-related services.

Section 10.02 Notices. All notices made pursuant to this Agreement shall be in writing and shall be deemed given upon (a) a transmitter’s confirmation of a receipt of a facsimile transmission (but only if followed by confirmed delivery by a standard overnight courier the following Business Day or if delivered by hand the following Business Day), or (b) confirmed delivery by a standard overnight courier or delivered by hand, to the parties at the following addresses:

if to Midwest:

[*]

With copies to:

[*]

and

[*]

if to RAI:

[*]

With copy to:

[*]

or to such other address as any party hereto may have furnished to the other parties by a notice in writing in accordance with this Section 10.02.

Section 10.03 Binding Effect; Assignment. This Agreement and all of the provisions hereof shall be binding upon the parties hereto and inure to the benefit of the parties hereto and their respective successors and permitted assigns. Except with respect to a merger or other consolidation of either party with another Person (and without limiting Midwest’s and RAI’s respective rights pursuant to Section 5.03 hereof), neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned by any party hereto without the prior written consent of the other parties.

Section 10.04 Amendment and Modification. This Agreement may not be amended or modified in any respect except by a written agreement signed by the parties hereto that specifically states that it is intended to amend or modify this Agreement.

Section 10.05 Waiver. The observance of any term of this Agreement may be waived (either generally or in a particular instance and either retroactively or prospectively) by the party entitled to enforce such term, but such waiver shall be effective only if it is in writing signed by the party against which such waiver is to be asserted that specifically states that it is intended to waive such term. Unless otherwise expressly provided in this Agreement, no delay or omission on the part of any party in exercising any right or privilege under this Agreement shall operate as a waiver thereof, nor shall any waiver on the part of any party of any right or privilege under this Agreement operate as a waiver of any other right or privilege under this Agreement nor shall any single or partial exercise of any right or privilege preclude any other or further exercise thereof or the exercise of any other right or privilege under this Agreement. No failure by any party to take any action or assert any right or privilege hereunder shall be deemed to be a waiver of such right or privilege in the event of the continuation or repetition of the circumstances giving rise to such right unless expressly waived in writing by each party against whom the existence of such waiver is asserted.

Section 10.06 Interpretation. The table of contents and the section and other headings and subheadings contained in this Agreement and in the exhibits and schedules hereto are solely for the purpose of reference, are not part of the agreement of the parties hereto, and shall not in any way affect the meaning or interpretation of this Agreement or any exhibit or schedule hereto. All references to days or months shall be deemed references to calendar days or months. All references to “$” shall be deemed references to United States dollars. Unless the context otherwise requires, any reference to an “Article,” a “Section,” an “Exhibit,” or a “Schedule” shall be deemed to refer to a section of this Agreement or an exhibit or schedule to this Agreement, as applicable. The words “hereof,” “herein” and “hereunder” and words of similar import referring to this Agreement refer to this Agreement as a whole and not to any particular provision of this Agreement. Whenever the words “include,” “includes” or “including” are used in this Agreement, unless otherwise specifically provided, they shall be deemed to be followed by the words “without limitation.” This Agreement shall be construed without regard to any presumption or rule requiring construction or interpretation against the party drafting or causing the document to be drafted.

Section 10.07 Confidentiality. Except as required by law or stock exchange or other regulation or in any proceeding to enforce the provisions of this Agreement, or as otherwise provided below, each party hereby agrees not to publicize or disclose to any third party (x) the terms or conditions of this Agreement, or any exhibit, schedule or appendix hereto or thereto, or any information, data, schedules, route information, fare schedules and rules shared between the parties during the course of performance under this Agreement, without the prior written consent of the other parties thereto, or (y) any confidential information or data, both oral and written, received from the other, whether pursuant to or in connection with this Agreement, and designated as such by the other without the prior written consent of the party providing such confidential information or data (except that a party may disclose such information to its third party consultants, advisors and representatives, in each case who are themselves bound to keep such information confidential). Each of party hereby agrees not to use any such confidential information or data of the other party other than in connection with performing their respective obligations or enforcing their respective rights under this Agreement, or as otherwise expressly permitted or contemplated by this Agreement. If either party is served with a subpoena or other process requiring the production or disclosure of any of such agreements or information, then the party receiving such subpoena or other process, before complying with such subpoena or other process, shall, unless expressly requested not to do so by a government agency issuing the subpoena or other process, immediately notify the other parties hereto of same and permit said other parties a reasonable period of time to intervene and contest disclosure or production. Upon termination of this Agreement, each party must return to each other any confidential information or data received from the other and designated as such by the party providing such confidential information or data which is still in the recipient’s possession or control. Without limiting the foregoing, no party shall be prevented from disclosing the following terms of this Agreement: the number of aircraft subject hereto, the periods for which such aircraft are subject hereto, and any termination provisions contained herein. The provisions of this Section 10.07 shall survive the termination of this Agreement for a period of ten years.

*Confidential

Section 10.08 Arbitration

(a) Agreement to Arbitrate. Subject to the equitable remedies provided under Section 10.11, any and all claims, demands, causes of action, disputes, controversies and other matters in question (all of which are referred to herein as “Claims”) arising out of or relating to this Agreement, shall be resolved by binding arbitration pursuant to the procedures set forth by the International Institute for Conflict Prevention and Resolution (the “CPR”). Each of the parties agrees that arbitration under this Section 10.08 is the exclusive method for resolving any Claim and that it will not commence an action or proceeding based on a Claim hereunder, except to enforce the arbitrators’ decisions as provided in this Section 10.08, to compel any other party to participate in arbitration under this Section 10.08. The governing law for any such action or proceeding shall be the law set forth in Section 10.08(f).

(b) Initiation of Arbitration. If any Claim has not been resolved by mutual agreement on or before the 15th day following the first notice of the Claim to or from a disputing party, then the arbitration may be initiated by one party by providing to the other party a written notice of arbitration specifying the Claim or Claims to be arbitrated. If a party refuses to honor its obligations to arbitrate under this provision, the other party may compel arbitration in either federal or state court in New York, New York and seek recovery of its attorneys’ fees and court costs incurred if the arbitration is ordered to proceed.

(c) Place of Arbitration. The arbitration proceeding shall be conducted in New York, New York, or some other location mutually agreed upon by the parties.

(d) Selection of Arbitrators. The arbitration panel (the “Panel”) shall consist of three arbitrators who are qualified to hear the type of Claim at issue. They may be selected by agreement of the Parties within thirty days of the notice initiating the arbitration procedure, or from the date of any order compelling such arbitration to proceed. If the Parties fail to agree upon the designation of any or all the Panel, then the Parties shall request the assistance of the CPR. The Panel shall make all of its decisions by majority vote. Evident partiality on the part of an arbitrator exists only where the circumstances are such that a reasonable person would have to conclude there in fact existed actual bias, and a mere appearance or impression of bias will not constitute evident partiality or otherwise disqualify an arbitrator. The decision of the Panel will be binding and non-appealable, except as permitted under the Federal Arbitration Act.

(e) Choice of Law as to Procedural Matters. The enforcement of this agreement to arbitrate, and all procedural aspects of the proceeding pursuant to this agreement to arbitrate, including but not limited to, the issues subject to arbitration (i.e., arbitrability), the scope of the arbitrable issues, and the rules governing the conduct of the arbitration, unless otherwise agreed by the Parties, shall be governed by and construed pursuant to the Federal Arbitration Act.

(f) Choice of Law as to Substantive Claims. In deciding the substance of the parties’ Claims, the arbitrators shall apply the substantive laws of the State of New York (excluding New York choice-of-law principles that might call for the application of the law of another jurisdiction).

(g) Procedure. It is contemplated that the arbitration proceeding will be self-administered by the parties and conducted in accordance with procedures jointly determined by the Panel and the Parties; provided, however, that if either or both Parties believes the process will be enhanced if it is administered by the CPR, then either or both Parties shall have the right to cause the process to become administered by the CPR and, thereafter, the arbitration shall be conducted, where applicable or appropriate, pursuant to the administration of the CPR. In determining the extent of discovery, the number and length of depositions, and all other pre-hearing matters, the Panel shall endeavor to the extent possible to streamline the proceedings and minimize the time and cost of the proceedings.

(h) Final Hearing. The final hearing shall be conducted within 120 days of the selection of the entire Panel. The final hearing shall not exceed ten business days, with each party to be granted one-half of the allocated time to present its case to the arbitrators, unless otherwise agreed by the Parties.

(i) Damages. Only actual damages may be awarded. It is expressly agreed that the Panel shall have no authority to award treble, exemplary or punitive damages of any type under any circumstances regardless of whether such damages may be available under the applicable law.

(j) Decision of the Arbitration. The Panel shall render its final decision and award in writing within 20 days of the completion of the final hearing completely resolving all of the Claims that are the subject of the arbitration proceeding. The Panel shall certify in its decision that no part of its award includes any amount for treble, exemplary or punitive damages. The Panel’s decision and award shall be final and non-appealable to the maximum extent permitted by law. Any and all of the Panel’s orders and decisions will be enforceable in, and judgment upon any award rendered in the arbitration proceeding may be confirmed and entered by, any federal or state court in New York, New York having jurisdiction.

(k) Confidentiality. All proceedings conducted hereunder and the decision and award of the Panel shall be kept confidential by the Panel and, except as required by law or stock exchange regulation or in any proceeding to enforce any decision or award by the Panel, by the Parties.

Section 10.09 Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. The Agreement may be executed by facsimile signature.

Section 10.10 Severability. Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof. Any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.

Section 10.11 Equitable Remedies; Certain Liquidated Damages

(a) Equitable Remedies. Each party acknowledges and agrees that, under certain circumstances, the breach by a party of a term or provision of this Agreement will materially and irreparably harm the other party, that money damages will accordingly not be an adequate remedy for such breach and that the non-defaulting party, in its sole discretion and in addition to its rights under this Agreement and any other remedies it may have at law or in equity, may apply to any court of law or equity of competent jurisdiction (without posting any bond or deposit) for specific performance and/or other injunctive relief in order to enforce or prevent any breach of the provisions of this Agreement.

(b) Certain Liquidated Damages. RAI will update from time to time Exhibit B to reflect the exact in-service week and in-service day that each of the TBD aircraft appearing on Exhibit B is known, with notification to Midwest as to such week being no later than [*]days in advance of the in-service week and the notification as to such date being no later than [*] days in advance of the in-service date. RAI will deliver such amended Exhibit B to Midwest as soon as possible. If RAI shall fail to provide the Covered Aircraft on the applicable in-service day reflected on the amended Exhibit B (such Covered Aircraft being referred to herein as the “Delayed Aircraft”), RAI will pay to Midwest within [*]days following such failure liquidated damages in an amount equal to [*] per each day between the in-service date reflected on the amended Exhibit B (the “Anticipated Service Date”) and the actual in-service date (or the date of any election by Midwest to remove the aircraft, as provided below), provided that, in the event such inservice delay is due to circumstances beyond the control of RAI and RAI provides prior notice (the “Delay Notice”) of such delay, such liquidated damages shall not in any event exceed (x) [*] if the Delay Notice is provided to Midwest no fewer than [*] days prior to the Anticipated Service Date for the Delayed Aircraft, or (y) if such notice is delivered fewer than 180 days prior to the Anticipated Service Date for the Delayed Aircraft, (i) [*] plus (ii) [*] times the difference between [*]minus the number of days between the date of such notice and the Anticipated Service Date for the Delayed Aircraft, and provided further, if the revised delivery date for the Delayed Aircraft indicated in the Delay Notice, or the final delivery date due to subsequent delays, is more than [*] days beyond the Anticipated Service Date, Midwest will have the right, to be exercised within five Business Days of receipt of such notice, to elect to remove the Delayed Aircraft from the terms of this Agreement. Should Midwest elect to remove the Delayed Aircraft from the terms of this Agreement pursuant to this Section 10.11(b), the liquidated damages described [*] will be calculated based on the number of days between the Anticipated Service Date and the date of Midwest’s election to remove such aircraft from this Agreement, if any.

The parties agree that the damages to be suffered by Midwest in connection with RAI’s failure to deliver an aircraft on an Anticipated Service Date shall be difficult to calculate, and that the foregoing liquidated damages are a good faith estimate of such damages, and that such liquidated damages are not intended to be a penalty. The parties further agree that the foregoing liquidated damages shall be Midwest’s sole and exclusive remedies against RAI for any damages suffered solely as a result of RAI’s failure to deliver an aircraft on an Anticipated Service Date as described above.

(c) Other Limitations on Seeking Damages. Neither the right of any party to terminate this Agreement, nor the exercise of such right, shall constitute a limitation on such party’s right to seek damages or such other legal redress to which such party may otherwise be entitled; provided that, absent the occurrence of another breach of this Agreement by RAI, Midwest shall not be entitled to seek damages solely for the occurrence of (i) an event of Cause of the type described in clause (iii) or clause (iv) of the definition thereof, (ii) a material breach of the type described in clause (ii) of Section 8.02(b), or (iii) a termination pursuant to Section 5.03 or Section 5.04.

Section 10.12 Relationship of Parties. Nothing in this Agreement shall be interpreted or construed as establishing between the parties a partnership, joint venture or other similar arrangement.

Section 10.13 Entire Agreement; No Third Party Beneficiaries. This Agreement (including the exhibits and schedules hereto) are intended by the parties as a complete statement of the entire agreement and understanding of the parties with respect to the subject matter hereof and all matters between the parties related to the subject matter herein or therein set forth. This Agreement is made among, and for the benefit of, the parties hereto, and the parties do not intend to create any third-party beneficiaries hereby, and no other Person shall have any rights arising under, or interests in or to, this Agreement.

Section 10.14 Governing Law. Except with respect to matters referenced in Section 10.08(e) (which shall be governed by and construed pursuant to the Federal Arbitration Act), this Agreement shall be governed by and construed in accordance with the laws of the State of New York (excluding New York choice-of-law principles that might call for the application of the law of another jurisdiction) as to all matters, including matters of validity, construction, effect, performance and remedies. Except as otherwise provided in Section 10.08(e), any action arising out of this Agreement or the rights and duties of the parties arising hereunder may be brought, if at all, only in the state or federal courts located in the City and County of New York, New York.

Section 10.15 Right of Set-Off. If any party hereto shall be in default hereunder to any other party, then in any such case the non-defaulting party shall be entitled to set off from any payment owed by such non-defaulting party to the defaulting party hereunder any amount owed by the defaulting party to the non-defaulting party thereunder; provided that contemporaneously with any such set-off, the non-defaulting party shall give written notice of such action to the defaulting party; provided further that the failure to give such notice shall not affect the validity of the set-off. It is specifically agreed that (i) for purposes of the set-off by any non-defaulting party, mutuality shall be deemed to exist among the parties; (ii) reciprocity among the parties exists with respect to their relative rights and obligations in respect of any such set-off; and (iii) the right of set-off is given as additional security to induce the parties to enter into the transactions contemplated hereby. Upon completion of any such set-off, the obligation of the defaulting party to the non-defaulting party shall be extinguished to the extent of the amount so set-off. Each party hereto further waives any right to assert as a defense to any attempted set-off the requirements of liquidation or mutuality. This set-off provision shall be without prejudice, and in addition, to any right of set-off, combination of accounts, lien or other right to which any non-defaulting party is at any time otherwise entitled (either by operation of law, contract or otherwise), including without limitation pursuant to Section 3.06(b)(ii) hereof.

Section 10.16 Cooperation with Respect to Reporting. Each of the parties hereto agrees to use its commercially reasonable efforts to cooperate with each other party in providing necessary data, to the extent in the possession of the first party, required by such other party in order to meet any reporting requirements to, or otherwise in connection with any filing with or provision of information to be made to, any regulatory agency or other governmental authority.

Section 10.17 Extension of Term. Midwest may extend the Term of this Agreement for up to two extension periods by delivering to RAI written notice on such extension no less than 365 days prior to the end of the then existing Term. Any extension shall be for no less than three years.

Section 10.18 Life Limited Parts. Midwest and RAI shall each cooperate with one another in order to manage and minimize engine life limited parts (“LLP”) expenses for Covered Aircraft. To that end, RAI shall provide annual projections of LLP requirements and supplemental notice of specific engine maintenance events which require LLP replacement as they are scheduled. Midwest may, at its option and with RAI’s consent (which consent shall not be unreasonably withheld) provide or arrange the provision of used serviceable LLPs that otherwise meet RAI’s specifications and reasonable minimum cycle-remaining requirements, to be incorporated into a Covered Aircraft. In connection with the withdrawal of any Covered Aircraft from the capacity purchase provisions of this Agreement (whether at the end of such aircraft’s scheduled term or otherwise), Midwest shall pay RAI for the pro-rata cost (based on useful life and using the then-current catalogue price for LLPs) of all LLPs consumed for all Scheduled Flights by such Covered Aircraft under this Agreement, and RAI shall pay Midwest for the pro-rata cost (based on useful life and using the then-current catalogue price for LLPs) of all LLPs provided by Midwest and incorporated into such Covered Aircraft pursuant to the previous sentence and not consumed for any Scheduled Flights under this Agreement.

*Confidential

Section 10.19 RAI Holdings Guarantee.

(a) RAI Holdings does hereby unconditionally and irrevocably guaranty to Midwest, as a primary obligor and not merely as surety, (i) the due, punctual, and full payment (when due, by acceleration or otherwise) of each amount which RAI is or may become obligated to pay under this Agreement, (ii) the full and punctual performance and observance by RAI of each term, provision, condition, agreement and covenant for which it is liable contained in this Agreement, and (iii) the accuracy of each of the representations and warranties of RAI set forth in this Agreement. RAI Holdings hereby expressly waives notice, promptness, presentment and diligence as to the obligations guaranteed hereby and acceptance of this guarantee or any requirement that Midwest proceed first against RAI or any security for or any other guarantor of any of the obligations guaranteed hereunder (and without having to join any other person in any such action). RAI Holdings agrees that it shall not be required to consent to, or receive any notice of, any amendment or modification of, or waiver, consent or extension with respect to, this Agreement or any payments or performance obligations required of RAI herein.

(b) This guarantee by RAI Holdings is a guarantee of payment and performance and not merely a guaranty of collection, and RAI Holding’s liabilities and obligations under this guarantee are and shall at all times continue to be absolute, irrevocable and unconditional in all respects in accordance with the terms of this Section 10.19, and shall at all times be valid and enforceable without set off, deduction, or counterclaim irrespective of any other agreements or circumstances of any nature whatsoever which might otherwise constitute a defense to this guarantee or the obligations of RAI Holdings hereunder.

(c) The guarantee by RAI Holdings in this Section 10.19 shall continue to be effective, or be reinstated, as the case may be, if at any time payment by RAI or RAI Holdings of all or any part of any sum payable pursuant to this Agreement or this guarantee is rescinded or otherwise must be returned by Midwest upon RAI’s insolvency, bankruptcy or reorganization, all as though such payment had not been made. Until all of the obligations guaranteed hereunder shall have been paid and performed in full, RAI Holdings shall have no right of subrogation or any other right to enforce any remedy which Midwest now has or may hereafter have against RAI.

(d) RAI Holdings hereby represents and warrants (i) that it has the necessary power and authority to execute and deliver this Agreement, (ii) all required consents, approvals and authorizations have been obtained with respect to the execution and delivery of this Agreement by RAI Holdings, and (iii) that this Agreement has been duly executed and delivered by RAI Holdings and is enforceable against RAI Holdings in accordance with its terms, provided, the representations and warranties set forth in clauses (i) through (iii) above are solely as to the extent necessary to provide the guarantee set forth in this Section 10.19, and, provided further, that such representations and warranties are qualified to the extent enforceability may be effected by the laws of bankruptcy and equity.

Section 10.20 Midwest Holdings Guarantee.

(a) Midwest Holdings does hereby unconditionally and irrevocably guaranty to RAI, as a primary obligor and not merely as surety, (i) the due, punctual, and full payment (when due, by acceleration or otherwise) of each amount which Midwest is or may become obligated to pay under this Agreement, (ii) the full and punctual performance and observance by Midwest of each term, provision, condition, agreement and covenant for which it is liable contained in this Agreement, and (iii) the accuracy of each of the representations and warranties of Midwest set forth in this Agreement. Midwest Holdings hereby expressly waives notice, promptness, presentment and diligence as to the obligations guaranteed hereby and acceptance of this guarantee or any requirement that RAI proceed first against Midwest or any security for or any other guarantor of any of the obligations guaranteed hereunder (and without having to join any other person in any such action). Midwest Holdings agrees that it shall not be required to consent to, or receive any notice of, any amendment or modification of, or waiver, consent or extension with respect to, this Agreement or any payments or performance obligations required of Midwest herein.

(b) This guarantee by Midwest Holdings is a guarantee of payment and performance and not merely a guaranty of collection, and Midwest Holding’s liabilities and obligations under this guarantee are and shall at all times continue to be absolute, irrevocable and unconditional in all respects in accordance with the terms of this Section 10.20, and shall at all times be valid and enforceable without set off, deduction, or counterclaim irrespective of any other agreements or circumstances of any nature whatsoever which might otherwise constitute a defense to this guarantee or the obligations of Midwest Holdings hereunder.

(c) The guarantee by Midwest Holdings in this Section 10.20 shall continue to be effective, or be reinstated, as the case may be, if at any time payment by Midwest or Midwest Holdings of all or any part of any sum payable pursuant to this Agreement or this guarantee is rescinded or otherwise must be returned by RAI upon Midwest’s insolvency, bankruptcy or reorganization, all as though such payment had not been made. Until all of the obligations guaranteed hereunder shall have been paid and performed in full, Midwest Holdings shall have no right of subrogation or any other right to enforce any remedy which RAI now has or may hereafter have against Midwest.

(d) Midwest Holdings hereby represents and warrants (i) that it has the necessary power and authority to execute and deliver this Agreement, (ii) all required consents, approvals and authorizations have been obtained with respect to the execution and delivery of this Agreement by Midwest Holdings, and (iii) that this Agreement has been duly executed and delivered by Midwest Holdings and is enforceable against Midwest Holdings in accordance with its terms, provided, the representations and warranties set forth in clauses (i) through (iii) above are solely as to the extent necessary to provide the guarantee set forth in this Section 10.19, and, provided further, that such representations and warranties are qualified to the extent enforceability may be effected by the laws of bankruptcy and equity.

IN WITNESS WHEREOF, the parties hereto have caused this Airline Services Agreement to be duly executed and delivered as of the date and year first written above.

MIDWEST AIRLINES, INC.			REPUBLIC AIRLINE INC.

/s/ Curtis E. Sawyer			/s/ Bryan Bedford
Name: Curtis E. Sawyer			Name: Bryan Bedford
Title: Senior Vice President			Title: President

The parties signing below do so solely with respect to their respective obligations under Section 10.19 and Section 10.20 of this Agreement.

MIDWEST AIR GROUP, INC.			REPUBLIC AIRWAYS HOLDINGS INC.

/s/ Curtis E. Sawyer			/s/ Bryan Bedford
Name: Curtis E. Sawyer			Name: Bryan Bedford
Title: Senior Vice President			Title: President

Exhibits

Exhibit A – Definitions

Exhibit B – Covered Aircraft & Inservice Schedule

Exhibit C – Aircraft Specification, Livery and Use of Midwest Marks

Exhibit D – Compensation

Exhibit E – Terms of Codeshare Arrangements

Exhibit F – Use of RAI Marks

Exhibit G – Reasonable Operating Constraints

Exhibit H – Form of Aircraft Lease Agreement and Related Agreements

EXHIBIT A

Definitions

ACARS – means the Aircraft Communications Addressing and Reporting System which provides communications between the Covered Aircraft and RAI with respect to operational matters.

Agreement – means the Airline Services Agreement, dated as of September 3, 2008, among Midwest and RAI, as amended from time to time pursuant to Section 10.04 hereof.

Base Compensation – is defined in Paragraph A.1 of Exhibit D.

Business Day – means each Monday, Tuesday, Wednesday, Thursday and Friday unless such day shall be a day when financial institutions in New York, New York or Milwaukee, Wisconsin are authorized by law to close or the general offices of Midwest or RAI are closed due to weather or other natural forces.

Cause – means (i) the suspension for three consecutive days or longer or the revocation of RAI’s authority to operate as a scheduled airline, (ii) the ceasing of RAI’s operations as a scheduled airline, other than as a result of a Labor Strike or the mandatory grounding of the Covered Aircraft by the FAA, and other than any temporary cessation for not more than 14 consecutive days, (iii) the occurrence of a Labor Strike that shall have continued for 10 consecutive days or longer, (iv) beginning after the month in which the 12th aircraft is placed in service, RAI operating at or below the Default Threshold for Controllable arrivals within [*] minutes or the Default Threshold for Controllable Completion Factor Percentage, each as described in Appendix 2 to Exhibit D, for any two consecutive calendar months, or (v) a willful or intentional material breach of this Agreement by RAI that substantially deprives Midwest of the benefits of this Agreement, which breach shall have continued for 45 days after notice thereof is delivered by Midwest to RAI.

Change of Control – means, with respect to any Person, the merger of such Person with, or the acquisition of direct or indirect control of such Person by, another air carrier, or a corporation directly or indirectly owning or controlling or directly or indirectly owned or controlled by another air carrier (a “Holding Company”), or a corporation directly or indirectly owned or controlled by such Holding Company, unless (1) such Person is the acquiring or surviving entity in such merger or acquisition, or (2) the ultimate beneficial ownership of the surviving entity immediately following such transaction is substantially similar (i.e., at least 60% common ownership) to the beneficial ownership of such Person immediately prior to such transaction.

Charter Flights – means any flight by a Covered Aircraft for charter operations arranged by Midwest that is not reflected in the Final Monthly Schedule.

Covered Aircraft – means all of the aircraft listed on Exhibit B (as amended from time to time pursuant to the provisions of this Agreement) and presented for service by RAI, as adjusted from time to time for withdrawals pursuant to Article VIII and for extensions pursuant to Section 10.17. Upon becoming subject to an Operating Lease, an aircraft shall cease to be a Covered

* Confidential

Aircraft for all purposes hereof.

DOT – means the United States Department of Transportation.

Effective Date – is as set forth in the preamble to this Agreement.

Enplanement – means one passenger for such passenger’s entire one-way flight itinerary, regardless of how many Scheduled Flights or flight segments comprise such itinerary.

FAA – means the United States Federal Aviation Administration.

Final Monthly Schedule – means the final schedule of Scheduled Flights for the next calendar month delivered by Midwest to RAI pursuant to Section 2.01(b).

Labor Strike – means a labor dispute, as such term is defined in 29 U.S.C. Section 113(c) involving RAI and some or all of its employees, which dispute results in a union-authorized strike resulting in a work stoppage.

LLP – is defined in Section 10.18.

Midwest – means Midwest Airlines, Inc., a Wisconsin corporation, and its successors and permitted assigns.

Midwest Marks – is defined in Exhibit C.

Midwest Holdings – means Midwest Air Group, Inc., a Wisconsin corporation.

Performance Period – means each 6 month period ending on a June 30th or December 31th occurring during the term of this Agreement.

Person – means an individual, partnership, limited liability company, corporation, joint stock company, trust, estate, joint venture, association or unincorporated organization, or any other form of business or professional entity.

RAI – means Republic Airlines, Inc., an Indiana corporation, and its successors and permitted assigns.

RAI Holdings – means Republic Airways Holdings Inc., a Delaware corporation.

RAI Marks – is defined in Exhibit F.

Reasonable Operating Constraints – means the operating constraints on Scheduled Flights set forth on Exhibit G.

Reconciled Expenses – are those Variable Cost elements subject to reconciliation as described in Exhibit D.

Regional Airline Services – means the provisioning by RAI to Midwest of Scheduled Flights and related ferrying using the Covered Aircraft or neutral spare aircraft in accordance with this Agreement.

Scheduled Flight – means a flight as determined by Midwest pursuant to Section 2.01(b)

Spare Aircraft – means any designated as such by Midwest that will not be part of the Scheduled Flights and is intended to be used in place of Aircraft that are removed from Scheduled Flights due to mechanical issues or heavy check requirements, and may be used to cover flights for RAI or other carriers; provided that, “Spare Aircraft” shall also mean a neutral spare aircraft operated by RAI for another carrier which, as a result of operational needs, is required on a temporary basis to Scheduled Flights under the Agreement, all in accordance and subject to the limitations set forth in Section 2.01(d) of this Agreement.

Subsidiary – means, as to any Person, (a) any corporation more than 50% of whose stock of any class or classes having by the terms thereof ordinary voting power to elect a majority of the directors of such corporation (irrespective of whether or not at the time, any class or classes of such corporation shall have or might have voting power by reason of the happening of any contingency) is at the time owned by such Person directly or indirectly through Subsidiaries and (b) any partnership, association, joint venture, limited liability company, joint stock company or any other form of business or professional entity, in which such Person directly or indirectly through Subsidiaries has more than 50% equity interest at any time.

Term – has the meaning set forth in Section 8.01, as earlier terminated pursuant to Section 8.02, if applicable, and any Wind-Down Period.

Termination Date – means the date of early termination of this Agreement, as provided in a notice delivered from one party to the others pursuant to Section 8.02, or, if no such early termination shall have occurred, the date of the end of the Term.

TSA – means the United States Transportation Security Administration.

Wind-Down Period – means the period after the Termination Date and until the time when the last Covered Aircraft has been withdrawn from the capacity purchase provisions of this Agreement.

Wind-Down Schedule – means the schedule, determined as provided in Article VIII of this Agreement, for Covered Aircraft to be withdrawn from the capacity purchase provisions of this Agreement.

EXHIBIT B

Covered Aircraft & In-Service Schedule

Number	Aircraft Type	U.S. Registration Number	Scheduled In- Service Day*
1.	EMB 170		[*]
2.	EMB 170		[*]
3.	EMB 170		[*]
4.	EMB 170		[*]
5.	EMB 170		[*]
6.	EMB 170		[*]
7.*	EMB 170		[*]
8.	EMB 170		[*]
9.	EMB 170		[*]
10.	EMB 170		[*]
11.**	EMB 170		[*]
12.**	EMB 170		[*]

*Aircraft number 7 shall be the Spare Aircraft

**RAI shall exercise reasonable good faith efforts to delivery Aircraft numbers 11 and 12 by November 1, 2008

* Confidential

EXHIBIT C

Aircraft Specification, Livery and Use of Midwest Marks

1.	Aircraft Specification. The specifications of the Covered Aircraft will be as set forth in Schedule 1 of this Exhibit C.

2.	Grant. Midwest hereby grants to RAI, and RAI accepts, a non-exclusive, personal, non-transferable, royalty-free right and license to adopt and use the Midwest Marks in connection with the rendering by RAI of Regional Airline Services, subject to the conditions and restrictions set forth herein.

3.	Ownership of the Midwest Marks.

a. Midwest shall at all times remain the owner of the Midwest Marks and any registrations thereof and RAI’s use of any Midwest Marks shall clearly identify Midwest as the owner of such marks (to the extent practical) to protect Midwest’s interest therein. All use by RAI of the Midwest Marks shall inure to the benefit of Midwest. Nothing in this Agreement shall give RAI any right, title, or interest in the Midwest Marks other than right to use the Midwest Marks in accordance with the terms of this Agreement.

b. RAI acknowledges that Midwest is the owner of the Midwest Marks and hereby agrees to take no action that would be contrary to Midwest’s ownership of the Midwest Marks and agrees to cooperate with all of Midwest’s reasonable request to take any and all actions necessary to protect and preserve Midwest’s ownership of the Midwest Marks.

4.	Use of the Midwest Marks.

a. RAI shall use the Midwest Marks only as authorized herein by Midwest and in accordance with such standards of quality as Midwest may establish.

b. RAI shall use the Midwest Marks on all Covered Aircraft and all facilities, equipment and printed materials used in connection with the Regional Airline Services.

c. RAI shall not use the Midwest Marks for any purpose other than as set forth in this Exhibit C, and specifically shall have no right to use the Midwest Marks on or in any aircraft other than Covered Aircraft or in connection with any other operations of RAI.

d. Midwest shall have exclusive control over the use and display of the Midwest Marks, and may change the Midwest Marks at any time and from time to time, in which case RAI shall as soon as practicable make such changes as are requested by Midwest to incorporate the new Midwest Marks; provided that Midwest shall either pay directly the reasonable costs of making such changes or shall promptly reimburse RAI for its reasonable expenses incurred in making such changes.

e. Nothing shall abridge Midwest’s right to use and/or to license the Midwest Marks, and Midwest reserves the right to the continued use of all the Midwest Marks, to license such other uses of the Midwest Marks and to enter into such agreements with other carriers providing for arrangements similar to those with RAI as Midwest may desire. No term or provision of this Agreement shall be construed to preclude the use of the Midwest Marks by other persons or for similar or other uses not covered by this Agreement.

Midwest-Controlled Litigation. Midwest at its sole expense shall take all steps that in its opinion and sole discretion are necessary and desirable to protect the Midwest Marks against any infringement or dilution. RAI agrees to cooperate fully with Midwest in the defense and protection of the Midwest Marks as reasonably requested by Midwest. RAI shall report to Midwest any infringement or imitation of, or challenge to, the Midwest Mark, immediately upon becoming aware of same. RAI shall not be entitled to bring, or compel Midwest to bring, an action or other legal proceedings on account of any infringements, imitations, or challenges to any element of the Midwest Marks without the written agreement of Midwest. Midwest shall not be liable for any loss, cost, damage or expense suffered or incurred by RAI because of the failure or inability to take or consent to the taking of any action on account of any such infringements, imitations or challenges or because of the failure of any such action or proceeding. If Midwest shall commence any action or legal proceeding on account of such infringements, imitations or challenges, RAI agrees to provide all reasonable assistance requested by Midwest in preparing for and prosecuting the same.

Revocation of License. Midwest shall have the right to cancel the license provided herein in whole or in part at any time and for any reason, in which event all terminated rights to use the Midwest Marks provided RAI herein shall revert to Midwest and the Midwest Marks shall not be used by RAI in connection with any operations of RAI. The following provisions shall apply to the termination of the license provided herein: in the case of a termination of the license to use the Midwest Marks, RAI shall cease all use of the Midwest Marks with respect to each Covered Aircraft within 30 days of such aircraft being withdrawn from the capacity purchase provisions of the Agreement, and shall cease all use of the Midwest Marks in all other respects within 30 days of last Covered Aircraft being withdrawn from this Agreement. Within such specified period, RAI shall cease all use of such other Midwest Marks, and shall change its facilities, equipment, uniforms and supplies to avoid any customer confusion or the appearance that RAI is continuing to have an operating relationship with Midwest, and RAI shall not thereafter make use of any word, words, term, design, name or mark confusingly similar to the Midwest Marks or take actions that otherwise may infringe the Midwest Marks.

7.	Assignment. The non-exclusive license granted by Midwest to RAI is personal to RAI and may not be assigned, sub-licensed or transferred by RAI in any manner without the written consent of a duly authorized representative of Midwest.

Midwest Marks. The Midwest Marks are as set forth in Schedule 2 to this Exhibit C and also include the Aircraft Livery, the Midwest flight code and other trade names, trademarks, service marks, graphics, logos, employee uniform designs, distinctive color schemes and other identification selected by Midwest in its sole discretion for the Regional Airline Services to be provided by RAI, whether or not such identification is copyrightable or otherwise protected or protectable under federal law.

9.	Aircraft Livery. The Covered Aircraft will be painted in accordance with the designs shown on Schedule 3 to this Exhibit C at RAI’s sole cost and expense.

10.	Survival. The provisions of this Exhibit C shall survive the termination of this Agreement for a period of six years.

Attachments to Exhibit C

Schedule 1 – Aircraft Specifications

Schedule 2 – Midwest Marks

Schedule 3 – Aircraft Livery

SCHEDULE 1 TO EXHIBIT C

Aircraft Specifications

SCHEDULE 2 TO EXHIBIT C

Midwest Marks

To be provided to RAI prior to the commencement of the Term

SCHEDULE 3 TO EXHIBIT C

Aircraft Livery

For Covered Aircraft (other than the Spare Aircraft):

to be provided by Midwest promptly following execution of the Agreement

EXHIBIT D

Compensation

Base and Incentive Compensation.

Base Compensation. Midwest will pay to RAI, in respect of the Covered Aircraft, the rates set for on Appendix 1 to this Exhibit D for each calendar month, times, the applicable Unit of Measure, times, in each case where the rate category is indicated. Rates indicated as “Subject to Escalation on Appendix 1 to this Exhibit D will be adjusted in accordance with Section 3.02 of this Agreement.

2.	Pre-Bill Invoiced Amount. The Invoiced Amount calculated in accordance with Section 3.06 (a) of the Agreement will be calculated by using the data from the Final Monthly Schedule and the Operational Assumptions for any given month as follows:

a. the Invoiced Amount for each of the Fixed Cost cost elements will be calculated by multiplying (i) the Rate, times (ii) the Unit of Measure (as set forth in the Final Monthly Schedule and the Operational Assumptions for the month). The Rate for each Fixed Cost element will not change during the Term except for the annual adjustment pursuant to Section 3.02 of the Agreement for those elements noted as “Subject to Escalation”; plus

b. the Invoiced Amount for each of the Variable Cost elements will be calculated by multiplying (i) the Rate, times (ii) the Unit of Measure (as set forth in the Final Monthly Schedule and the Operational Assumptions for the month), times (iii) the Completion Factor Target Threshold percentage as in effect at the time of calculation, where “Blk Hrs” are the block hours estimated to be flown by the Covered Aircraft for the month, “W/A A/C” is the weighted average number of Covered Aircraft for the month, “Departures” is the number of departures estimated to be made by the Covered Aircraft during the month, “Flt Hrs” are the flight hours estimated to be flown by the Covered Aircraft for the month, “Pax” is the number of passengers estimated to be transported by the Covered Aircraft during the month, and “1000 RPMS” is the estimated revenue passenger miles flown by the Covered Aircraft during the month divided by 1,000. The Rate for each Variable Cost element will not change during the Term except for (i) the annual adjustment pursuant to Section 3.02 of the Agreement for those elements noted as “Subject to Escalation, and (ii) those elements noted as subject to “Periodic Adjustment” will be adjusted based on the actual costs of the related insurance premiums paid by RAI, taking into account any increases or reductions in those premiums due to end of the coverage year calculations based on RAI’s operational statistics.

Reconciled Costs. The Fixed Cost elements calculated by using the “W/A A/C” Unit of Measure, and the Variable Cost elements will be reconciled pursuant to Section 3.06 (b) of the Agreement by calculating the difference between the Invoiced Amount for such elements and the amount due for such elements based on the Rate for each Variable Cost element times the actual Unit of Measure for the month.

4.	Pass-Thru Costs. Midwest will reimburse RAI for each Pass-Thru Cost element in accordance with Section 3.06 (c) of the Agreement. Pass-Thru Costs are actual costs incurred and are not subject to Escalation or Periodic Adjustment.

5.	Incentive Compensation. With respect to each calendar month, incentive compensation shall be calculated as follows:

a. On-Time Bonus/Rebate. The reconciliation for any calendar month shall include, as applicable, a bonus (represented by a payment by Midwest to RAI) or a rebate or offset (represented by a payment by RAI to Midwest), in each case in respect of on-time performance, as determined pursuant to Appendix 2 to this Exhibit D .

b. Completion Factor Bonus/Rebate. The reconciliation for any calendar month shall include, as applicable, a bonus (represented by a payment by Midwest to RAI) or a rebate or offset (represented by a payment by RAI to Midwest), in each case in respect of RAI’s completion factor for the month, as determined pursuant to Appendix 2 to this Exhibit D.

c. Other Bonuses/Rebates. The reconciliation for any calendar month shall include, as applicable, a bonus (represented by a payment by Midwest to RAI) or a rebate or offset (represented by a payment by RAI to Midwest), in each case in respect of each of RAI’s customer complaints factor, care check score and customer experience pulse for the month, as determined pursuant to Appendix 2 to this Exhibit D.

Midwest Expenses. With respect to Scheduled Flights, in consideration of the provision by RAI of Regional Airline Services and its compliance with the other terms and conditions of this Agreement, the following expenses shall be incurred directly Midwest, provided that, should RAI incur any such expenses, RAI will be reimbursed for such expenses in accordance with Section 3.06 (c) of the Agreement:

(a)

Covered Aircraft fuel, including into plane charges, taxes and administrative fees;

(b)

Landing fees;

(c)

Passenger catering;

(d)

Travel agency and OAL related CRS booking fees;

(e)

Revenue taxes and PFCs;

(f)

Credit card processing fees;

(g)

Deicing services at all cities;

(h)

All customer inconvenience charges;

(i)

TSA fees or charges and any other passenger security fees;

(j)

NAV Canada fees; and

(k)

Any future ATC or enroute navigation fees charged in the United States of America; and

(l)

Station expenses;

(m)

Staged overnight hotel and per diem expense; and

(n)

Rates and charges relating to the Milwaukee Operations Space as defined in Section 5.02(i).

No Reconciliation for Fines, Etc. Notwithstanding anything to the contrary contained in this Exhibit D or the Agreement, Midwest shall not be required to incur any cost or make any reconciliation payment to RAI to the extent that such cost or reconciliation payment is attributable to any costs, expenses or losses (including fines, penalties and any costs and expenses associated with any related investigation or defense) incurred by RAI as a result of any violation by RAI of any law, statute, judgment, decree, order, rule or regulation of any governmental or airport authority, provided that, Midwest shall be liable for all any costs, expenses or losses (including fines, penalties and any costs and expenses associated with any related investigation or defense) incurred by RAI as a result of any violation by Midwest or its agents of any law, statute, judgment, decree, order, rule or regulation of any governmental or airport authority.

Exhibit D Appendices

Appendix 1 Base Compensation Rates

Appendix 2 Incentive Bonuses/Rebates

Appendix 1 to Exhibit D

Base Compensation Rates

	COST	SUBJECT	UNIT OF		PERIODIC
	ELEMENT	TO ESCALATION	MEASURE	RATE1	ADJUSTMENT
FIXED COSTS:
	[*]	[*]	[*]	[*]	[*]
	[*]	[*]	[*]	[*]	[*]
	[*]	[*]	[*]	[*]	[*]
	[*]	[*]	[*]	[*]	[*]
	[*]	[*]	[*]	[*]	[*]

VARIABLE COSTS:
	[*]	[*]	[*]	[*]	[*]
	[*]	[*]	[*]	[*]	[*]
	[*]	[*]	[*]	[*]	[*]
	[*]	[*]	[*]	[*]	[*]
	[*]	[*]	[*]	[*]	[*]
	[*]	[*]	[*]	[*]	[*]
	[*]	[*]	[*]	[*]	[*]
	[*]	[*]	[*]	[*]	[*]
	[*]	[*]	[*]	[*]	[*]
	[*]	[*]	[*]	[*]	[*]
	[*]	[*]	[*]	[*]	[*]
	[*]	[*]	[*]	[*]	[*]
	[*]	[*]	[*]	[*]	[*]

PASS-THRU COSTS:
	[*]	[*]	[*]	[*]	[*]
	[*]	[*]	[*]	[*]	[*]
	[*]	[*]	[*]	[*]	[*]
	[*]	[*]	[*]	[*]	[*]
	[*]	[*]	[*]	[*]	[*]
	[*]	[*]	[*]	[*]	[*]
	[*]	[*]	[*]	[*]	[*]

Costs and Rates applicable to training flights operated per Section 8.02(d)(ii).

	COST	SUBJECT	UNIT OF		PERIODIC
	ELEMENT	TO ESCALATION	MEASURE	RATE1	ADJUSTMENT
FIXED COSTS:
	[*]	[*]	[*]	[*]	[*]

VARIABLE COSTS:
	[*]	[*]	[*]	[*]	[*]
	[*]	[*]	[*]	[*]	[*]

[*]

1 Costs expressed in January 2008 economics

* Confidential

Appendix 2 to Exhibit D

Incentive Bonuses/Rebates

1. Service Standards

(a) Minimum Completion Factor. RAI shall achieve a completion factor (the “Completion Factor”) for all Scheduled Flights which are scheduled to be operated by RAI during each Performance Period which is no less than [*] standard deviations worse than Midwest Actual Performance (as such term is defined in Section 3 of this Appendix 2) for the Completion Factor for the same Performance Period. Scheduled Flights which are cancelled (i) at Midwest’s request (as determined by Midwest’s System Operations Control operations reporting group), or (ii) because of any action or inaction on the part of Midwest, will not be included in calculating the Completion Factor, and station overflys due to no passenger load will not be considered a cancellation.

(b) Minimum On Time Reliability. RAI shall achieve an on time arrival factor (the “On-Time Factor”) for all Scheduled Flights which are scheduled to be operated by RAI during each Performance Period which is no less than [*]standard deviations worse than Midwest Actual Performance for the same Performance Period. Scheduled Flights that are delayed (i) at Midwest’s request, or (ii) because of any action or inaction on the part of Midwest, will not be included in calculating the On Time Factor.

(c) Customer Complaints Factor. The number of customer complaints (the “Customer Complaints Factor”) received by Midwest in respect of Regional Airline Services during any Performance Period shall be no greater than [*] standard deviations worse than Midwest Actual Performance for the number of customer complaints for the same Performance Period. The number of customer complaints shall be determined by Midwest by dividing (i) the total number of RAI-caused complaints during the applicable Performance Period, by (ii) the total number of enplaned revenue passengers during such Performance Period as reported by Midwest.

(d) Care Check Score. RAI shall achieve a score on the Care Check (the “Care Check Factor”) during each Performance Period which is no less than [*] standard deviations worse than Midwest Actual Performance for the Care Check Factor for the same Performance Period.

(e) Customer Experience Pulse. RAI shall achieve a score on the Customer Experience Pulse (the “Customer Experience Pulse Factor”) during each Performance Period which is no less than [*] standard deviations worse than Midwest Actual Performance for the Customer Experience Pulse Factor for the same Performance Period.

* Confidential

(f) Calculations. The parties agree that the performance standard targets described in this Section 1, shall be calculated for each Performance Period during the term of this Agreement and shall be equal to the actual average results of Midwest for each of the performance standards for such Performance Period (“Midwest Actual Performance”).The Midwest Actual Performance for each performance standard set forth in this Section 1 and related standard deviations shall be calculated and delivered by Midwest in accordance with the provisions of Section 3, below. The performance standards set forth in paragraphs (a) through (e) of this Section 1 shall be calculated on a monthly basis beginning in the month of placement into service of the initial Covered Aircraft pursuant to Section 2.01(c) of the Agreement. The Completion Factor and the On-Time Factor, shall first be calculated for default purposes for the Performance Period which begins on January 1, 2010 and ends on June 30, 2010.

2. Bonus/Penalty Payment Calculations.

RAI shall be subject to certain target performance levels and incentives or penalties as described in this Section 2 (“Performance Criteria”). The performance of RAI during each Performance Period will be measured against each of the Performance Criteria. Any incentive or penalty associated with achievement against the Performance Criteria shall be made in the next scheduled payment pursuant to Section 3.06 of the Agreement, either as an increment to the amount otherwise due and payable or as an offset thereto, as the case may be. Achievement of each criterion is independent of the others. The applicable Performance Criteria and associated targets, incentives and penalties shall be based on the weighted average results (with a [*] weighting given to the Completion Factor, a [*] weighting given to the On Time Factor and a [*] weighting given to each of the other Factors) of Midwest for each Performance Period and calculated as follows:

Completion Factor:

	Penalty	Target	Incentive
Performance Level	more than [*] standard deviation worse than Midwest Actual Performance	Midwest Actual Performance	more than [*] standard deviation better than Midwest Actual Performance
Incentive/Penalty per flight	[*]	[*]	[*]

On Time Factor:

	Penalty	Target	Incentive
Performance Level	more than [*] standard deviation worse than Midwest Actual Performance	Midwest Actual Performance	more than [*] standard deviation better than Midwest Actual Performance
Incentive/Penalty per flight	[*]	[*]	[*]

Customer Complaints Factor:

	Penalty	Target	Incentive
Performance Level	more than [*] standard deviation worse than Midwest Actual Performance	Midwest Actual Performance	more than [*] standard deviation better than Midwest Actual Performance
Incentive/Penalty per flight	[*]	[*]	[*]

Care Check Factor:

	Penalty	Target	Incentive
Performance Level	more than [*] standard deviation worse than Midwest Actual Performance	Midwest Actual Performance	more than [*] standard deviation better than Midwest Actual Performance
Incentive/Penalty per flight	[*]	[*]	[*]

Customer Experience Pulse Factor:

	Penalty	Target	Incentive
Performance Level	more than [*] standard deviation worse than Midwest Actual Performance	Midwest Actual Performance	more than [*] standard deviation better than Midwest Actual Performance
Incentive/Penalty per flight	[*]	[*]	[*]

* Confidential

3. Calculations. The parties agree that the Performance Criteria targets described in Section 2, above, shall be calculated for each Performance Period during the term of this Agreement and shall be equal to the weighted average results (with a [*] weighting given to the Completion Factor, a [*]weighting given to the On Time Factor and a [*] weighting given to each of the other Factors) of Midwest for each of the Performance Criteria for such Performance Period (“Midwest Actual Performance”). After Midwest Actual Performance for a Performance Period has been calculated for each of the Performance Criteria, Midwest shall calculate standard deviations for each Midwest Actual Performance result for purposes of this Section 3 and Section 5, below, based on the rolling six (6) month averages for the twenty-four (24) month period ending on the last month of the applicable Performance Period. Within two (2) months after the end of each Performance Period, Midwest shall provide RAI with its calculations of (i) Midwest Actual Performance for each of the Performance Criteria for such Performance Period, and (ii) the standard deviations of each such Midwest Actual Performance result required by this Section 3 and Section 5, below.

4. Reconciliation of Performance Standards. Within thirty (30) days after the end of each Performance Period, (i) RAI shall determine the total number of actual flights operated by it during such Performance Period and, (ii) RAI shall calculate its Completion Factor and On-Time Factor for such Performance Period. Within thirty (30) days after Midwest provides RAI with the calculations of Midwest Actual Performance and related standard deviations pursuant to Section 3, above, for such Performance Period, Midwest shall prepare and deliver to RAI (x) a reconciliation of RAI’s actual performance to the targeted performance with respect to each of the Performance Criteria, and (y) a written calculation of the resulting penalty and/or incentive payments payable by or to RAI for such Performance Period. Midwest and RAI will have the right to audit the determinations and calculations prepared by the other pursuant to this Section 4 and shall report any discrepancies to the other. Any discrepancy not reported in writing within one hundred fifty (150) days of the end of any Performance Period shall be deemed waived. The payment in respect of any discrepancy shall be handled as a disputed amount to be resolved in accordance with Section 10.08 of the Agreement.

5. Additional Performance Criteria. During the term of this Agreement, Midwest may propose other performance criteria for RAI’s operations pursuant to this Agreement. The parties agree that they will meet upon the introduction of additional performance levels for Midwest’s operations to develop similar performance targets for RAI, taking into account the differences in operations between the two companies, and shall use their best commercially reasonable efforts to develop a system of performance levels and incentives/penalties for RAI’s performance with respect thereto in a manner consistent with the performance standards agreed to herein.

* Confidential

EXHIBIT E

Terms of Codeshare Arrangements

1. RAI’s use of YX code. During the Term of the Agreement, Midwest shall place its designator code, “YX”, on all Scheduled Flights operated by RAI. Midwest may suspend the display of its code on flights operated by RAI if RAI is in breach of any of its safety-related obligations, or material breach of any of its operational obligations, under the Agreement during the period that such breach continues. All RAI operated flights that display the YX code are referred to herein as “YX Flights”.

2. RAI’s display of YX code.

(a) All YX Flights will be included in the schedule, availability and fare displays of all computerized reservations systems in which Midwest and RAI participate, the Official Airline Guide (to the extent agreed upon) and Midwest’s and RAI’s internal reservation systems, under the YX code, to the extent possible. Midwest and RAI will take the appropriate measures necessary to ensure the display of the schedules of all YX Flights in accordance with the preceding sentence.

(b) Midwest and RAI will disclose and identify the YX Flights to the public as actually being a flight of and operated by RAI, in at least the following ways:

(i) a symbol or a flight number range will be used in timetables and computer reservation systems indicating that YX Flights are actually operated by RAI;

(ii) to the extent reasonable, messages on airport flight information displays will identify RAI as the operator of flights shown as YX Flights;

(iii) Midwest and RAI advertising concerning YX Flights and Midwest and RAI reservationists will disclose RAI as the operator of each YX Flight; and

(iv) in any other manner prescribed by law or DOT regulation.

3. Terms and Conditions of Carriage. In all cases the contract of carriage between a passenger and a carrier will be that of the carrier whose code is designated on the ticket. Midwest and RAI shall each cooperate with the other in the exchange of information necessary to conform each carrier’s contract of carriage to reflect service offered by the other carrier.

4. Notification of Irregular Operations. RAI shall promptly notify Midwest System Operations Control via both positive phone contact and email of all irregularities involving a YX Flight which result in any material damage to persons or property as soon as such information is

available and shall furnish to Midwest as much detail as practicable. For purposes of this section, notification shall be made as follows:

5300 South Howell Avenue

Milwaukee, WI 53207

Phone: 414-294-6224 (recorded line) or 6225 (not recorded)

Email: soc_mgr@midwestairlines.com

5. Code Sharing License.

(a) Grant of License. Subject to the terms and conditions of the Agreement, Midwest hereby grants to RAI a nonexclusive, nontransferable, revocable license to use the YX designator code on all of its flights operated as a YX Flight.

(b) Control of YX Flights. Subject to the terms and conditions of the Agreement, RAI shall have sole responsibility for and control over, and Midwest shall have no responsibility for, control over or obligations or duties with respect to, each and every aspect of RAI’s operation of YX Flights.

6. Display of other Codes. During the Term of the Agreement, Midwest shall have the exclusive right to determine which other airlines (“Alliance Airlines”), if any, may place their two letter designator codes on flights operated by RAI with Covered Aircraft and to enter into agreements with such Alliance Airlines with respect thereto. RAI will cooperate with Midwest and any Alliance Airlines in the formation of a code share relationship between RAI and the Alliance Airlines and enter into reasonably acceptable agreements and make the necessary governmental filings, as requested by Midwest, with respect thereto.

EXHIBIT F

Use of RAI Marks

1. Grant. RAI hereby grants to Midwest, and Midwest accepts, a non-exclusive, personal, non-transferable, royalty-free right and license to adopt and use the RAI Marks (as defined below) in connection with Midwest’s entering into this Agreement, subject to the conditions and restrictions set forth herein.

2. Ownership of the RAI Marks.

a. RAI shall at all times remain the owner of the RAI Marks and any registrations thereof and Midwest’s use of any RAI Marks shall clearly identify RAI as the owner of such marks (to the extent practical) to protect RAI’s interest therein. All use by Midwest of the RAI Marks shall inure to the benefit of RAI. Nothing in this Agreement shall give Midwest any right, title, or interest in the RAI Marks other than right to use the RAI Marks in accordance with the terms of this Agreement

b. Midwest acknowledges RAI’s ownership of the RAI Marks and further acknowledges the validity of the RAI Marks. Midwest agrees that it will not do anything that in any way infringes or abridges RAI’s rights in the RAI Marks or directly or indirectly challenges the validity of the RAI Marks.

3. Use of the RAI Marks.

a. Midwest shall use the RAI Marks only as authorized herein by RAI and in accordance with such standards of quality as RAI may establish.

b. Midwest shall use the RAI Marks as necessary or appropriate in Midwest’s sole discretion in connection with the Regional Airline Services, including without limitation the sale or disposition by Midwest of the seat inventory of the Scheduled Flights.

c. Midwest shall not use the RAI Marks for any purpose other than as set forth in this Exhibit F, and specifically shall have no right to use the RAI Marks in connection with any other operations of Midwest.

d. RAI may change the RAI Marks at any time and from time to time (including by adding or deleting marks from the list specified in this Exhibit F), in which case Midwest shall as soon as practicable make such changes as are requested by RAI to utilize the new RAI Marks; provided that RAI shall either pay directly the reasonable costs of making such changes to the RAI Marks or shall promptly reimburse Midwest for its reasonable expenses incurred in making such changes.

e. Nothing shall abridge RAI’s right to use and/or to license the RAI Marks, and RAI reserves the right to the continued use of all the RAI Marks, to license such other uses of the RAI Marks and to enter into such agreements with other carriers providing for arrangements similar to those with Midwest as RAI may desire. No term or provision of this Agreement shall be construed to preclude the use of the RAI Marks by other persons or for other similar uses not covered by this Agreement.

4. RAI-Controlled Litigation. RAI at its sole expense shall take all steps that in its opinion and sole discretion are necessary and desirable to protect the RAI Marks against any infringement or dilution. Midwest agrees to cooperate fully with RAI in the defense and protection of the RAI Marks as reasonably requested by RAI. Midwest shall report to RAI any infringement or imitation of, or challenge to, the RAI Marks, immediately upon becoming aware of same. Midwest shall not be entitled to bring, or compel RAI to bring, an action or other legal proceedings on account of any infringements, imitations, or challenges to any element of the RAI Marks without the written agreement of RAI. RAI shall not be liable for any loss, cost, damage or expense suffered or incurred by Midwest because of the failure or inability to take or consent to the taking of any action on account of any such infringements, imitations, challenges or because of the failure of any such action or proceeding. If RAI shall commence any action or legal proceeding on account of such infringements, imitations or challenges, Midwest agrees to provide all reasonable assistance requested by RAI in preparing for and prosecuting the same.

5. Revocation of License. RAI shall have the right to cancel the license provided herein in whole or in part at any time and for any reason, in which event all terminated rights to use the RAI Marks provided Midwest herein shall revert to RAI and the RAI Marks shall not be used by Midwest in connection with any operations of Midwest. Midwest shall cease all use of the RAI Marks in all respects upon the last Covered Aircraft being withdrawn from this Agreement. Midwest shall not thereafter make use of any word, words, term, design, name or mark confusingly similar to the RAI Marks or take actions that otherwise may infringe the RAI Marks.

6. Assignment. The non-exclusive license granted by RAI to Midwest is personal to Midwest and may not be assigned, sub-licensed or transferred by Midwest in any manner without the written consent of a duly authorized representative of RAI.

7. RAI Marks. The RAI Marks shall be as provided to Midwest prior to the commencement of the Term.

8. Survival. The provisions of this Exhibit F shall survive the termination of this Agreement for a period of six years.

EXHIBIT G

Reasonable Operating Constraints

The schedules for the Covered Aircraft shall meet all of the following quarterly average requirements:

1. Minimum & Maximum Scheduling Parameters:

	Minimum	Maximum
Scheduled Block Hours per Aircraft per day	[*]	[*]
Scheduled Cycles per Aircraft per day	[*]	[*]

Note: the above minimum and maximum schedule parameters apply only to those Covered Aircraft in scheduled service, not to the Spare Aircraft.

2. Aircraft Maintenance and Crew Requirements.

Midwest agrees to take into consideration RAI’s operational requirements for overnight maintenance and crew productivity (including, where feasible, mid-day flights into RAI crew base cities for crew exchanges) and legality.

Midwest shall use its best efforts to produce a Final Monthly Schedule in cooperation with RAI that meets the following location and minimum hour requirements for overnight aircraft:

(i) a minimum of two scheduled Covered Aircraft will RON each weeknight and Sunday night, at least 6.5 hours nightly, in either IND, CMH or PIT, for normal maintenance; and

(ii) at least two scheduled Covered Aircraft per week (based on a Saturday to Sunday pulldown) will be scheduled to provide at least 14 hours of available maintenance time (block to block) in either IND, CMH or PIT.

3. Reserved.

4. Crew Overnights.

The schedule may allow for single overnights, multiple overnights, staged, and continuous duty overnights of crews in outstations, provided, should Midwest schedule continuous duty overnights or staged crews, incremental hotel and per diem costs related to such continuous duty overnights or staged crews will be billed by RAI to Midwest in arrears as Pass Thru costs. Midwest reserves the right to review RAI’s crew schedules to ensure efficient and economic crew scheduling and agrees to negotiate economic settlement with RAI for schedule changes that materially affect crew utilization or line maintenance requirements.

5. Charter Flights Sold by Midwest.

Midwest may schedule, price and sell Charter Flights using the Covered Aircraft, provided RAI receives 45 days’ advance notice of the tentative dates and times of such Charter Flights and the final dates are built into the Final Monthly Schedule. Midwest may also request RAI to consider ad hoc Charter Flights that do not otherwise appear in the Final Monthly Schedule. Midwest agrees to compensate RAI for any additional operating costs of the Charter Flights, including but not limited to aircraft ferry costs and unproductive crew time, as such costs are provided to Midwest at the time Midwest provides notice to RAI of the Charter Flights, or sufficiently in advance of Midwest’s bid for the Charter Flight to allow such costs to be passed through to the charterer.

* Confidential

EXHIBIT H

Form of Aircraft Lease Agreement and Related Agreements

EX-10.2 3 exhibit10_2.htm SHUTTLE AMERICA CORPORATION AND MOKULELE FLIGHT SERVICES AGREEMENT exhibit10_2.htm

EXHIBIT 10.2

CONFIDENTIAL TREATMENT

REQUESTED PURSUANT TO RULE 24b-2

CONFIDENTIAL

EXECUTION VERSION

AMENDED AND RESTATED AIRLINE SERVICES AGREEMENT

BETWEEN

MOKULELE FLIGHT SERVICE, INC. AND

SHUTTLE AMERICA CORPORATION

DATED AS OF OCTOBER 8, 2008

AMENDED AND RESTATED AIRLINE SERVICES AGREEMENT

This Amended and Restated Airline Services Agreement (this “Agreement”), dated as of October 8, 2008 (the “Effective Date”), is between Mokulele Flight Service, Inc., a Hawaii corporation (“Mokulele”), and Shuttle America Corporation, an Indiana corporation (“Shuttle”) and acknowledged by Republic Airline, Inc. (“RAI”).

WHEREAS, Mokulele and RAI entered into that certain Airline Services Agreement, dated as of October 1, 2008 (“Original Airline Services Agreement”);

NOW, THEREFORE, in consideration of the foregoing premises and the mutual covenants and obligations hereinafter contained, RAI and the parties agree to amend and restate the Original Airline Services Agreement in its entirety as follows:

ARTICLE I

DEFINITIONS

ARTICLE II

AIRLINE SERVICES, SCHEDULES AND FARES

Section 2.01 Capacity Purchase. Mokulele agrees to purchase the capacity of each Covered Aircraft for the period beginning on the date such aircraft is presented for service by Shuttle under this Agreement and ending on the last day of the Term, in each case unless such aircraft is earlier withdrawn pursuant to Article VIII, all under the terms and conditions set forth herein and for the consideration described in Article III. Subject to the terms and conditions of this Agreement, Shuttle shall provide all of the scheduled service capacity of the Covered Aircraft solely to Mokulele and use the Covered Aircraft solely to operate the Scheduled Flights. Except as provided in Section 2.01(e), the Covered Aircraft may not be used by Shuttle for any other purpose without the express prior written consent of Mokulele. During the Term (as such term is defined in Section 8.01) and so long as Mokulele is not in default under this Agreement or the Loan Agreement (as such term is defined in Section 2.05), Shuttle shall not enter into any agreement with any other air carrier to operate aircraft on routes within the state of Hawaii.

(a) Fares, Rules and Seat Inventory; Reservations Capabilities. Mokulele shall establish and publish all fares and related tariff rules for all seats on the Covered Aircraft. Shuttle shall not publish any fares, tariffs, or related information for the Covered Aircraft. In addition, Mokulele shall have complete control over all seat inventory and revenue management decisions for the Covered Aircraft, including overbooking levels, discount seat levels and allocation of seats among various fare buckets. All costs associated with system configuration and interface for Mokulele’s requirements will be paid directly by Mokulele.

(b) Flight Schedules. Mokulele shall, in its sole discretion, establish and publish all schedules for the Covered Aircraft (such scheduled flights, together with Charter Flights and ferry flights required to accommodate such scheduled flights and Charter Flights or otherwise made at Mokulele’s request, referred to herein as “Scheduled Flights”), including determining the city-pairs served, frequencies, utilization and timing of scheduled arrivals and departures, and shall, in its sole discretion, make all determinations regarding the establishment and scheduling of any Charter Flights arranged by Mokulele; provided that such schedules shall be subject to Reasonable Operating Constraints. Shuttle shall remain in sole operational control of the Covered Aircraft at all times. Subject to the notice requirement set forth in Section 4.08 regarding international service, Mokulele will provide Shuttle with a preliminary schedule in a Standard Schedule Input Message (“SSIM”) file format or Microsoft Excel format 45 days prior to the first day of the month to which the preliminary schedule relates. Shuttle will review the proposed schedule and provide feedback to Mokulele no later than 14 days following receipt of the preliminary schedule by Shuttle. Mokulele will send Shuttle a Final Monthly Schedule, together with operational assumptions for the month (the “Operational Assumptions”), including without limitation the weighted average number of Covered Aircraft, estimated passengers, revenue passenger miles, departures, block hours, and flights hours, based on the Final Monthly Schedule, no later than two Business Days following receipt of Shuttle’s comments to the preliminary schedule. Following delivery of the Final Monthly Schedule, however, Mokulele may make such adjustments to the proposed Final Monthly Schedule as it deems appropriate (subject to Reasonable Operating Constraints).

(c) Start Up Dates. The Covered Aircraft shall be placed into service under the terms and conditions of this Agreement on such dates as are provided on Exhibit B.

(d) Spare Aircraft. The Spare Aircraft shall be used by Shuttle solely as an operational and maintenance spare to replace Covered Aircraft that are out of service due to scheduled maintenance, unscheduled maintenance or aircraft damage or to cover for other irregular operations, provided, there shall be no Spare Aircraft available for operations hereunder on or after March 1, 2009.

(e) Shuttle Charters or Other Operations. Shuttle shall be permitted to operate the Covered Aircraft to fly charters so long as such operation does not adversely affect the performance by Shuttle of its obligations under this Agreement.

Section 2.02 Flight-Related Revenue. [*], Shuttle acknowledges and agrees that all revenues resulting from the sale and issuance of passenger tickets associated with the operation of the Covered Aircraft and all other sources of revenue associated with the operation of the Covered Aircraft, including without limitation fees related to ticket changes, unaccompanied minors, excess baggage and nonrevenue pass travel, revenues relating to the transportation of cargo or mail, and revenues associated with food, beverage, passenger entertainment, duty-free services, and guaranteed or incentive payments from airport, local or municipal authorities in connection with scheduling flights to such airport or locality, are the sole property of and shall be retained by Mokulele (or, if received by Shuttle, shall be promptly accounted for and remitted to Mokulele).

Section 2.03 Pass Travel. Shuttle operational personnel traveling to provide critical repair services, management personnel traveling on business in connection with this Agreement, and dead heading Shuttle crews will be entitled to travel on flights operated by Shuttle or Mokulele as “must ride” passengers. Commuting Shuttle crew members and all other Shuttle employees will be entitled to travel on Mokulele and Mokulele Connect flights at a priority category one level below the lowest category for Mokulele employees and subject to the fare policies applicable to individuals traveling at that priority level. To the extent permitted by existing arrangements, Mokulele employees will be entitled to (x) travel on Scheduled Flights operated by Shuttle under the category of travel and fare policies to which they are entitled to travel on Mokulele flights, and (y) will be entitled to travel on all other Shuttle operated flights at a category one level below the lowest category for Shuttle employees.

Section 2.04 Conversion of Covered Aircraft. Mokulele will be responsible for all costs and expenses of preparing each Covered Aircraft prior to its being placed into service hereunder in accordance with the specifications and cabin configurations as required by Exhibit C.

Section 2.05 Conditions Precedent. As conditions precedent to the obligations of Shuttle pursuant to this Agreement, Mokulele shall (i) enter into an administrative services agreement in form and substance satisfactory to Shuttle in respect of certain administrative and support services to be provided to Mokulele by Shuttle and (ii) enter into a loan agreement in form and substance satisfactory to Shuttle in respect of the proposed financing by Shuttle (the “Loan Agreement”) and satisfy all conditions precedent therein; provided that Shuttle may terminate this Agreement if the foregoing conditions precedent are not satisfied on or prior to October 12, 2008. In the event of such a termination by Shuttle, Mokulele shall reimburse Shuttle for expenses incurred by Shuttle or its Affiliates (including reasonable expenses of counsel) in connection with (x) the negotiation of this Agreement, the Loan Agreement and all related agreements and (y) preparations by Shuttle to perform any of the foregoing; provided that such reimbursement shall not exceed [*].

ARTICLE III

SHUTTLE COMPENSATION

Section 3.01 Base and Incentive Compensation. For and in consideration of the aircraft and services to be provided by Shuttle hereunder, Mokulele shall pay Shuttle the base and incentive compensation as provided in Exhibit D hereto, subject to the terms and conditions set forth in this Article III.

*Confidential

Section 3.02 Periodic Adjustment of Base Compensation. The rates under this Agreement set forth in Appendix 1 to Exhibit D hereto shall remain in effect throughout the Term of this Agreement, provided, the rates on Appendix 1 to Exhibit D hereto will be adjusted from time to time as described in Exhibit D, and, provided further, that the rates on Appendix 1 to Exhibit D designated as “Subject to Escalation” will remain in effect through December 31, 2008, and thereafter shall be adjusted on each January 1, beginning with January 1, 2009, as follows: the new rates, applicable beginning on such January 1, shall equal the rates in effect on the immediately preceding December 31 multiplied by ([*] + (Annual Change in PPI [*])), where PPI = the annual Producer Price Index, Commodities, Finished Goods (not seasonally adjusted), Series ID: WPUSOP3000 as published by the Bureau of Labor Statistics for January of the applicable year, provided further, annual adjustments will not decrease from the prior year and will not increase more than [*] over the prior year. Adjustments will be calculated as soon as the PPI for the prior year is published by the Bureau of Labor Statistics and the adjusted rates will be applied retroactively to the 1st day of the calendar year and paid as part of the next monthly payment.

Section 3.03 Shuttle Expenses. Except as provided otherwise in Section 3.04, Shuttle shall pay in accordance with commercially reasonable practices all expenses incurred in connection with Shuttle’s provision of Regional Airline Services.

Section 3.04 Mokulele Expenses

(a) Certain Expenses. Mokulele shall incur directly those expenses relating to the Regional Airlines Services that are described in Paragraph 6 of Exhibit D.

(b) Design Changes. Mokulele shall be responsible for any reasonable out-of-pocket expenses relating to interior and exterior design changes to the Covered Aircraft and other product-related changes required by Mokulele, including facility-related design changes and the cost of changes in aircraft livery, in each case that occur outside of the Covered Aircraft specifications, livery and other requirements of Exhibit C to this Agreement or as otherwise specified in this Agreement.

Section 3.05 Audit Rights; Financial Information. Shuttle shall make available for inspection by Mokulele and its outside auditors and advisors, within a reasonable period of time after Mokulele makes a written request therefor, all of Shuttle’s books and records (including all financial and accounting records and operations reports, and records of other subsidiaries or affiliates of Shuttle, if any) as necessary to audit any reimbursement of Pass-Thru Costs or other expenses set forth in Paragraph 6 of Exhibit D hereto. In connection with such audit, Mokulele and its outside auditors and advisors shall be entitled to make copies and notes of such information as they deem necessary and to discuss such records with Shuttle’s Chief Financial Officer or such other employees or agents of Shuttle knowledgeable about such records. Upon the reasonable written request of Mokulele or its outside auditors or advisors, Shuttle will cooperate with Mokulele and its outside auditors and advisors to permit Mokulele and its outside auditors and advisors access to RAI Holding’s outside auditors for purposes of reviewing such records.

Section 3.06 Billing and Payment; Reconciliation.

(a) Billing and Payment. No later than ten calendar days prior to the beginning of the month covered by a Final Monthly Schedule and the Operational Assumptions for a given month pursuant to Section 2.01(b), Shuttle shall present a reasonably detailed written invoice for amounts due under this Agreement in respect of the Base Compensation for the Scheduled Flights during the month to which such Final Monthly Schedule and Operational Assumptions pertain, calculated in accordance with Paragraph 2 of Exhibit D. Mokulele shall pay Shuttle the amount due under such invoice (the “Invoiced Amount”), subject to Mokulele’s right to dispute any calculations set forth on such invoice that do not comply with the terms of this Agreement, net of amounts owed by Shuttle to Mokulele, as follows:

(i) Thirty-four percent (34%) of the Invoiced Amount on the later of the first Business Day of the covered month or the third Business Day following receipt by Mokulele of the invoice, by electronic transfer of funds to a bank account designated by Shuttle;

(ii) Thirty-three percent (33%) of the Invoiced Amount on the 10th calendar day of the covered month, or if such day is not a Business Day, the next Business Day thereafter, by electronic transfer of funds to a bank account designated by Shuttle; and

(iii) Thirty-three percent (33%) of the Invoiced Amount on the 20th calendar day of the covered month, or if such day is not a Business Day, the next Business Day thereafter, by electronic transfer of funds to a bank account designated by Shuttle.

(b) Reconciliation. Not later than 15 days following the end of each month, Shuttle and Mokulele shall reconcile actual amounts due in respect of such month for the Fixed Cost and Variable Cost elements set forth in Appendix 1 to Exhibit D with the estimated amounts included in the Invoiced Amount for such elements for such month in accordance with the terms and conditions set forth in Exhibit D. On or before the 5th day following the end of such reconciliation period (or if such day is not a Business Day, the next Business Day), such reconciled amounts for such month to the extent applicable: (i) shall be paid by Mokulele to Shuttle, together with any payment to be made by Mokulele pursuant to Section 3.06(a)(iii) above, or (ii) shall be paid by Shuttle to Mokulele or set off by Mokulele against any other amounts owing to Shuttle under this Agreement.

(c) Reimbursed Costs. From time to time it is anticipated that Shuttle may incur certain costs and expenses in connection will the provision of Regional Airline Services under this Agreement for which Shuttle will be reimbursed by Mokulele. These costs and expenses are indicated as “Pass-Thru Costs” on Appendix 1 to Exhibit D. Shuttle will pay all Pass-Thru Costs in advance, and will submit to Mokulele an invoice together with all supporting documentation for all Pass-Thru Costs incurred. Mokulele will reimburse Shuttle for all uncontested Pass-Thru Costs within five Business Days following receipt of the invoice and supporting documentation by electronic transfer of funds to a bank account designated by Shuttle will provide any additional supporting information and documentation to Mokulele for any Pass-Thru Costs contested by Mokulele at Shuttle’s earliest convenience. Any disputed Pass-Thru Costs not resolved within 30 days of receipt of the invoice by Mokulele will be resolved in accordance with the arbitration provisions of this Agreement.

*Confidential

Section 3.07 Security Payment. Mokulele shall pay Shuttle the sum of [*] by paying [*] on or prior to each date on which a Covered Aircraft (as described by Exhibit B) is placed into service hereunder (such amounts collectively referred to herein as the “Security Payment”); [*]. The Security Payment shall be the property of Shuttle. If a default by Mokulele shall occur hereunder and be continuing, then, in addition to any other rights that Shuttle may have hereunder or under applicable law, Shuttle may at any time as an agreed remedy set off all or any portion of the amount of the Security Payment in full or partial payment for amounts constituting or corresponding to any amounts owed by Mokulele to Shuttle hereunder. If Shuttle exercises any such right of set-off, Mokulele shall immediately upon demand from Shuttle pay to Shuttle an amount equal to such set-off. [*].

Section 3.08 [*]

ARTICLE IV

SHUTTLE OPERATIONS AND AGREEMENTS WITH MOKULELE

Section 4.01 Crews, Etc. Shuttle shall be responsible for providing all crews (flight and cabin) and maintenance personnel necessary to operate the Scheduled Flights and for all aspects (personnel and other) of dispatch control. Flight crews will be domiciled in Honolulu, Hawaii and any other location deemed suitable for Shuttle’s staffing requirements. Shuttle pilots will wear neutral uniforms with Shuttle logo items. Shuttle flight attendants will wear neutral uniforms with accessories displaying approved Mokulele Marks and designs. Shuttle flight attendants will obtain Mokulele branded accessories through Mokulele or its approved vendor (subject to the vendor’s approval), and Mokulele will be responsible for all costs and expenses, including shipping, relating to their orders. Notwithstanding the foregoing, at its election, Mokulele may provide alternative “Hawaii style” uniforms for pilots and flight crew; provided that, any such alternate uniforms would be subject to the approval of Shuttle and provided at the sole cost and expense of Mokulele.

Section 4.02 Governmental Regulations. Shuttle has and shall maintain all certifications, permits, licenses, certificates, exemptions, approvals, plans, and insurance required by governmental authorities, including, without limitation, FAA, DOT and TSA, to enable Shuttle to perform the services required by this Agreement. All flight operations, dispatch operations and all other operations and services undertaken by Shuttle pursuant to this Agreement shall be conducted, operated and provided by Shuttle in compliance with all U.S. and foreign governmental laws, regulations and requirements, including, without limitation, those relating to airport security, the use and transportation of hazardous materials and dangerous goods, crew qualifications, crew training and crew hours, the carriage of persons with disabilities and without any violation of U.S. or foreign laws, regulations or governmental prohibitions. All Covered Aircraft shall be operated and maintained by Shuttle in compliance with all laws, regulations and governmental requirements, Shuttle’s own operations manuals and maintenance manuals and procedures, and all applicable equipment manufacturers’ manuals and instructions.

Section 4.03 Quality of Service. At all times, Shuttle shall provide Regional Airline Services with appropriate standards of care, but in no event lower than such standards provided by Shuttle for its other scheduled airline partners as well as such standards held by Mokulele as of the date of this Agreement. Mokulele procedures, performance standards and means of measurement thereof concerning the provision of air passenger and air cargo services shall be applicable to all Regional Airline Services provided by Shuttle. Shuttle shall achieve at least the comparable quality of airline service as provided by Shuttle for its other scheduled airline partners and by Mokulele, subject to limitations imposed by the type of aircraft used by Shuttle and its route network. Shuttle shall comply with all airline customer service commitments and policies of Mokulele as of the date hereof, including without limitation the employee conduct, appearance and training policies in place as of the date hereof, and shall handle customer-related services in a professional, businesslike and courteous manner. In connection therewith, Shuttle shall maintain adequate aircraft staffing levels, to achieve a level of operations that routinely meet or exceed the on-time performance Target Threshold and the completion factor Target Threshold as set forth in Appendix 2 to Exhibit D. Shuttle shall provide Mokulele with timely communication regarding the status of all Scheduled Flights. At either party’s request, Shuttle and Mokulele will meet to discuss and review Shuttle’s customer service and handling procedures and policies and its employees’ conduct, appearance and training standards and policies. Mokulele shall give Shuttle not less than 15 days prior written notice of any non-safety-related breach of this Section 4.03 prior to exercising any remedy regarding such breach.

Section 4.04 Incidents or Accidents. Shuttle shall promptly notify Mokulele of all irregularities involving a Scheduled Flight or Covered Aircraft operated by Shuttle, including, without limitation, aircraft accidents and incidents which result in any damage to persons and/or property or may otherwise result in a complaint or claim by passengers or an investigation by a governmental agency or authority. Shuttle shall furnish to Mokulele as much detail as practicable concerning such irregularities and shall cooperate with Mokulele at Shuttle’s own expense in any appropriate investigation. Mokulele shall promptly notify Shuttle of all irregularities involving ground handling in respect of Scheduled Flights or Covered Aircraft, including, without limitation, accidents and incidents which result in any damage to persons and/or property or may otherwise result in a complaint or claim by passengers or an investigation by a governmental agency or authority. Mokulele shall furnish to Shuttle as much detail as practicable concerning such irregularities and shall cooperate with Shuttle at Mokulele’s own expense in any appropriate investigation.

Section 4.05 Emergency Response. Shuttle shall adopt Mokulele’s Emergency Response Plan for aircraft accidents or incidents. In the event of an accident or incident involving a Covered Aircraft or Scheduled Flight, Mokulele will have the right to manage the emergency response efforts on behalf of Shuttle with full cooperation from Shuttle and if such right is exercised, Shuttle acknowledges and agrees that Mokulele representatives will conduct all public communications, and that Shuttle will make no public statements, regarding such accident or incident.

Section 4.06 Safety Matters. In the event of a reasonable safety concern, Mokulele shall have the right, at its own cost, to inspect, review, and observe Shuttle’s operations of Scheduled Flights. Notwithstanding the conduct or absence of any such review, Shuttle is and shall remain solely responsible for the safe operation of its aircraft and the safe provision of Regional Airline Services, including all Scheduled Flights, and nothing in this Section 4.06 or otherwise in this Agreement is intended or shall be interpreted to make Mokulele responsible for such safety matters.

Section 4.07 Codeshare Terms. Shuttle agrees to operate all Scheduled Flights using the Mokulele flight code and flight numbers assigned by Mokulele, or such other flight codes and flight numbers as may be assigned by Mokulele (to accommodate, for example, a Mokulele alliance partner), and otherwise under the codeshare terms set forth in Exhibit E.

Section 4.08 Slots and Route Authorities. Should Mokulele schedule Covered Aircraft on international routes, Mokulele will provide Shuttle notice of such intent no fewer than 150 days in advance of the intended start date. To the extent permitted under applicable laws and regulations, Mokulele will obtain the necessary slots, route authorities or other approval required for such service at its own cost and expense, provided such items may be held and controlled by Mokulele. If it is required that Shuttle, as the operator of the Scheduled Flights, obtain the authorities and approvals, or if Mokulele is prohibited from holding such authorities and approvals in its own name, Shuttle will use its commercially reasonable efforts to obtain all necessary licenses, permits, route authorities or slots (collectively referred to as “Permits”) and complete all necessary filings and registrations, and Mokulele shall reimburse Shuttle for its reasonable costs and expenses, in order to obtain such Permits and initiate such service. During the Term, Shuttle will operate Scheduled Flights on these routes solely on behalf of Mokulele.

Section 4.09 Use of Mokulele Marks. Mokulele hereby grants to Shuttle the non-exclusive and non-transferable rights to use the Mokulele Marks as provided in, and Shuttle shall use the Mokulele Marks, in accordance with the terms and conditions of Exhibit C.

Section 4.10 Use of Shuttle Marks. Shuttle hereby grants to Mokulele the non-exclusive and non-transferable rights to use the Shuttle Marks as provided in, and Mokulele shall use the Shuttle Marks in accordance with, the terms and conditions of Exhibit F.

Section 4.11 Catering Standards.

(a) Station Services. Mokulele or its designated agents shall provide all airport passenger and aircraft ground handling at all airports served by Scheduled Flights.

(b) Onboard Services. Mokulele will determine, in its sole discretion, and at its sole cost, meal/beverage service parameters and scheduling for Scheduled Flights. Mokulele has the right to conduct onboard service audits on Scheduled Flights to ensure service standards are being met. Shuttle flight attendants providing Regional Airline Services will be trained on meal and beverage service procedures, including liquor and duty-free sales and cash handling, and will collect all on-board revenue for liquor and duty-free sales. Shuttle will provide sufficient galley service ship’s equipment to operate onboard services, such as ovens, coffee makers and trash bins. Mokulele will provide all, at its sole expense, liveried catering items, such as cups and napkins, and all food, liquor and other beverage items.

*Confidential

ARTICLE V

CERTAIN RIGHTS AND OBLIGATIONS OF MOKULELE

Section 5.01 Use of Covered Aircraft. Shuttle agrees that, except as otherwise directed or approved in writing by Mokulele in Mokulele’s sole discretion or as provided in Section 2.01(e) herein with respect to the Spare Aircraft, the Covered Aircraft may be used only to provide Regional Airline Services.

Section 5.02 Mokulele Obligations. Mokulele shall provide to Shuttle, at no cost to Shuttle, the following support services (either directly or by contracting with third party vendors or by contracting with Shuttle pursuant to a separately negotiated handling agreement):

(a) all airport passenger service and aircraft ground handling at all airports served, including without limitation:

(i)	all ticket counter and gate check-in services;

(ii)	all passenger enplaning and deplaning services, including sky cap and wheelchair services;

(iii)

aircraft loading and unloading services, including airside busing;

(iv)	passenger ticketing;

(v)	jet bridges and air stairs, including maintenance and cleaning;

(vi)	janitorial services;

(vii)

deicing services;

(viii)

aircraft towing and push back; and

(ix)	airport security services.

(b) all Mokulele logo items, such as drink cups, napkins, pillows, blankets and inflight magazines;

(c) lavatory service and light aircraft cleaning (“turn cleaning”) at Honolulu International Airport (HNL), heavy interior cleaning at all aircraft overnight locations that are not Shuttle maintenance locations, and, upon the written request of Shuttle, at other cities served by the Covered Aircraft;

(d) denied boarding amenities and travel voucher compensation certificates consistent with Mokulele customer service programs;

(e) customer reaccommodations due to schedule disruption;

(f) interface and all technological support necessary to ensure accurate and reliable dynamic transfer of operational data from Mokulele to Shuttle’s system operational control center in Indianapolis, Indiana, a data interface of Shuttle’s ACARS to Mokulele’s reservation systems, and of Shuttle’s system control with Mokulele’s flight information data;

(g) capital expenditures for aircraft ground handling;

(h) advertising and sales programs;

(i) operations space at Honolulu International Airport (HNL) (the “Honolulu Operations Space”), including gates, holdrooms, and airport concourse space for offices, break rooms, parts storage, crew lounges, and flight operations, all as agreed to by the parties;

(j) hangar access as needed;

(k) nightly engine power washing program and exterior aircraft wash program;

(l) interface of Shuttle’s system control with Mokulele FLIFO data;

(m) hangar space for one RON Covered Aircraft at Honolulu International Airport (HNL); and

(n) engine washes as required by Shuttle.

Section 5.03 Change of Control. Upon the occurrence of a Change of Control of Mokulele (excluding a Change of Control involving Shuttle or an affiliate of Shuttle) without the prior written consent of Shuttle (such consent not to be unreasonably withheld), Shuttle shall have the right to terminate this Agreement on 90 days prior written notice, such notice to be delivered not later than 90 days after Shuttle becomes aware of such Change of Control (which termination shall not be effective if the circumstances giving rise to such Change of Control shall no longer exist on the 30th day after the written notice of termination is delivered).

Section 5.04 Transfer of Assets. Mokulele shall not enter into an agreement (or series of agreements) to sell, assign transfer or convey substantially all of its assets to any Person (excluding Shuttle or an affiliate of Shuttle) unless, as part of such agreement, such Person agrees to assume any and all of Mokulele’s rights, duties and obligations arising under this Agreement and Shuttle consents in writing in advance to such sale, assignment, transfer or conveyance.

ARTICLE VI

INSURANCE

Section 6.01 Insurance Coverages. During the Term, Shuttle shall maintain, or cause to be maintained, in full force and effect for the Covered Aircraft policies of insurance with insurers of recognized reputation and responsibility, in each case in an amount and subject to such terms as are consistent with the insurance carried on similar aircraft operated by Shuttle under similar circumstances.

Section 6.02 Evidence of Insurance Coverage. At the commencement of this Agreement, and thereafter upon Mokulele’s reasonable request, Shuttle shall furnish to Mokulele evidence of such insurance coverage, including certificates certifying that such insurance and endorsements are in full force and effect.

ARTICLE VII

INDEMNIFICATION

Section 7.01 Shuttle Indemnification of Mokulele. Shuttle shall be liable for and hereby agrees to fully defend, release, discharge, indemnify and hold harmless Mokulele, its directors, officers, employees and agents from and against any and all claims, demands, damages, liabilities, suits, judgments, actions, causes of action, losses, costs and expenses of any kind, character or nature whatsoever, including attorneys’ fees, costs and expenses in connection therewith and expenses of investigation and litigation thereof, which may be suffered by, accrued against, charged to, or recoverable from Mokulele or its directors, officers, employees or agents, including but not limited to, any such losses, costs and expenses involving (i) death or injury (including claims of emotional distress and other non-physical injury by passengers) to any person including any of Shuttle’s or Mokulele’s directors, officers, employees or agents, (ii) loss of, damage to, or destruction of property (including real, tangible and intangible property, and specifically including regulatory property such as route authorities, slots and other landing rights), including any loss of use of such property, and (iii) damages due to delays in any manner, in each case arising out of, connected with, or attributable to (x) any act or omission by Shuttle or any of its directors, officers, employees or agents relating to the provision of Regional Airline Services, (y) the performance, improper performance, or non-performance of any and all obligations to be undertaken by Shuttle or any of its directors, officers, employees or agents pursuant to this Agreement, or (z) the operation, non-operation, or improper operation of the Covered Aircraft or Shuttle’s equipment or facilities at any location, in each case excluding only claims, demands, damages, liabilities, suits, judgments, actions, causes of action, losses, costs and expenses to the extent resulting from the gross negligence or willful misconduct of Mokulele or its directors, officers, agents or employees (other than gross negligence or willful misconduct imputed to such indemnified person by reason of its interest in a Covered Aircraft). Shuttle will use commercially reasonable efforts to cause and assure that Shuttle will at all times be and remain in custody and control of all aircraft, equipment, and facilities of, or operated by, Shuttle, and Mokulele and its directors, officers, employees and agents shall not, for any reason, be deemed to be in custody or control, or a bailee, of such aircraft, equipment or facilities.

Section 7.02 Mokulele Indemnification of Shuttle. Mokulele shall be liable for and hereby agrees fully to defend, release, discharge, indemnify, and hold harmless Shuttle, its directors, officers, employees, and agents from and against any and all claims, demands, damages, liabilities, suits, judgments, actions, causes of action, losses, costs and expenses of any kind, character or nature whatsoever, including attorneys’ fees, costs and expenses in connection therewith and expenses of investigation and litigation thereof, which may be suffered by, accrued against, charged to, or recoverable from Shuttle, or its directors, officers, employees or agents, including but not limited to, any such losses, costs and expenses involving (i) death or injury (including claims of emotional distress and other non-physical injury by passengers) to any person including any of Shuttle’s or Mokulele’s directors, officers, employees or agents, (ii) loss of, damage to, or destruction of property (including real, tangible and intangible property, and specifically including regulatory property such as route authorities, slots and other landing rights), including any loss of use of such property, and (iii) damages due to delays in any manner, in each case arising out of, connected with, or attributable to, (x) the performance, improper performance, or nonperformance of any and all obligations to be undertaken by Mokulele or any of its directors, officers, employees or agents pursuant to this Agreement, (y) the operation, non-operation or improper operation of Mokulele’s aircraft, equipment or facilities (excluding, for the avoidance of doubt, Covered Aircraft and any equipment or facilities leased or subleased by Mokulele to Shuttle) at any location, in each case excluding only claims, demands, damages, liabilities, suits judgments, actions, causes of action, losses, costs and expenses to the extent resulting from the gross negligence or willful misconduct of Shuttle or its directors, officers, agents or employees.

Section 7.04 Employer’s Liability; Independent Contractors; Waiver of Control

(b) Employees, etc., of Shuttle. The employees, agents, and independent contractors of Shuttle engaged in performing any of the services Shuttle is to perform pursuant to this Agreement are employees, agents, and independent contractors of Shuttle for all purposes, and under no circumstances will be deemed to be employees, agents or independent contractors of Mokulele. In its performance under this Agreement, Shuttle will act, for all purposes, as an independent contractor and not as an agent for Mokulele. Notwithstanding the fact that Shuttle has agreed to follow certain procedures, instructions and standards of service of Mokulele pursuant to this Agreement, Mokulele will have no supervisory power or control over any employees, agents or independent contractors engaged by Shuttle in connection with its performance hereunder, and all complaints or requested changes in procedures made by Mokulele will, in all events, be transmitted by Mokulele to Shuttle’s designated representative. Nothing contained in this Agreement is intended to limit or condition Shuttle’s control over its operations or the conduct of its business as an air carrier.

(c) Employees, etc., of Mokulele. The employees, agents, and independent contractors of Mokulele engaged in performing any of the services Mokulele is to perform pursuant to this Agreement are employees, agents, and independent contractors of Mokulele for all purposes, and under no circumstances will be deemed to be employees, agents, or independent contractors of Shuttle. Shuttle will have no supervision or control over any such Mokulele employees, agents and independent contractors and any complaint or requested change in procedure made by Shuttle will be transmitted by Shuttle to Mokulele’s designated representative. In its performance under this Agreement, Mokulele will act, for all purposes, as an independent contractor and not as an agent for Shuttle. Nothing contained in this Agreement is intended to limit or condition Mokulele’s control over its operations (except with respect to operational control over the Covered Aircraft, which shall remain with Shuttle) or the conduct of its business as an air carrier.

(d) Shuttle Flights. The fact that Shuttle’s operations are conducted under Mokulele’s Marks and listed under the MW designator code will not affect their status as flights operated by Shuttle for purposes of this Agreement or any other agreement between the parties, and Shuttle and Mokulele agree to advise all third parties, including passengers, of this fact.

Section 7.05 Survival. The provisions of this Article VII shall survive the termination of this Agreement for a period of seven years.

ARTICLE VIII

TERM, TERMINATION AND DISPOSITION OF AIRCRAFT

Section 8.01 Term. The Term of this Agreement shall commence on and shall be effective as of the Effective Date and, unless earlier terminated for Cause or breach shall continue until October 31, 2018 (the “Term”), and on such date the Covered Aircraft shall be completely withdrawn from the capacity purchase provisions of this Agreement and cease to be a Covered Aircraft.

Section 8.02 Early Termination

(a) By Mokulele for Cause. Mokulele shall have the right to terminate this Agreement upon written notice following the occurrence of any event that constitutes Cause. Any termination pursuant to this Section 8.02(a) shall supersede any other termination pursuant to any other provision of this Agreement (even if such other right of termination shall already have been exercised). The notice of termination provided by Mokulele pursuant to this Section 8.02(a) shall designate a Termination Date (which may be any date between the date of the notice and a date no more than 120 days of the date of the notice), and on such date the Covered Aircraft shall be completely withdrawn from the capacity purchase provisions of this Agreement and cease to be a Covered Aircraft, and the termination date set forth in the notice provided by Mokulele will be the Termination Date for purposes of this Agreement (and such Termination Date pursuant to this Section 8.02(a) shall supersede any other Termination Date that may have been previously established pursuant to another termination). In the event that Mokulele shall not have delivered written notice of termination pursuant to this Section 8.02(a) within 45 days after Mokulele receives written notice from Shuttle of the occurrence of any event that constitutes Cause by Shuttle, then Mokulele shall be conclusively deemed to have waived any right to terminate this Agreement based upon such event; provided that such waiver shall not apply to any subsequent or continuing event that constitutes Cause.

(b) By Mokulele for Breach. Mokulele may terminate this Agreement, upon two Business Days’ prior written notice, upon the occurrence of a material breach of this Agreement by Shuttle with respect to matters reasonably within its control, which breach shall not have been cured within 60 days after written notice of such breach is delivered by Mokulele to Shuttle (which 60-day notice period may run concurrently with the 15-day notice period, if any, provided pursuant to Section 4.03 for non-safety-related breaches). Any termination notice provided by Mokulele pursuant to this Section 8.02(b), shall specify a Termination Date that will be no more than 90 days from the date of such notice and on such date the Covered Aircraft shall be completely withdrawn from the capacity purchase provisions of this Agreement and cease to be a Covered Aircraft. In the event that Mokulele shall not have delivered written notice of termination pursuant to this Section 8.02(b) within 45 days after Mokulele receives written notice from Shuttle of any material breach of this Agreement by Shuttle, then Mokulele shall be conclusively deemed to have waived any right to terminate this Agreement based upon such breach; provided that such waiver shall not apply to any subsequent or continuing breach.

(c) By Shuttle for Breach. Shuttle may terminate this Agreement upon (i) five Business Days prior written notice upon (A) any failure by Mokulele to make any payment or payments under this Agreement aggregating in excess of [*], but specifically excluding any amounts which are the subject of a good faith dispute between the parties, which failure shall not have been cured within five Business Days after written notice of such failure is delivered by Shuttle to Mokulele, or (B) a breach by Mokulele of its covenant contained in Section 5.03 or 5.04, (ii) the occurrence of any other failure by Mokulele to make any payment or payments under this Agreement aggregating in excess of [*], but specifically excluding any amounts which are the subject of a good faith dispute between the parties, which failure shall not have been cured within 20 days after written notice of such breach is delivered by Shuttle to Mokulele, or (iii) the occurrence of any other material breach of this Agreement by Mokulele, which breach shall not have been cured within 60 days after written notice of such breach is received by Mokulele. In the event that Shuttle shall not have delivered written notice of termination pursuant to this Section 8.02(c) within 45 days after Shuttle receives written notice from Mokulele of any material breach of this Agreement by Mokulele, then Shuttle shall be conclusively deemed to have waived any right to terminate this Agreement based upon such breach; provided that such waiver shall not apply to any subsequent or continuing breach.

If this Agreement is terminated by Shuttle under the first paragraph of this Section 8.02(c), the notice of termination delivered by Shuttle to Mokulele pursuant to Section 8.02(c)(i) shall be irrevocable and shall contain a Termination Date that is no more than 180 days after the date of such notice; provided that in the case of a termination under Section 8.02(c)(i)(A) or (c)(ii), such termination notice shall be void and of no further effect automatically upon the payment by Mokulele prior to such Termination Date of all unpaid amounts giving rise to such termination notice. As of the Termination Date set forth in a notice of termination, all of the Covered Aircraft shall automatically be withdrawn from the capacity purchase provisions of this Agreement and shall cease to be Covered Aircraft as of such date.

Section 8.03 Punitive Damages. No party to this Agreement or any of its affiliates shall be liable to any other party hereto or any of its affiliates for claims for punitive, special or exemplary damages, arising out of or relating to this Agreement or the transactions contemplated hereby, regardless of whether a claim is based on contract, tort (including negligence), strict liability, violation of any applicable deceptive trade practices act or similar law or any other legal or equitable principle, and each party releases the others and their respective affiliates from liability for any such damages. No party shall be entitled to rescission of this Agreement as a result of breach of any other party’s representations, warranties, covenants or agreements, or for any other matter; provided, that nothing in this Section 8.03 shall restrict the right of any party to exercise any right to terminate this Agreement pursuant to the terms hereof.

ARTICLE IX

REPRESENTATIONS, WARRANTIES AND COVENANTS

Section 9.01 Representations and Warranties of Shuttle. Shuttle represents, warrants and covenants to Mokulele as of the date hereof as follows:

(a) Organization and Qualification. Shuttle is a duly organized and validly existing corporation under the laws of the State of Indiana. Shuttle has the corporate power and authority to own, operate and use its assets and to provide the Regional Airline Services.

(b) Authority Relative to this Agreement. Shuttle has the corporate power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby in accordance with the terms hereof. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly authorized by all necessary corporate action on the part of Shuttle. This Agreement has been duly and validly executed and delivered by Shuttle and is, assuming due execution and delivery thereof by Mokulele and that Mokulele has legal power and right to enter into this Agreement, a valid and binding obligation of Shuttle, enforceable against Shuttle in accordance with its terms, except as enforcement hereof may be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws relating to or affecting the enforcement of creditors’ rights generally and legal principles of general applicability governing the availability of equitable remedies (whether considered in a proceeding in equity or at law or otherwise under applicable law).

(c) Conflicts. Neither the execution or delivery of this Agreement nor the performance by Shuttle of the transactions contemplated hereby will (i) violate, conflict with, or constitute a default under any of the terms of Shuttle’s certificate of incorporation, by-laws, or any provision of, or result in the acceleration of any obligation under, any material contract, sales commitment, license, purchase order, security agreement, mortgage, note, deed, lien, lease or other agreement to which Shuttle is a party or by which it or any of its properties or assets may be bound, (ii) result in the creation or imposition of any lien, charge or encumbrance in favor of any third person or entity, (iii) violate any law, statute, judgment, decree, order, rule or regulation of any governmental authority or body, or (iv) constitute any event which, after notice or lapse of time or both, would result in such violation, conflict, default, acceleration or creation or imposition of liens, charges or encumbrances.

(d) No Default. Shuttle is not (i) in violation of its charter or by-laws, (ii) in breach or default in any material respect, and no event has occurred which, with notice or lapse of time or both, would constitute such a breach or default, in the due performance or observance of any term, covenant or condition contained in any indenture, mortgage, deed of trust, loan agreement or other agreement or instrument to which it is a party or by which it is bound or to which any of its properties or assets is subject, or (iii) in violation of any law, ordinance, governmental rule, regulation or court decree to which it or its property or assets may be subject or has failed to obtain any material license, permit, certificate, franchise or other governmental authorization or permit necessary to the ownership of its property or to the conduct of its business, where such violation, breach, default or failure would have a material adverse effect on Shuttle or on its ability to provide Regional Airlines Services and otherwise perform its obligations hereunder.

(e) Insurance. Shuttle is insured by insurers of recognized financial responsibility against such losses and risks and in such amounts and with such deductibles as are customary in the businesses in which they are engaged.

(f) No Proceedings. There are no legal or governmental proceedings pending, or investigations commenced of which Shuttle has received notice, in each case to which Shuttle is a party or of which any property or assets of Shuttle is the subject which, if determined adversely to Shuttle, would individually or in the aggregate have a material adverse effect on Shuttle or on Shuttle’s ability to provide Regional Airlines Services and otherwise perform its obligations hereunder; and to the best knowledge of Shuttle, no such proceedings are threatened or contemplated by governmental authorities or threatened by others.

(g) Permits. Shuttle possesses all material certificates, authorizations and permits issued by FAA and other applicable federal, state or foreign regulatory authorities necessary to conduct their respective businesses, to provide Regional Airlines Services and otherwise to perform their respective obligations hereunder, and Shuttle has not received any notice of proceedings relating to the revocation or modification of any such certificate, authorization or permit which, individually or in the aggregate, if the subject of an unfavorable decision, ruling or finding, would result in a material adverse effect on Shuttle or on its ability to conduct its businesses, to provide Regional Airlines Services and otherwise to perform its obligations hereunder.

Section 9.02 Representations and Warranties of Mokulele. Mokulele represents and warrants to Shuttle as of the date hereof as follows:

(a) Organization and Qualification. Mokulele is a duly incorporated and validly existing corporation in good standing under the laws of the State of Hawaii.

(b) Authority Relative to this Agreement. Mokulele has the corporate power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby in accordance with the terms hereof. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly authorized by all necessary corporate action on the part of Mokulele. This Agreement has been duly and validly executed and delivered by Mokulele and is, assuming due execution and delivery thereof by Shuttle and that Shuttle has legal power and right to enter into this Agreement, a valid and binding obligation of Mokulele, enforceable against Mokulele in accordance with its terms, except as enforcement hereof may be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws relating to or affecting the enforcement of creditors’ rights generally and legal principles of general applicability governing the availability of equitable remedies (whether considered in a proceeding in equity or at law or otherwise under applicable law).

(c) Conflicts; Defaults. Neither the execution or delivery of this Agreement nor the performance by Mokulele of the transactions contemplated hereby will (i) violate, conflict with, or constitute a default under any of the terms of Mokulele’s certificate of incorporation, by-laws, or any provision of, or result in the acceleration of any obligation under, any material contract, sales commitment, license, purchase order, security agreement, mortgage, note, deed, lien, lease or other agreement to which Mokulele is a party or by which it or its properties or assets may be bound, (ii) result in the creation or imposition of any lien, charge or encumbrance in favor of any third person or entity, (iii) violate any law, statute, judgment, decree, order, rule or regulation of any governmental authority or body, or (iv) constitute any event which, after notice or lapse of time or both, would result in such violation, conflict, default, acceleration or creation or imposition of liens, charges or encumbrances.

(d) Broker. Mokulele has not retained or agreed to pay any broker or finder with respect to this Agreement and the transactions contemplated hereby.

(e) No Proceedings. There are no legal or governmental proceedings pending, or investigations commenced of which Mokulele has received notice, in each case to which Mokulele is a party or of which any property or assets of Mokulele is the subject which, if determined adversely to Mokulele, would individually or in the aggregate have a material adverse effect on Mokulele or on its ability to perform its obligations hereunder; and to the best knowledge of Mokulele, no such proceedings are threatened or contemplated by governmental authorities or threatened by others. For the avoidance of doubt, the parties hereto acknowledge that the United States Department of Transportation pursuant to 14 C.F.R. Part 204 may review a substantial change of operations and/or a substantial change of ownership of Mokulele in connection with this Agreement and any related transaction.

(f) Financial Statements. The financial statements (including the related notes and supporting schedules) of Mokulele delivered (or, if filed with the Securities and Exchange Commission, made available) to Shuttle immediately prior to the date hereof fairly present in all material respects the consolidated financial position of Mokulele. Since the date of the latest of such financial statements, there has been no material adverse change nor any development or event involving a prospective material adverse change with respect to Mokulele. Such financial statements have been prepared in accordance with generally accepted accounting principles in the United States consistently applied throughout the periods involved, except to the extent disclosed therein.

Section 9.03 Covenants of Mokulele. Mokulele shall deliver to Shuttle:

(a) as soon as available, but in any event within 90 days after the end of each fiscal year of Mokulele, its consolidated balance sheet as at the end of such fiscal year, and the related consolidated statements of income or operations, shareholders’ equity and cash flows for such fiscal year, setting forth in each case in comparative form the figures for the previous year, all in reasonable detail and prepared in accordance with GAAP, audited by an independent certified public accountant;

(b) as soon as available, but in any event within 20 days after the end of each month, a consolidated balance sheet of Mokulele as at the end of such fiscal month, and the related consolidated statements of income or operations, shareholders’ equity and cash flows for such fiscal month and for the portion of Mokulele’s fiscal year then ended, setting forth in each case in comparative form the figures for the corresponding fiscal month of the previous fiscal year and the corresponding portion of the previous fiscal year, all in reasonable detail and certified by the chief financial officer of Mokulele as fairly presenting the financial condition, results of operations, shareholders’ equity and cash flows of Mokulele in accordance with GAAP, subject only to normal year end audit adjustments and the absence of footnotes.

ARTICLE X

MISCELLANEOUS

Section 10.01 Transition Arrangements

(a) Scheduling. Subsequent to the execution of this Agreement, and prior to the inservice date of the first Covered Aircraft, Shuttle and Mokulele shall work together to facilitate the initial monthly scheduling of Scheduled Flights.

(b) Other Setup Arrangements. Subsequent to the execution of this Agreement, and prior to the inservice date of the first Covered Aircraft, Shuttle and Mokulele shall work together to facilitate all other relevant aspects of the commencement of Shuttle’s provision of Regional Airlines Services, including without limitation the provision of passenger-related and technology-related services.

if to Mokulele:

[*]

With copy to:

[*]

if to Shuttle:

[*]

With copy to:

[*]

or to such other address as any party hereto may have furnished to the other parties by a notice in writing in accordance with this Section 10.02.

Section 10.03 Binding Effect; Assignment. This Agreement and all of the provisions hereof shall be binding upon the parties hereto and inure to the benefit of the parties hereto and their respective successors and permitted assigns. Except with respect to a merger or other consolidation of either party with another Person (and without limiting Shuttle’s rights pursuant to Section 5.03 hereof), neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned by any party hereto without the prior written consent of the other parties.

*Confidential

Section 10.07 Confidentiality. Except as required by law or stock exchange or other regulation or in any proceeding to enforce the provisions of this Agreement, or as otherwise provided below, each party hereby agrees not to publicize or disclose to any third party (x) the terms or conditions of this Agreement, or any exhibit, schedule or appendix hereto or thereto, or any information, data, schedules, route information, fare schedules and rules shared between the parties during the course of performance under this Agreement, without the prior written consent of the other parties thereto, or (y) any confidential information or data, both oral and written, received from the other, whether pursuant to or in connection with this Agreement, and designated as such by the other without the prior written consent of the party providing such confidential information or data (except that a party may disclose such information to its third party consultants, advisors and representatives, in each case who are themselves bound to keep such information confidential). Each party hereby agrees not to use any such confidential information or data of the other party other than in connection with performing their respective obligations or enforcing their respective rights under this Agreement, or as otherwise expressly permitted or contemplated by this Agreement. If either party is served with a subpoena or other process requiring the production or disclosure of any of such agreements or information, then the party receiving such subpoena or other process, before complying with such subpoena or other process, shall, unless expressly requested not to do so by a government agency issuing the subpoena or other process, immediately notify the other parties hereto of same and permit said other parties a reasonable period of time to intervene and contest disclosure or production. Upon termination of this Agreement, each party must return to each other any confidential information or data received from the other and designated as such by the party providing such confidential information or data which is still in the recipient’s possession or control. Without limiting the foregoing, no party shall be prevented from disclosing the following terms of this Agreement: the number of aircraft subject hereto, the periods for which such aircraft are subject hereto, and any termination provisions contained herein. The provisions of this Section 10.07 shall survive the termination of this Agreement for a period of ten years.

Section 10.08 Arbitration

(c) Place of Arbitration. The arbitration proceeding shall be conducted in New York, New York, or some other location mutually agreed upon by the parties.

(d) Selection of Arbitrators. The arbitration panel (the “Panel”) shall consist of three arbitrators who are qualified to hear the type of Claim at issue. They may be selected by agreement of the Parties within thirty days of the notice initiating the arbitration procedure, or from the date of any order compelling such arbitration to proceed. If the Parties fail to agree upon the designation of any or all of the Panel, then the Parties shall request the assistance of the CPR. The Panel shall make all of its decisions by majority vote. Evident partiality on the part of an arbitrator exists only where the circumstances are such that a reasonable person would have to conclude there in fact existed actual bias, and a mere appearance or impression of bias will not constitute evident partiality or otherwise disqualify an arbitrator. The decision of the Panel will be binding and non-appealable, except as permitted under the Federal Arbitration Act.

(g) Procedure. It is contemplated that the arbitration proceeding will be self-administered by the Parties and conducted in accordance with procedures jointly determined by the Panel and the Parties; provided, however, that if either or both Parties believes the process will be enhanced if it is administered by the CPR, then either or both Parties shall have the right to cause the process to become administered by the CPR and, thereafter, the arbitration shall be conducted, where applicable or appropriate, pursuant to the administration of the CPR. In determining the extent of discovery, the number and length of depositions, and all other pre-hearing matters, the Panel shall endeavor to the extent possible to streamline the proceedings and minimize the time and cost of the proceedings.

Section 10.11 Equitable Remedies; Certain Liquidated Damages

(b) Certain Liquidated Damages. If Shuttle shall fail to provide a Covered Aircraft within 30 days of the applicable in-service day reflected on Exhibit B (such Covered Aircraft being referred to herein as a “Delayed Aircraft”), Shuttle will pay to Mokulele following such failure liquidated damages in an amount equal to [*] for each day between the [*] day following the in-service date reflected on Exhibit B and the actual in-service date of such Delayed Aircraft; provided that, in the event such in-service delay is due to circumstances beyond the control of Shuttle and Shuttle provides prior notice of such delay, such liquidated damages shall not in any event exceed [*].

The parties agree that the damages to be suffered by Mokulele in connection with Shuttle’s failure to deliver an aircraft on a scheduled in-service date as provided in Exhibit B shall be difficult to calculate, and that the foregoing liquidated damages are a good faith estimate of such damages, and that such liquidated damages are not intended to be a penalty. The parties further agree that the foregoing liquidated damages shall be Mokulele’s sole and exclusive remedy against Shuttle for any damages suffered solely as a result of Shuttle’s failure to deliver an aircraft on a scheduled in-service date as provided in Exhibit B.

(c) Other Limitations on Seeking Damages. Neither the right of any party to terminate this Agreement, nor the exercise of such right, shall constitute a limitation on such party’s right to seek damages or such other legal redress to which such party may otherwise be entitled; provided that, absent the occurrence of another breach of this Agreement by Shuttle, Mokulele shall not be entitled to seek damages solely for the occurrence of an event of Cause of the type described in clause (iii) or clause (iv) of the definition thereof.

Section 10.12 Relationship of Parties. Nothing in this Agreement shall be interpreted or construed as establishing between the parties a partnership, joint venture or other similar arrangement.

Section 10.17 Reserved.

Section 10.18 Life Limited Parts. Mokulele and Shuttle shall each cooperate with one another in order to manage and minimize engine life limited parts (“LLP”) expenses for Covered Aircraft. To that end, Shuttle shall provide annual projections of LLP requirements and supplemental notice of specific engine maintenance events which require LLP replacement as they are scheduled. Mokulele may, at its option and with Shuttle’s consent (which consent shall not be unreasonably withheld), provide or arrange the provision of used serviceable LLPs that otherwise meet Shuttle’s specifications and reasonable minimum cycle-remaining requirements, to be incorporated into a Covered Aircraft. In connection with the withdrawal of any Covered Aircraft from the capacity purchase provisions of this Agreement (whether at the end of such aircraft’s scheduled term or otherwise), Mokulele shall pay Shuttle for the pro-rata cost (based on useful life and using the then-current catalogue price for LLPs) of all LLPs consumed for all Scheduled Flights by such Covered Aircraft under this Agreement, and Shuttle shall pay Mokulele for the pro-rata cost (based on useful life and using the then-current catalogue price for LLPs) of all LLPs provided by Mokulele and incorporated into such Covered Aircraft pursuant to the previous sentence and not consumed for any Scheduled Flights under this Agreement.

Section 10.19 Original Airline Services Agreement

Mokulele, RAI and Shuttle hereby agree that upon the effectiveness of this Agreement, the terms and provisions of the Original Airline Services Agreement which in any manner govern or evidence the obligations arising hereunder, the rights and interests of the RAI and Shuttle and any terms, conditions or matters related to any thereof, shall be and hereby are amended and restated in their entirety by the terms, conditions and provisions of this Agreement, and the terms and provisions of the Original Airline Services Agreement, except as otherwise expressly provided herein, shall be superseded by this Agreement.

*Confidential

IN WITNESS WHEREOF, the parties hereto have caused this Airline Services Agreement to be duly executed and delivered as of the date and year first written above.

MOKULELE FLIGHT SERVICE, INC.			SHUTTLE AMERICA CORPORATION


/s/ William J. Boyer, Jr.			/s/ Robert H. Cooper
Name: William J. Boyer, Jr. CEO			Name: Robert H. Cooper , Executive Vice-President



Acknowledged and Agreed to by:
REPUBLIC AIRLINE, INC.


/s/ Robert H. Cooper
Name: Robert H. Cooper,Executive Vice-President

Exhibits

Exhibit A – Definitions

Exhibit B – Covered Aircraft & Inservice Schedule

Exhibit C – Aircraft Specification, Interior Configuration, Livery and Use of Mokulele Marks

Exhibit D – Compensation

Exhibit E – Terms of Codeshare Arrangements

Exhibit F – Use of Shuttle Marks

Exhibit G – Reasonable Operating Constraints

EXHIBIT A

Definitions

Agreement – means the Airline Services Agreement, dated as of October _, 2008, among Mokulele and Shuttle, as amended from time to time pursuant to Section 10.04 hereof.

Base Compensation – is defined in Paragraph A.1 of Exhibit D.

Business Day – means each Monday, Tuesday, Wednesday, Thursday and Friday unless such day shall be a day when financial institutions in New York, New York or Honolulu, Hawaii are authorized by law to close or the general offices of Mokulele or Shuttle are closed due to weather or other natural forces.

Cause – means (i) the suspension for three consecutive days or longer or the revocation of Shuttle’s authority to operate as a scheduled airline, (ii) the ceasing of Shuttle’s operations as a scheduled airline, other than as a result of a Labor Strike or the mandatory grounding of the Covered Aircraft by the FAA and other than any temporary cessation for not more than 14 consecutive days, (iii) beginning after the month in which the 4th aircraft is placed in service, Shuttle operating at or below the Default Threshold as described in Appendix 2 to Exhibit D, for any three consecutive calendar months, or (iv) a willful or intentional material breach of this Agreement by Shuttle that substantially deprives Mokulele of the benefits of this Agreement, which breach shall have continued for 45 days after notice thereof is delivered by Mokulele to Shuttle.

Charter Flights – means any flight by a Covered Aircraft for charter operations arranged by Mokulele that is not reflected in the Final Monthly Schedule.

[*]

Covered Aircraft – means all of the aircraft listed on Exhibit B (as amended from time to time pursuant to the provisions of this Agreement) and presented for service by Shuttle, as adjusted from time to time for withdrawals pursuant to Article VIII and for extensions pursuant to Section 10.17.

Direct Cost – means, with respect to any given calendar quarter, all costs incurred by Mokulele in respect of Scheduled Flights, including all costs and expenses for which Mokulele is liable pursuant to this Agreement and any distribution or marketing costs incurred by Mokulele in respect of Scheduled Flights but not including fixed and overhead costs incurred by Mokulele generally in the ordinary course of its business.

DOT – means the United States Department of Transportation.

Effective Date – is as set forth in the preamble to this Agreement.

FAA – means the United States Federal Aviation Administration.

Final Monthly Schedule – means the final schedule of Scheduled Flights for the next calendar month delivered by Mokulele to Shuttle pursuant to Section 2.01(b).

Labor Strike – means a labor dispute, as such term is defined in 29 U.S.C. Section 113(c) involving Shuttle and some or all of its employees, which dispute results in a union-authorized strike resulting in a work stoppage.

LLP – is defined in Section 10.18.

Mokulele – means Mokulele Flight Service, Inc., a Hawaii corporation, and its successors and permitted assigns.

Mokulele Marks – is defined in Exhibit C.

Original Airline Services Agreement – means the Airline Services Agreement, dated as of October 1, 2008, among Mokulele and RAI, as amended from time to time pursuant to Section 10.04 thereof.

RAI - means Republic Airline, Inc., an Indiana corporation.

RAI Holdings – means Republic Airways Holdings Inc., a Delaware corporation.

Shuttle Marks – is defined in Exhibit F.

Reasonable Operating Constraints – means the operating constraints on Scheduled Flights set forth on Exhibit G.

Regional Airline Services – means the provisioning by Shuttle to Mokulele of Scheduled Flights and related ferrying using the Covered Aircraft or neutral spare aircraft in accordance with this Agreement.

Scheduled Flight – means a flight as determined by Mokulele pursuant to Section 2.01(b)

Shuttle– means Shuttle America Corporation, an Indiana corporation, and its successors and permitted assigns.

Spare Aircraft – means the Aircraft designated as such by Shuttle that will not be part of the Scheduled Flights and is intended to be used in place of Aircraft that are removed from Scheduled Flights due to mechanical issues, heavy check requirements or to compensate for Scheduled Flights in which a line is running behind schedule.

Term – has the meaning set forth in Section 8.01, as earlier terminated pursuant to Section 8.02, if applicable.

Total Revenue – means, with respect to any given calendar quarter, all revenue earned by Mokulele in respect of Scheduled Flights for such quarter, including but not limited to passenger and baggage revenue, catering revenue, and any other revenue or fees collected by Mokulele in respect of such Scheduled Flights.

TSA – means the United States Transportation Security Administration.

*Confidential

EXHIBIT B

Covered Aircraft & In-Service Schedule

Number	Aircraft Type	U.S. Registration Number	Scheduled In- Service Day
1.	EMB 170		[*]
2.	EMB 170		[*]
3.	EMB 170		[*]
4.	EMB 170		[*]

1 Aircraft number 3 will be considered the Spare Aircraft from the Scheduled In-Service Day until March 1, 2009.

*Confidential

EXHIBIT C

Aircraft Specification, Interior Configuration, Livery and Use of Mokulele Marks

1.	Aircraft Specification. The specifications of the Covered Aircraft will be as set forth in Schedule 1 of this Exhibit C.

Grant. Mokulele hereby grants to Shuttle, and Shuttle accepts, a non-exclusive, personal, non-transferable, royalty-free right and license to adopt and use the Mokulele Marks in connection with the rendering by Shuttle of Regional Airline Services, subject to the conditions and restrictions set forth herein.

3.	Ownership of the Mokulele Marks.

a. Mokulele shall at all times remain the owner of the Mokulele Marks and any registrations thereof and Shuttle’s use of any Mokulele Marks shall clearly identify Mokulele as the owner of such marks (to the extent practical) to protect Mokulele’s interest therein. All use by Shuttle of the Mokulele Marks shall inure to the benefit of Mokulele. Nothing in this Agreement shall give Shuttle any right, title, or interest in the Mokulele Marks other than right to use the Mokulele Marks in accordance with the terms of this Agreement.

b. Shuttle acknowledges that Mokulele is the owner of the Mokulele Marks and hereby agrees to take no action that would be contrary to Mokulele’s ownership of the Mokulele Marks and agrees to cooperate with all of Mokulele’s reasonable request to take any and all actions necessary to protect and preserve Mokulele’s ownership of the Mokulele Marks.

4.	Use of the Mokulele Marks.

a. Shuttle shall use the Mokulele Marks only as authorized herein by Mokulele and in accordance with such standards of quality as Mokulele may establish.

b. Shuttle shall use the Mokulele Marks on all Covered Aircraft (other than the Spare Aircraft) and all facilities, equipment and printed materials used in connection with the Regional Airline Services.

c. Shuttle shall not use the Mokulele Marks for any purpose other than as set forth in this Exhibit C, and specifically shall have no right to use the Mokulele Marks on or in any aircraft other than Covered Aircraft or in connection with any other operations of Shuttle.

d. Mokulele shall have exclusive control over the use and display of the Mokulele Marks, and may change the Mokulele Marks at any time and from time to time, in which case Shuttle shall as soon as practicable make such changes as are requested by Mokulele to incorporate the new Mokulele Marks; provided that Mokulele shall either pay directly the reasonable costs of making such changes or shall promptly reimburse Shuttle for its reasonable expenses incurred in making such changes.

e. Nothing shall abridge Mokulele’s right to use and/or to license the Mokulele Marks, and Mokulele reserves the right to the continued use of all the Mokulele Marks, to license such other uses of the Mokulele Marks and to enter into such agreements with other carriers providing for arrangements similar to those with Shuttle as Mokulele may desire. No term or provision of this Agreement shall be construed to preclude the use of the Mokulele Marks by other persons or for similar or other uses not covered by this Agreement.

Mokulele-Controlled Litigation. Mokulele at its sole expense shall take all steps that in its opinion and sole discretion are necessary and desirable to protect the Mokulele Marks against any infringement or dilution. Shuttle agrees to cooperate fully with Mokulele in the defense and protection of the Mokulele Marks as reasonably requested by Mokulele. Shuttle shall report to Mokulele any infringement or imitation of, or challenge to, the Mokulele Mark, immediately upon becoming aware of same. Shuttle shall not be entitled to bring, or compel Mokulele to bring, an action or other legal proceedings on account of any infringements, imitations, or challenges to any element of the Mokulele Marks without the written agreement of Mokulele. Mokulele shall not be liable for any loss, cost, damage or expense suffered or incurred by Shuttle because of the failure or inability to take or consent to the taking of any action on account of any such infringements, imitations or challenges or because of the failure of any such action or proceeding. If Mokulele shall commence any action or legal proceeding on account of such infringements, imitations or challenges, Shuttle agrees to provide all reasonable assistance requested by Mokulele in preparing for and prosecuting the same.

Revocation of License. Mokulele shall have the right to cancel the license provided herein in whole or in part at any time and for any reason, in which event all terminated rights to use the Mokulele Marks provided Shuttle herein shall revert to Mokulele and the Mokulele Marks shall not be used by Shuttle in connection with any operations of Shuttle. The following provisions shall apply to the termination of the license provided herein: in the case of a termination of the license to use the Mokulele Marks, Shuttle shall cease all use of the Mokulele Marks with respect to each Covered Aircraft within 30 days of such aircraft being withdrawn from the capacity purchase provisions of the Agreement, and shall cease all use of the Mokulele Marks in all other respects within 30 days of last Covered Aircraft being withdrawn from this Agreement. Within such specified period, Shuttle shall cease all use of such other Mokulele Marks, and shall change its facilities, equipment, uniforms and supplies to avoid any customer confusion or the appearance that Shuttle is continuing to have an operating relationship with Mokulele, and Shuttle shall not thereafter make use of any word, words, term, design, name or mark confusingly similar to the Mokulele Marks or take actions that otherwise may infringe the Mokulele Marks.

7.	Assignment. The non-exclusive license granted by Mokulele to Shuttle is personal to Shuttle and may not be assigned, sub-licensed or transferred by Shuttle in any manner without the written consent of a duly authorized representative of Mokulele.

Mokulele Marks. The Mokulele Marks are as set forth in Schedule 2 to this Exhibit C and also include the Aircraft Livery, the Mokulele flight code and other trade names, trademarks, service marks, graphics, logos, employee uniform designs, distinctive color schemes and other identification selected by Mokulele in its sole discretion for the Regional Airline Services to be provided by Shuttle, whether or not such identification is copyrightable or otherwise protected or protectable under federal law.

9.	Aircraft Livery. The Covered Aircraft will be painted in accordance with the designs shown on Schedule 3 to this Exhibit C at Shuttle’s sole cost and expense. Any subsequent livery change shall be at Mokulele’s sole cost and expense.

10.	Aircraft Interior. Each Covered Aircraft will enter service with an “as is, where is” interior and will be clean and in good working order for passenger operations.

11.	Survival. The provisions of this Exhibit C shall survive the termination of this Agreement for a period of six years.

Attachments to Exhibit C

Schedule 1 – Aircraft Specifications

Schedule 2 – Mokulele Marks

Schedule 3 – Aircraft Livery

SCHEDULE 1 TO EXHIBIT C

Aircraft Specifications

(to be provided by Shuttle)

SCHEDULE 2 TO EXHIBIT C

Mokulele Marks

(to be provided by Mokulele)

SCHEDULE 3 TO EXHIBIT C

Aircraft Livery

(to be provided by Mokulele sufficiently in advance to allow a reasonable time for the painting of the livery as provided by Section 9 of Exhibit C)

EXHIBIT D

Compensation

Base and Incentive Compensation.

1.	Base Compensation. Mokulele will pay to Shuttle, in respect of the Covered Aircraft, the rates set forth on Appendix 1 to this Exhibit D for each calendar month, times, the applicable Unit of Measure, times, in each case where the rate category is indicated [*].

2.	Pre-Bill Invoiced Amount. The Invoiced Amount calculated in accordance with Section 3.06 (a) of the Agreement will be calculated by using the data from the Final Monthly Schedule and the Operational Assumptions for any given month as follows:

b. the Invoiced Amount for each of the Variable Cost elements will be calculated by multiplying (i) the Rate, times (ii) the Unit of Measure (as set forth in the Final Monthly Schedule and the Operational Assumptions for the month), times (iii) the Completion Factor Target Threshold percentage as in effect at the time of calculation, where “Blk Hrs” are the block hours estimated to be flown by the Covered Aircraft for the month, “W/A A/C” is the weighted average number of Covered Aircraft for the month, “Departures” is the number of departures estimated to be made by the Covered Aircraft during the month, “Flt Hrs” are the flight hours estimated to be flown by the Covered Aircraft for the month, “Pax” is the number of passengers estimated to be transported by the Covered Aircraft during the month, and “1000 RPMS” is the estimated revenue passenger miles flown by the Covered Aircraft during the month divided by 1,000. The Rate for each Variable Cost element will not change during the Term except for (i) the annual adjustment pursuant to Section 3.02 of the Agreement for those elements noted as “Subject to Escalation, and (ii) those elements noted as subject to “Periodic Adjustment” will be adjusted based on the actual costs of the related insurance premiums paid by Shuttle, taking into account any increases or reductions in those premiums due to end of the coverage year calculations based on Shuttle’s operational statistics.

*Confidential

4.	Pass-Thru Costs. Mokulele will reimburse Shuttle for each Pass-Thru Cost element in accordance with Section 3.06 (c) of the Agreement. Pass-Thru Costs are actual costs incurred and are not subject to [*], Escalation or Periodic Adjustment.

5.	Incentive Compensation. With respect to each calendar month, incentive compensation shall be calculated as follows:

a. On-Time Bonus/Rebate. The reconciliation for any calendar month shall include, as applicable, a bonus (represented by a payment by Mokulele to Shuttle) or a rebate or offset (represented by a payment by Shuttle to Mokulele), in each case in respect of on-time performance, as determined pursuant to Appendix 2 to this Exhibit D .

b. Completion Factor Bonus/Rebate. The reconciliation for any calendar month shall include, as applicable, a bonus (represented by a payment by Mokulele to Shuttle) or a rebate or offset (represented by a payment by Shuttle to Mokulele), in each case in respect of Shuttle’s completion factor for the month, as determined pursuant to Appendix 2 to this Exhibit D.

Mokulele Expenses. With respect to Scheduled Flights, in consideration of the provision by Shuttle of Regional Airline Services and its compliance with the other terms and conditions of this Agreement, the following expenses shall be incurred directly by Mokulele, provided that, should Shuttle incur any such expenses, Shuttle will be reimbursed for such expenses in accordance with Section 3.06 (c) of the Agreement:

(a)

Covered Aircraft fuel, including into plane charges, taxes and administrative fees;

(b)

Landing fees;

(c)

Passenger catering;

(d)

Travel agency and OAL related CRS booking fees;

(e)

Revenue taxes and PFCs;

(f)

Credit card processing fees;

(g)

Deicing services at all cities;

(h)

All customer inconvenience charges;

(i)

TSA fees or charges and any other passenger security fees;

(j)

Any local, state, federal or other fees associated with the transportation of passengers and cargo;

(k)

Staged overnight hotel and per diem expenses; and

(l)

Rates and charges relating to the Honolulu Operations Space as defined in Section 5.02(i).

No Reconciliation for Fines, Etc. Notwithstanding anything to the contrary contained in this Exhibit D or the Agreement, Mokulele shall not be required to incur any cost or make any reconciliation payment to Shuttle to the extent that such cost or reconciliation payment is attributable to any costs, expenses or losses (including fines, penalties and any costs and expenses associated with any related investigation or defense) incurred by Shuttle as a result of any violation by Shuttle of any law, statute, judgment, decree, order, rule or regulation of any governmental or airport authority, provided that, Mokulele shall be liable for all any costs, expenses or losses (including fines, penalties and any costs and expenses associated with any related investigation or defense) incurred by Shuttle as a result of any violation by Mokulele or its agents of any law, statute, judgment, decree, order, rule or regulation of any governmental or airport authority.

*Confidential

Exhibit D Appendices

Appendix 1 Base Compensation Rates

Appendix 2 Incentive Bonuses/Rebates

Appendix 1 to Exhibit D

Base Compensation Rates

Carrier Controlled Costs:		RATE	[*]	SUBJECT TO ESCALATION
Per AC per Month: (Rents)	$	[*]	[*]	[*]
Per AC per Month:	$	[*]	[*]	[*]
Per BH:	$	[*]	[*]	[*]
Per FH:	$	[*]	[*]	[*]
Per Departure:	$	[*]	[*]	[*]

Amounts expressed in January 2008 economics.

*Confidential

Appendix 2 to Exhibit D

Incentive Bonuses/Rebates

(to be mutually agreed prior to March 1, 2009, provided that a failure to mutually agree on Incentive Bonuses and Rebates shall not be an event of default or grounds for termination of this Agreement)

EXHIBIT E

Terms of Codeshare Arrangements

1. Shuttle’s use of MW code. During the Term of the Agreement, Mokulele shall place its designator code, “MW”, on all Scheduled Flights operated by Shuttle. Mokulele may suspend the display of its code on flights operated by Shuttle if Shuttle is in breach of any of its safety-related obligations, or material breach of any of its operational obligations, under the Agreement during the period that such breach continues. All Shuttle operated flights that display the MW code are referred to herein as “MW Flights”.

2. Shuttle’s display of MW code.

(a) All MW Flights will be included in the schedule, availability and fare displays of all computerized reservations systems in which Mokulele and Shuttle participate, the Official Airline Guide (to the extent agreed upon) and Mokulele’s and Shuttle’s internal reservation systems, under the MW code, to the extent possible. Mokulele and Shuttle will take the appropriate measures necessary to ensure the display of the schedules of all MW Flights in accordance with the preceding sentence.

(b) Mokulele and Shuttle will disclose and identify the MW Flights to the public as actually being a flight of and operated by Shuttle, in at least the following ways:

(i) a symbol or a flight number range will be used in timetables and computer reservation systems indicating that MW Flights are actually operated by Shuttle;

(ii) to the extent reasonable, messages on airport flight information displays will identify Shuttle as the operator of flights shown as MW Flights;

(iii) Mokulele and Shuttle advertising concerning MW Flights and Mokulele and Shuttle reservationists will disclose Shuttle as the operator of each MW Flight; and

(iv) in any other manner prescribed by law or DOT regulation.

3. Terms and Conditions of Carriage. In all cases the contract of carriage between a passenger and a carrier will be that of the carrier whose code is designated on the ticket. Mokulele and Shuttle shall each cooperate with the other in the exchange of information necessary to conform each carrier’s contract of carriage to reflect service offered by the other carrier.

4. Notification of Irregular Operations. Shuttle shall promptly notify Mokulele System Operations Control via both positive phone contact and email of all irregularities involving a MW Flight which result in any material damage to persons or property as soon as such information is available and shall furnish to Mokulele as much detail as practicable. For purposes of this section, notification shall be made as follows:

[*]

5. Code Sharing License.

(a) Grant of License. Subject to the terms and conditions of the Agreement, Mokulele hereby grants to Shuttle a nonexclusive, nontransferable, revocable license to use the MW designator code on all of its flights operated as a MW Flight.

(b) Control of MW Flights. Subject to the terms and conditions of the Agreement, Shuttle shall have sole responsibility for and control over, and Mokulele shall have no responsibility for, control over or obligations or duties with respect to, each and every aspect of Shuttle’s operation of MW Flights.

6. Display of other Codes. During the Term of the Agreement, Mokulele shall have the exclusive right to determine which other airlines (“Alliance Airlines”), if any, may place their two letter designator codes on flights operated by Shuttle with Covered Aircraft and to enter into agreements with such Alliance Airlines with respect thereto. Shuttle will cooperate with Mokulele and any Alliance Airlines in the formation of a code share relationship between Shuttle and the Alliance Airlines and enter into reasonably acceptable agreements and make the necessary governmental filings, as requested by Mokulele, with respect thereto.

*Confidential

EXHIBIT F

Use of Shuttle Marks

1. Grant. Shuttle hereby grants to Mokulele, and Mokulele accepts, a non-exclusive, personal, non-transferable, royalty-free right and license to adopt and use the Shuttle Marks (as defined below) in connection with Mokulele’s entering into this Agreement, subject to the conditions and restrictions set forth herein.

2. Ownership of the Shuttle Marks.

a. Shuttle shall at all times remain the owner of the Shuttle Marks and any registrations thereof and Mokulele’s use of any Shuttle Marks shall clearly identify Shuttle as the owner of such marks (to the extent practical) to protect Shuttle’s interest therein. All use by Mokulele of the Shuttle Marks shall inure to the benefit of Shuttle. Nothing in this Agreement shall give Mokulele any right, title, or interest in the Shuttle Marks other than right to use the Shuttle Marks in accordance with the terms of this Agreement

b. Mokulele acknowledges Shuttle’s ownership of the Shuttle Marks and further acknowledges the validity of the Shuttle Marks. Mokulele agrees that it will not do anything that in any way infringes or abridges Shuttle’s rights in the Shuttle Marks or directly or indirectly challenges the validity of the Shuttle Marks.

3. Use of the Shuttle Marks.

a. Mokulele shall use the Shuttle Marks only as authorized herein by Shuttle and in accordance with such standards of quality as Shuttle may establish.

b. Mokulele shall use the Shuttle Marks as necessary or appropriate in Mokulele’s sole discretion in connection with the Regional Airline Services, including without limitation the sale or disposition by Mokulele of the seat inventory of the Scheduled Flights.

c. Mokulele shall not use the Shuttle Marks for any purpose other than as set forth in this Exhibit F, and specifically shall have no right to use the Shuttle Marks in connection with any other operations of Mokulele.

d. Shuttle may change the Shuttle Marks at any time and from time to time (including by adding or deleting marks from the list specified in this Exhibit F), in which case Mokulele shall as soon as practicable make such changes as are requested by Shuttle to utilize the new Shuttle Marks; provided that Shuttle shall either pay directly the reasonable costs of making such changes to the Shuttle Marks or shall promptly reimburse Mokulele for its reasonable expenses incurred in making such changes.

e. Nothing shall abridge Shuttle’s right to use and/or to license the Shuttle Marks, and Shuttle reserves the right to the continued use of all the Shuttle Marks, to license such other uses of the Shuttle Marks and to enter into such agreements with other carriers providing for arrangements similar to those with Mokulele as Shuttle may desire. No term or provision of this Agreement shall be construed to preclude the use of the Shuttle Marks by other persons or for other similar uses not covered by this Agreement.

4. Shuttle-Controlled Litigation. Shuttle at its sole expense shall take all steps that in its opinion and sole discretion are necessary and desirable to protect the Shuttle Marks against any infringement or dilution. Mokulele agrees to cooperate fully with Shuttle in the defense and protection of the Shuttle Marks as reasonably requested by Shuttle. Mokulele shall report to Shuttle any infringement or imitation of, or challenge to, the Shuttle Marks, immediately upon becoming aware of same. Mokulele shall not be entitled to bring, or compel Shuttle to bring, an action or other legal proceedings on account of any infringements, imitations, or challenges to any element of the Shuttle Marks without the written agreement of Shuttle. Shuttle shall not be liable for any loss, cost, damage or expense suffered or incurred by Mokulele because of the failure or inability to take or consent to the taking of any action on account of any such infringements, imitations, challenges or because of the failure of any such action or proceeding. If Shuttle shall commence any action or legal proceeding on account of such infringements, imitations or challenges, Mokulele agrees to provide all reasonable assistance requested by Shuttle in preparing for and prosecuting the same.

5. Revocation of License. Shuttle shall have the right to cancel the license provided herein in whole or in part at any time and for any reason, in which event all terminated rights to use the Shuttle Marks provided Mokulele herein shall revert to Shuttle and the Shuttle Marks shall not be used by Mokulele in connection with any operations of Mokulele. Mokulele shall cease all use of the Shuttle Marks in all respects upon the last Covered Aircraft being withdrawn from this Agreement. Mokulele shall not thereafter make use of any word, words, term, design, name or mark confusingly similar to the Shuttle Marks or take actions that otherwise may infringe the Shuttle Marks.

6. Assignment. The non-exclusive license granted by Shuttle to Mokulele is personal to Mokulele and may not be assigned, sub-licensed or transferred by Mokulele in any manner without the written consent of a duly authorized representative of Shuttle.

7. Shuttle Marks. The Shuttle Marks shall be as provided to Mokulele prior to the commencement of the Term.

8. Survival. The provisions of this Exhibit F shall survive the termination of this Agreement for a period of six years.

EXHIBIT G

Reasonable Operating Constraints

The schedules for the Covered Aircraft shall meet all of the following quarterly average requirements:

1. Minimum & Maximum Scheduling Parameters:

	Minimum	Maximum
Scheduled Block Hours per Aircraft per day	[*]	[*]
Scheduled Cycles per Aircraft per day	[*]	[*]

Note: the above minimum and maximum schedule parameters apply only to those Covered Aircraft in scheduled service, not to the Spare Aircraft.

2. Aircraft Maintenance and Crew Requirements.

Mokulele agrees to take into consideration Shuttle’s operational requirements for overnight maintenance and crew productivity (including, where feasible, mid-day flights into Shuttle crew base cities for crew exchanges) and legality.

Mokulele shall produce a Final Monthly Schedule in cooperation with Shuttle that meets the following location and minimum hour requirements for overnight aircraft:

(i) each of the Covered Aircraft will remain overnight at Honolulu International Airport (HNL) for normal maintenance; and

(ii) each of the Covered Aircraft shall remain overnight for at least 10 hours (as measured by the time from the last terminating flight to the first originating flight).

3. Maintenance Bases.

Shuttle will establish a crew base and a maintenance base for line and overnight aircraft maintenance work at Honolulu International Airport (HNL). Provided that Mokulele provides adequate hangar space, such maintenance base will be sufficient to perform intermediate maintenance checks, clear minimum equipment list and configuration deviation list items, and perform general maintenance, trouble shooting, and component removals and repairs.

4. Crew Overnights.

The schedule may allow for single overnights, multiple overnights, staged, and continuous duty overnights of crews in outstations, provided, should Mokulele schedule continuous duty overnights or staged crews, incremental hotel and per diem costs related to such continuous duty overnights or staged crews will be billed by Shuttle to Mokulele in arrears as a Pass Thru costs [*]. Mokulele reserves the right to review Shuttle’s crew schedules to ensure efficient and economic crew scheduling and agrees to negotiate economic settlement with Shuttle for schedule changes that materially affect crew utilization or line maintenance requirements.

5. Charter Flights Sold by Mokulele.

Mokulele may schedule, price and sell Charter Flights using the Covered Aircraft, provided Shuttle receives 60 days’ advance notice of the tentative dates and times of such Charter Flights and the final dates are built into the Final Monthly Schedule. Mokulele may also request Shuttle to consider ad hoc Charter Flights or extra sections. Mokulele agrees to compensate Shuttle for any additional operating costs of the Charter Flights, including but not limited to aircraft ferry costs and unproductive crew time, as such costs are provided to Mokulele at the time Mokulele provides notice to Shuttle of the Charter Flights, or sufficiently in advance of Mokulele’s bid for the Charter Flight to allow such costs to be passed through to the charterer.

*Confidential

EXHIBIT H

Financial Projections

(see attached)

EX-10.3 4 exhibit10_3.htm REPUBLIC AIRWAYS HOLDINGS AND US AIRWAYS CREDIT AGREEMENT exhibit10_3.htm

EXHIBIT 10.3

CONFIDENTIAL TREATMENT

REQUESTED PURSUANT TO RULE 24b-2

Certain portions of this exhibit have been omitted pursuant to a request for confidential treatment unde r Rule 24b-2 of the Securities Exchange Act of 1934. The omitted materials have been filed separately with the Securities and Exchange Commission.

CONFIDENTIAL

EXECUTION COPY

$35,000,000

CREDIT AGREEMENT

between

US AIRWAYS, INC.,

as Borrower,

and

REPUBLIC AIRWAYS HOLDINGS INC.,

as Lender

Dated as of October 20, 2008

CONFIDENTIAL

TABLE OF CONTENTS

SECTION 1. DEFINITIONS

1.1	Defined Terms
1.2	Other Definitional Provisions

SECTION 2. AMOUNT AND TERMS OF COMMITMENT

2.1	Loans
2.2	Procedure for Borrowing
2.3	Repayment of Loans
2.4	Optional Prepayments
2.5	Interest Rates and Payment Dates
2.6	Computation of Interest and Fees
2.7	Payments

SECTION 3. REPRESENTATIONS AND WARRANTIES

3.1	Existence: Compliance with Law
3.2	Power: Authorization: Enforceable Obligations
3.3	Financial Statements
3.4	Litigation
3.5	Disclosure
3.6	[*]
3.7	Liquidity Conditions

SECTION 4. CONDITIONS PRECEDENT

4.1	Conditions to Initial Term Loan
4.2	Conditions to Delayed Draw Term Loan
4.3	Conditions to Each Extension of Credit

SECTION 5. AFFIRMATIVE COVENANTS

5.1	Financial Statements: Other Information
5.2	Maintenance of Existence: Compliance with Law
5.3	Further Assurances
5.4	[*]
5.5	Use of Proceeds

SECTION 6. EVENTS OF DEFAULT

SECTION 7. MISCELLANEOUS

7.1	Amendments and Waivers
7.2	Notices
7.3	No Waiver: Cumulative Remedies
7.4	Successors and Assigns: Participations and Assignments
7.5	Counterparts
7.6	Severability
7.7	Integration
7.8	Governing Law
7.9	Submission to Jurisdiction: Waivers
7.10	Acknowledgements
7.11	Confidentiality
7.12	Waiver of Jury Trial

* Confidential

CONFIDENTIAL

EXHIBITS:

A	Form of Guaranty
B-1	Form of Initial Term Loan Note
B-2	Form of Delayed Draw Term Loan Note

CONFIDENTIAL

CREDIT AGREEMENT (this “Agreement”), dated as of October 20, 2008, between US AIRWAYS, INC., a Delaware corporation (the “Borrower”), and REPUBLIC AIRWAYS HOLDINGS INC. (the “Lender”).

The parties hereto hereby agree as follows:

SECTION 1. DEFINITIONS

1.1 Defined Terms. As used in this Agreement, the terms listed in this Section 1.1 shall have the respective meanings set forth in this Section 1.1.

“Agreement”: as defined in the preamble hereto.

“Assignee”: as defined in Section 7.4.

“AWA”: America West Airlines, Inc., a Delaware corporation.

“Barclays Financing”: the America West Co-Branded Card Agreement, dated January 25, 2005, between US Airways and Barclays as amended, restated, supplemented or modified from time to time.

“Borrower”: as defined in the preamble hereto.

“Borrowing”: (a) the incurrence of the Initial Term Loan on the Closing Date, and (b) the incurrence of the Delayed Draw Term Loan on or prior to the Delayed Draw Deadline.

“Business Day”: a day other than a Saturday, Sunday or other day on which commercial banks in New York City are authorized or required by law to close.

“[*]”: [*].

“Closing Date”: the date on which the conditions precedent set forth in Section 4.1 shall have been satisfied and the Initial Term Loan has been funded, which date is October 20, 2008.

“Default”: any of the events specified in Section 6, whether or not any requirement for the giving of notice, the lapse of time, or both, has been satisfied.

“Delayed Draw Deadline”: 5:00 P.M. New York time on March 31, 2009.

“Delayed Draw Funding Date”: the date on which the Delayed Draw Term Loan is made to the Borrower hereunder, which date shall be on or prior, but no earlier than March 1, 2009, to the Delayed Draw Deadline.

“Delayed Draw Term Loan”: as defined in Section 2.1(b).

“Delayed Draw Term Loan Commitment”: the obligation of the Lender to make the Delayed Draw Term Loan to the Borrower in a principal amount not to exceed $25,000,000.

* Confidential

“Delayed Draw Term Loan Note”: a promissory note in the form of Exhibit B-2, as it may be amended, supplemented or otherwise modified from time to time.

“Dollars” and “$”: dollars in lawful currency of the United States.

“Event of Default”: any of the events specified in Section 6, provided that any requirement for the giving of notice, the lapse of time, or both, has been satisfied.

“GAAP”: generally accepted accounting principles in the United States as in effect from time to time.

“Governmental Approval”: any consent, authorization, approval, order, license, franchise, permit, certificate, accreditation, registration, filing or notice, of, issued by, from or to, or other act by or in respect of, any Governmental Authority.

“Governmental Authority”: any nation or government, any state or other political subdivision thereof, any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative functions of or pertaining to government, any securities exchange and any self-regulatory organization.

“Group”: US Airways Group, Inc., a Delaware corporation.

“Guaranty”: the Guaranty to be executed and delivered by Group in favor of the Lender, substantially in the form of Exhibit A (as amended, restated, amended and restated, supplemented or otherwise modified from time to time).

“Initial Term Loan”: as defined in Section 2.1.

“Initial Term Loan Commitment”: the obligation of Lender to make the Initial Term Loan to the Borrower in a principal amount equal to $10,000,000.

“Initial Term Loan Note”: a promissory note in the form of Exhibit B-1, as it may be amended, supplemented or otherwise modified from time to time.

“Interest Payment Date”: (i) for the Initial Term Loan, the Interest Payment Dates shall be as follows: January 31, 2009, April 30, 2009, July 31, 2009, and October 31, 2009 (and in the event the Delayed Draw Term Loan is funded, the Interest Payment Dates with respect to the Initial Term Loan shall also include January 31, 2010, April 30, 2010, October 31, 2010, January 31, 2011, April 30, 2011, July 31, 2011 and October 31, 2011); and (ii) for the Delayed Draw Term Loan, the Interest Payment Dates shall be as follows: July 31, 2009, October 31, 2009, January 31, 2010, April 30, 2010, October 31, 2010, January 31, 2011, April 30, 2011, July 31, 2011 and October 31, 2011.

“Juniper Financing”: the America West Co-Branded Card Agreement, dated January 25, 2005, between AWA and Juniper Bank, as amended, restated, amended and restated, supplemented or otherwise modified from time to time , including pursuant to the Assignment and First Amendment to the America West Co-Branded Card Agreement, dated as of August 8, 2005, among AWA, Group and Juniper Bank.

“Lender”: as defined in the preamble hereto.

“LIBOR Rate”: the London interbank offered rate, rounded upward, if necessary, to the nearest 1/100 of 1%, equal to the offered rate for deposits in Dollars for a three-month period, which is determined to be the British Bankers Interest Settlement Rate, as published by Reuters (for delivery on the first day of such period) or any successor service for the purpose of displaying London interbank offered rates of major banks as of 11:00 A.M. (London time), determined as of the Closing Date and as of the last Business Day of each January, April, July and October thereafter.

“Loan”: any of the Initial Term Loan or the Delayed Draw Term Loan made or maintained by the Lender pursuant to this Agreement.

“Loan Documents”: this Agreement, the Guaranty, the Notes, the [*] and any amendment, waiver, supplement or other modification to any of the foregoing.

“Loan Parties”: Group and the Borrower.

“Material Adverse Effect”: a material adverse effect on the business, assets, liabilities, operations, condition (financial or otherwise), operating results or projections of Group and its Subsidiaries taken as a whole.

“Maturity Date”: (x) October 31, 2009, or (y) if the Delayed Draw Funding Date occurs, October 31, 2011.

“Notes”: the Initial Term Loan Note and the Delayed Draw Term Loan Note.

“Obligations”: the unpaid principal of and interest on (including interest accruing after the maturity of the Loans and interest accruing after the filing of any petition in bankruptcy, or the commencement of any insolvency, reorganization or like proceeding, relating to the Borrower or Group, whether or not a claim for post-filing or post-petition interest is allowed in such proceeding) the Loans and all other obligations and liabilities of the Borrower or Group to the Lender, whether direct or indirect, absolute or contingent, due or to become due, or now existing or hereafter incurred, which may arise under, out of, or in connection with, this Agreement, any other Loan Document or any other document made, delivered or given in connection herewith or therewith, whether on account of principal, interest, reimbursement obligations, fees, indemnities, costs, expenses (including all fees, charges and disbursements of counsel to the Lender that are required to be paid by the Borrower or Group pursuant hereto) or otherwise.

“Person”: an individual, partnership, corporation, limited liability company, business trust, joint stock company, trust, unincorporated association, joint venture, Governmental Authority or other entity of whatever nature.

“[*]”: [*].

“Requirement of Law”: as to any Person, the certificate of incorporation and by-laws or other organizational or governing documents of such Person, and any law, treaty, rule or regulation or determination of an arbitrator or a court or other Governmental Authority, in each case applicable to or binding upon such Person or any of its property or to which such Person or any of its property is subject.

“SEC”: the Securities and Exchange Commission, any successor thereto and any analogous Governmental Authority.

“[*]”: as defined in Section 4.1(b).

* Confidential

“[*]”: [*].

“Subsidiary”: as to any Person, a corporation, partnership, limited liability company or other entity of which shares of stock or other ownership interests having ordinary voting power (other than stock or such other ownership interests having such power only by reason of the happening of a contingency) to elect a majority of the board of directors or other managers of such corporation, partnership or other entity are at the time owned, or the management of which is otherwise controlled, directly or indirectly through one or more intermediaries, or both, by such Person. Unless otherwise qualified, all references to a “Subsidiary” or to “Subsidiaries” in this Agreement shall refer to a Subsidiary or Subsidiaries of the Borrower.

1.2 Other Definitional Provisions.

(a) Unless otherwise specified therein, all terms defined in this Agreement shall have the defined meanings when used in the other Loan Documents or any certificate or other document made or delivered pursuant hereto or thereto.

(b) As used herein and in the other Loan Documents, and any certificate or other document made or delivered pursuant hereto or thereto, (i) accounting terms relating to Group, the Borrower or any of its Subsidiaries not defined in Section 1.1 and accounting terms partly defined in Section 1.1, to the extent not defined, shall have the respective meanings given to them under GAAP, (ii) the words “include”, “includes” and “including” shall be deemed to be followed by the phrase “without limitation”, (iii) the word “incur” shall be construed to mean incur, create, issue, assume, become liable in respect of or suffer to exist (and the words “incurred” and “incurrence” shall have correlative meanings), (iv) the words “asset” and “property” shall be construed to have the same meaning and effect and to refer to any and all tangible and intangible assets and properties, including cash, capital stock, securities, revenues, accounts, leasehold interests and contract rights, and (v) references to agreements shall, unless otherwise specified, be deemed to refer to such agreements amended, restated, amended and restated, supplemented or otherwise modified from time to time.

(c) The words “hereof”, “herein” and “hereunder” and words of similar import, when used in this Agreement, shall refer to this Agreement as a whole and not to any particular provision of this Agreement, and Section and Exhibit references are to this Agreement unless otherwise specified.

(d) The meanings given to terms defined herein shall be equally applicable to both the singular and plural forms of such terms.

SECTION 2. AMOUNT AND TERMS OF COMMITMENT

2.1 Loans.

(a) Subject to the terms and conditions hereof, the Lender agrees to make a term loan (an “Initial Term Loan”) to the Borrower on the Closing Date in an amount not to exceed the Initial Term Loan Commitment.

(b) Subject to the terms and conditions hereof, the Lender agrees to make a term loan (a “Delayed Draw Term Loan”) to the Borrower on or prior to the Delayed Draw Deadline in an amount not to exceed the Delayed Draw Term Loan Commitment.

2.2 Procedure for Borrowing. The Borrower shall give the Lender notice of each Borrowing (which notice must be received by the Lender prior to at least two Business Days prior to each Borrowing). Such notice shall specify (i) the aggregate principal amount of Loans to be made, and (ii) the date of the Borrowing (which shall be a Business Day). Not later than 12:00 Noon, New York City time, on the date specified in the applicable notice, the Lender shall make the amount of the Loan available to the Borrower in immediately available funds in an account designated by the Borrower.

2.3 Repayment of Loans.

(a) The Borrower agrees to repay to the Lender, on the Maturity Date, all then outstanding Loans. In the event the Delayed Draw Finding Date occurs, the Borrower shall repay the aggregate outstanding principal amount of the Loans in installments on the dates and in amounts equal to the following percentages of the Loans outstanding on the Delayed Draw Funding Date (after the incurrence of the Delayed Draw Term Loans) (each, a “Principal Installment”), in accordance with the following schedule (provided that the Principal Installments set forth below shall be reduced in connection with any voluntary prepayments of the Loans in accordance with Section 2.4):

Payment Date	Principal Installment
January 31, 2010	[*]%
April 30, 2010	[*]%
July 31, 2010	[*]%
October 31, 2010	[*]%
January 31, 2011	[*]%
April 30, 2011	[*]%
July 31, 2011	[*]%
Maturity Date	[*]%

2.4 Optional Prepayments. The Borrower may, at any time and from time to time, prepay the Loans, in whole or in part, without premium or penalty, upon notice delivered to the Lender no later than one Business Day prior thereto, which notice shall specify the date and amount of prepayment. If any such notice is given, the amount specified in such notice shall be due and payable on the date specified therein, together with accrued interest to such date on the amount prepaid. Partial prepayments of Loans shall be in an aggregate principal amount of $500,000 or a whole multiple thereof.

2.5 Interest Rates and Payment Dates.

(a) Each Loan shall bear interest at a rate per annum equal to the sum of the LIBOR Rate plus [*] basis points per annum, which rate shall be measured and adjusted (if required) quarterly.

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(b) Upon the occurrence and continuation of an Event of Default, any amount then due hereunder shall bear interest at a rate per annum equal to the rate that would otherwise be applicable to the Loans pursuant to the foregoing provisions of this Section plus [*] basis points per annum, in each case, from such date until such amount is paid in full (after as well as before judgment).

(c) Interest shall be payable in arrears on each Interest Payment Date, provided that interest accruing pursuant to paragraph (b) of this Section shall be payable from time to time on demand.

2.6 Computation of Interest and Fees. Interest payable pursuant hereto shall be calculated on the basis of a 365- or 366-day year (as applicable) for the actual days elapsed.

2.7 Payments.

(a) Each optional prepayment by the Borrower on account of principal of and interest on the Loans shall be applied to the remaining scheduled principal payments in inverse order of maturity. Amounts prepaid on account of the Loans may not be reborrowed.

(b) All payments (including prepayments) to be made by the Borrower hereunder, whether on account of principal, interest or otherwise, shall be made without setoff or counterclaim and shall be made prior to 2:00 p.m. New York City time, on the due date thereof to the Lender, for the account of the Lender, in Dollars and in immediately available funds. If any payment hereunder becomes due and payable on a day other than a Business Day, such payment shall be extended to the next succeeding Business Day. In the case of any extension of any payment of principal pursuant to the preceding sentence, interest thereon shall be payable at the then applicable rate during such extension. All such payments shall be made to the Lender at such account as the Lender may designate to the Borrower from time to time.

(c) Any and all payments by the Borrower to or for the account of the Lender under any Loan Document shall be made free and clear of and without deduction for any and all present or future taxes, duties, levies, imposts, deductions, assessments, fees, withholdings or similar charges, and all liabilities with respect thereto, excluding, in the case of the Lender, taxes imposed on or measured by its overall net income, and franchise taxes imposed on it (in lieu of net income taxes), by the jurisdiction (or any political subdivision thereof) under the Laws of which the Lender is organized or is otherwise a resident or doing business (other than a jurisdiction in which such Person is deemed to be doing business solely as a result of entering into, or performing its obligations under, any Loan Document) (all non-excluded taxes, duties, levies, imposts, deductions, assessments, fees, withholdings or similar charges, and liabilities being hereinafter referred to as “Taxes”). If the Borrower shall be required by any Laws to deduct any Taxes from or in respect of any sum payable under any Loan Document to the Lender, then, (i) the sum payable shall be increased as necessary so that after making all required deductions with respect to Taxes (including deductions applicable to additional sums payable under this Section), the Lender receives an amount equal to the sum it would have received had no such deductions been made, (ii) the Borrower shall make such deductions, (iii) the Borrower shall pay the full amount deducted to the relevant taxation authority or other authority in accordance with applicable Laws, and (iv) within 30 days after the date of such payment, the Borrower shall furnish to the Lender the original or a certified copy of a receipt evidencing payment thereof to the extent such a receipt is issued therefor, or other written proof of payment thereof that is satisfactory to the Lender; provided however, if the Lender is not a corporation (or an entity treated as a corporation for U.S. federal income tax purposes) or that is created or organized under the laws of a jurisdiction other than the United States, any State thereof or the District of Columbia (a “U.S. Lender” ) and an amount payable under the preceding clause (i) exceeds the amount that would have been payable by the Borrower if such lender were a U.S. Lender, then the Borrower shall not be required to pay such excess amount to the Lender.

(d) Each Assignee (as defined in Section 7.4) organized under the laws of a jurisdiction outside the United States on the date of an assignment and from time to time thereafter (i) as reasonably requested in writing by the Borrower or (ii) not less than 30 days prior to the date on which any Internal Revenue Service form previously provided shall expire or no longer be valid shall provide the Borrower with two properly completed Internal Revenue Service Forms W-8BEN, W-8ECI or other applicable form prescribed by the Internal Revenue Service, certifying as to such Lender’s status regarding United States withholding tax on payments pursuant to the Loan Documents. For the avoidance of doubt, any Taxes resulting from the failure of an Assignee to provide a form pursuant to this Section 2.7(d) shall be excluded from Taxes.

SECTION 3. REPRESENTATIONS AND WARRANTIES

To induce the Lender to enter into this Agreement and to make the Loans, the Borrower hereby represents and warrants to the Lender that:

3.1 Existence; Compliance with Law. Each Loan Party (a) is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization, (b) except as would not reasonably be expected to have a Material Adverse Effect, has the power and authority, and the legal right, to own and operate its property, to lease the property it operates as lessee and to conduct the business in which it is currently engaged, and (c) is in compliance with all Requirements of Law except to the extent that the failure to comply therewith would not, in the aggregate, reasonably be expected to have a Material Adverse Effect.

3.2 Power; Authorization; Enforceable Obligations. Each Loan Party has the power and authority, and the legal right, to make, deliver and perform the Loan Documents to which it is a party and, in the case of the Borrower, to obtain extensions of credit hereunder. Each Loan Party has taken all necessary organizational action to authorize the execution, delivery and performance of the Loan Documents to which it is a party and, in the case of the Borrower, to authorize the extensions of credit on the terms and conditions of this Agreement. No Governmental Approval or consent or authorization of, filing with, notice to or other act by or in respect of, any other Person is required in connection with the Acquisition and the extensions of credit hereunder or with the execution, delivery, performance, validity or enforceability of this Agreement or any of the other Loan Documents, except (x) to the extent that the failure to obtain such Governmental Approvals, consents, authorizations, filings and notices would not reasonably be expected to have a Material Adverse Effect, and (y) Governmental Approvals, consents, authorizations, filings and notices that have been obtained or made and are in full force and effect. Each Loan Document has been duly executed and delivered on behalf of each Loan Party that is a party thereto. This Agreement constitutes, and each other Loan Document upon execution will constitute, a legal, valid and binding obligation of each Loan Party party thereto, enforceable against each such Loan Party in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors’ rights generally and by general equitable principles (whether enforcement is sought by proceedings in equity or at law).

3.3 Financial Statements.

(a) The audited financial statements of Group and its Subsidiaries dated December 31, 2007 (i) were prepared in accordance with GAAP consistently applied throughout the period covered thereby, and (ii) fairly present in all material respects the financial condition of Group and its Subsidiaries as of the date thereof and their results of operations for the period covered thereby in accordance with GAAP consistently applied throughout the period covered thereby.

(b) The unaudited consolidated financial statements of Group and its Subsidiaries dated June 30, 2008, and the related consolidated statements of income or operations, shareholders’ equity and cash flows for the fiscal quarter ended on that date (i) were prepared in accordance with GAAP consistently applied throughout the period covered thereby, and (ii) fairly present in all material respects the financial condition of Group and its Subsidiaries as of the date thereof and their results of operations for the period covered thereby, subject, in the case of clauses (i) and (ii), to the absence of footnotes and to normal year-end audit adjustments.

3.4 Litigation. There are no actions, suits, proceedings, claims or disputes pending or, to the knowledge of the Borrower, threatened or contemplated, at law, in equity, in arbitration or before any Governmental Authority, by or against Group, the Borrower or any of the Borrower’s Subsidiaries or against any of their properties or revenues that either individually or in the aggregate could reasonably be expected to have a Material Adverse Effect. There are no actions, suits or proceedings pending that challenge the validity of any Loan Document or the applicability or enforceability of any Loan Document which seek to void, avoid, limit, or otherwise adversely affect any payment made pursuant thereto.

3.5 Disclosure. No information contained in this Agreement, any of the other Loan Documents, any financial statements or other written reports from time to time prepared by either Loan Party and delivered hereunder or any written statement prepared by or on behalf of either Loan Party and furnished to the Lender pursuant to the terms of this Agreement or any other Loan Document contains or will contain any untrue statement of a material fact or omits or will omit to state a material fact necessary to make the statements contained herein or therein not misleading in light of the circumstances under which they were made.

3.6 [*].

3.7 Liquidity Conditions. The conditions precedents set forth in Section 4.1(d) and Section 4.1(e) have been met as of the Closing Date.

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SECTION 4. CONDITIONS PRECEDENT

4.1 Conditions to Initial Term Loan. The agreement of the Lender to make the Initial Term Loan is subject to the satisfaction, prior to or concurrently with the making of such Initial Term Loan on the Closing Date, of the following conditions precedent:

(a) Credit Agreement; Guaranty. The Lender shall have received (i) this Agreement, executed and delivered by the Lender and the Borrower, and (ii) the Guaranty, executed and delivered by the Lender and Group, and (iii) an Initial Term Loan Note executed and delivered by the Borrower.

(b) [*].

(c) Board Approval. Each Loan Party shall have obtained approval of the Loan, Loan Documents and related transactions from their respective Boards of Directors.

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(d) Minimum Funding Amount. The Borrower must have received (in the aggregate) not less than $600,000,000 (the “Minimum Funding Amount”) in the form of funding and payment deferrals from external sources and Financing Commitments (as defined below), of which not less than $500,000,000 shall be funds actually received as of the Closing Date or committed payment deferrals, in each case from external sources (including proceeds from equity issuances) since August 14, 2008. “Financing Commitments” means additional commitments for financing (which commitments may be in the form of deferrals for purchase price obligations, services and engineering and/or commitments to provide financing on assets) and which commitments may be subject to internal approvals and other customary conditions (including, without limitation, documentation, diligence, appraisal and financing conditions).

(e) Adjusted Unrestricted Cash. The Borrower shall, after giving effect to (a) the funding of the Initial Term Loan and the receipt of proceeds (and payment deferrals) from the contemporaneous or prior fundings (or payment deferrals) described above and (b) the proceeds of Financing Commitments (including any payment deferrals) to be funded (or received) after the Closing Date, have Adjusted Unrestricted Cash of not less than $2,097,000,000. “Adjusted Unrestricted Cash” means, as of any date of determination, the sum of (i) all unrestricted cash on hand, (ii) the Financing Commitments and (iii) all cash posted as collateral by the Borrower in respect of its fuel hedges.

(f) [*].

4.2 Condition to Delayed Draw Term Loan.. The agreement of the Lender to make the Delayed Draw Term Loan is subject to the satisfaction, prior to or concurrently with the making of such Delayed Draw Term Loan on the Delayed Draw Funding Date, of the following conditions precedent:

(a) Delayed Draw Term Loan Note. The Lender shall have received a Delayed Draw Term Loan Note executed and delivered by the Borrower.

(b) [*].

4.3 Conditions to Each Extension of Credit. The agreement of the Lender to make any extension of credit requested to be made by it on any date (including its initial extension of credit) is subject to the satisfaction of the following conditions precedent:

(a) Representations and Warranties. Each of the representations and warranties made by any Loan Party in or pursuant to the Loan Documents shall be true and correct in all material respects on and as of such date as if made on and as of such date.

(b) No Default. No Default or Event of Default shall have occurred and be continuing on such date or after giving effect to the extensions of credit requested to be made on such date.

(c) No Change. Since the Closing Date, there has been no development or event that has had or would reasonably be expected to have a Material Adverse Effect.

Each Borrowing hereunder shall constitute a representation and warranty by the Borrower as of the date of such extension of credit that the conditions contained in this Section 4.3 have been satisfied.

SECTION 5. AFFIRMATIVE COVENANTS

The Borrower hereby agrees that, so long as any Loan or other amount is owing to the Lender hereunder, the Borrower shall:

5.1 Financial Statements; Other Information. Furnish or make available to the Lender, promptly upon their filing, copies of (A) all financial statements, reports, notices and proxy statements sent or made available generally by Group to its security holders and (B) all regular, periodic and current reports (including all Form 8-K reports) and all registration statements and prospectuses, if any, filed by Group with any securities exchange or with the SEC or any Governmental Authority or private regulatory authority; provided that in lieu of delivering a hard copy of any such document, the Borrower may transmit an electronic copy of such document, provided, further, that to the extent any such document is included in materials otherwise filed with the SEC, such document shall be deemed to have been delivered on the date of the applicable filing.

5.2 Maintenance of Existence; Compliance with Law. (a) (i) Preserve, renew and keep in full force and effect its organizational existence and (ii) take all reasonable action to maintain all rights, privileges and franchises necessary or desirable in the normal conduct of its business, except, in each case, to the extent that failure to do so would not reasonably be expected to have a Material Adverse Effect; (b) comply with all Requirements of Law except to the extent that failure to comply therewith would not, in the aggregate, reasonably be expected to have a Material Adverse Effect; and (c) comply with all Governmental Approvals except to the extent that failure to do so would not reasonably be expected to have a Material Adverse Effect.

5.3 Further Assurances. Promptly upon request by the Lender do, execute and acknowledge any and all such further acts, deeds, certificates, assurances and other instruments as the Lender may reasonably require from time to time in order to carry out more effectively the purposes of the Loan Documents.

5.4 [*].

5.5 Use of Proceeds. Use the proceeds of the Loan for general corporate purposes and to pay ordinary operating costs and expenses of the Loan Parties.

SECTION 6. EVENTS OF DEFAULT

6.1 Events of Default

. If any of the following events shall occur and be continuing:

(a) the Borrower shall fail to pay any principal of any Loan when due in accordance with the terms hereof; or the Borrower shall fail to pay any interest on any Loan, or any other amount payable hereunder or under any other Loan Document, within 5 days after any such interest or other amount becomes due in accordance with the terms hereof; or

(b) any Loan Party shall default in the observance or performance of any other agreement contained in this Agreement or any other Loan Document (other than as provided in paragraphs (a) of this Section), and such default shall continue unremedied for a period of 30 days after notice to the Borrower from the Lender; or

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(c) (i) any Loan Party shall commence any case, proceeding or other action (1) under any existing or future law of any jurisdiction, domestic or foreign, relating to bankruptcy, insolvency, reorganization or relief of debtors, seeking to have an order for relief entered with respect to it, or seeking to adjudicate it a bankrupt or insolvent, or seeking reorganization, arrangement, adjustment, winding-up, liquidation, dissolution, composition or other relief with respect to it or its debts, or (2) seeking appointment of a receiver, trustee, custodian, conservator or other similar official for it or for all or any substantial part of its assets, or any Loan Party shall make a general assignment for the benefit of its creditors; or (ii) there shall be commenced against any Loan Party any case, proceeding or other action of a nature referred to in clause (i) above that (a) results in the entry of an order for relief or any such adjudication or appointment or (b) remains undismissed, undischarged or unbonded for a period of 90 days; or (iii) there shall be commenced against any Loan Party any case, proceeding or other action seeking issuance of a warrant of attachment, execution, distraint or similar process against all or any substantial part of its assets that results in the entry of an order for any such relief that shall not have been vacated, discharged, or stayed or bonded pending appeal within 60 days from the entry thereof; or (iv) any Loan Party shall take any action in furtherance of, or indicating its consent to, approval of, or acquiescence in, any of the acts set forth in clause (i), (ii), or (iii) above; or (v) any Loan Party shall generally not, or shall be unable to, or shall admit in writing its inability to, pay its debts as they become due; or

(d) the guarantee contained in Section 1.1 of the Guaranty shall cease, for any reason, to be in full force and effect; or

(e) [*]; or

(f) [*]; or

(g) any Loan Party (i) fails to make when due (after giving effect to applicable cure or grace periods, and whether as primary obligor or as guarantor or other surety) payments in respect of rents, principal, interest or premium or other payments, if any, in respect of indebtedness (other than indebtedness under the Barclays Financing and the Juniper Financing) and such failure relates to indebtedness which has a principal amount that equals or exceeds $25,000,000 or (ii) fails to duly observe, perform or comply with any agreement or any term or condition of any instrument, if such failure, either individually or in the aggregate, shall have resulted in the acceleration of, or entitles any person to accelerate, the payment of indebtedness (other than the Barclays Financing and the Juniper Financing) owed by such Loan Party which, together with all other accelerated indebtedness and indebtedness that is entitled to be accelerated, has a principal amount that equals or exceeds $25,000,000; provided that the failure by a Loan Party to make one or more payments that are attributable to and relate solely to return conditions under aircraft leases shall not constitute an Event of Default under this Section 6.1(g) so long as any of the Loan Parties are, in good faith, disputing the amount of such payments; or

(h) there is entered against any Loan Party (i) one or more final judgments or orders for the payment of money in an aggregate amount in excess of $25,000,000 and which are not covered by insurance (treating any deductibles, self-insurance (except to the extent reinsured) or retention as not so covered) or (ii) one or more non-monetary judgments or orders that could reasonably be expected to have a Material Adverse Effect shall have been entered against a Loan Party and, in each case, shall remain undischarged or unstayed, by reason of a pending appeal or otherwise, for a period in excess of 60 days; or

(i) any representation, warranty, certification or statement of fact made by or on behalf of the Borrower or any other Loan Party herein, in any other Loan Document, or in any document delivered in connection herewith or therewith shall be incorrect or misleading in any material respect when made; or

(j) the Borrower fails to satisfy the covenant contained in Section 5.4 of this Agreement.

then, and in any such event, (a) if such event is an Event of Default specified in clause (i) or (ii) of paragraph (c) above with respect to the Borrower, automatically the Loans (with accrued interest thereon) and all other amounts owing under this Agreement and the other Loan Documents shall immediately become due and payable, and (b) if such event is any other Event of Default, the Lender may, by notice to the Borrower, declare the Loans (with accrued interest thereon) and all other amounts owing under this Agreement and the other Loan Documents to be due and payable forthwith, whereupon the same shall immediately become due and payable. Except as expressly provided above in this Section, presentment, demand, protest and all other notices of any kind are hereby expressly waived by the Borrower.

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SECTION 7. MISCELLANEOUS

7.1 Amendments and Waivers. Neither this Agreement, any other Loan Document, nor any terms hereof or thereof may be amended, supplemented or modified except in accordance with the provisions of this Section 7.1. The Lender and each Loan Party to the relevant Loan Document may, from time to time, enter into written amendments, supplements or modifications hereto and to the other Loan Documents for the purpose of adding any provisions to this Agreement or the other Loan Documents or changing in any manner the rights of the Lender or of the Loan Parties hereunder or thereunder. In the case of any waiver, the Loan Parties and the Lender shall be restored to their former position and rights hereunder and under the other Loan Documents, and any Default or Event of Default waived shall be deemed to be cured and not continuing; but no such waiver shall extend to any subsequent or other Default or Event of Default, or impair any right consequent thereon.

7.2 Notices. All notices, requests and demands to or upon the respective parties hereto to be effective shall be in writing (including by telecopy), and, unless otherwise expressly provided herein, shall be deemed to have been duly given or made when delivered, or three Business Days after being deposited in the mail, postage prepaid, or, in the case of telecopy notice, when received, addressed as follows, or to such other address as may be hereafter notified by the respective parties hereto:

Borrower:	US Airways, Inc. 111 W. Rio Salado Pkwy. Tempe, AZ 85281 Attention: General Counsel Telecopy: (480) 693-5932 Telephone: (480) 693-2860
Lender:	Republic Airways Holdings Inc. 8909 Purdue Road, Suite 300 Indianapolis, IN 46268 Telecopy: (317) 484-4547 Telephone: (317) 484-6047

7.3 No Waiver; Cumulative Remedies. No failure to exercise and no delay in exercising, on the part of the Lender, any right, remedy, power or privilege hereunder or under the other Loan Documents shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. The rights, remedies, powers and privileges herein provided are cumulative and not exclusive of any rights, remedies, powers and privileges provided by law.

7.4 Successors and Assigns; Participations and Assignments. The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns permitted hereby, except that (i) the Borrower may not assign or otherwise transfer any of its rights or obligations hereunder without the prior written consent of the Lender (and any attempted assignment or transfer by the Borrower without such consent shall be null and void) and (ii) Lender may not assign to one or more assignees, other than an Affiliate (each, an “Assignee”), all or a portion of its rights and obligations under this Agreement unless Lender has provided notice to the Borrower at least 10 days prior to the date of the proposed assignment; provided that such Assignee shall comply in all material respects with Section 2.7(d).

7.5 Counterparts. This Agreement may be executed by one or more of the parties to this Agreement on any number of separate counterparts, and all of said counterparts taken together shall be deemed to constitute one and the same instrument. Delivery of an executed signature page of this Agreement by facsimile or other electronic transmission (including e-mail) shall be effective as delivery of a manually executed counterpart hereof. A set of the copies of this Agreement signed by all the parties shall be lodged with the Borrower and the Lender.

7.6 Severability. Any provision of this Agreement that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.

7.7 Integration. This Agreement and the other Loan Documents represent the entire agreement of the Borrower and the Lender with respect to the subject matter hereof and thereof, and there are no promises, undertakings, representations or warranties by the Lender relative to the subject matter hereof not expressly set forth or referred to herein or in the other Loan Documents.

7.8 Governing Law. This agreement and the rights and obligations of the parties under this agreement shall be governed by, and construed and interpreted in accordance with, the law of the state of New York, without regard to its conflict of laws principles.

7.9 Submission To Jurisdiction; Waivers. Each of the Borrower and the Lender hereby irrevocably and unconditionally:

(a) submits for itself and its property in any legal action or proceeding relating to this Agreement and the other Loan Documents to which it is a party, or for recognition and enforcement of any judgment in respect thereof, to the non-exclusive general jurisdiction of the courts of the State of New York, the courts of the United States for the Southern District of New York, and appellate courts from any thereof;

(b) consents that any such action or proceeding may be brought in such courts and waives any objection that it may now or hereafter have to the venue of any such action or proceeding in any such court or that such action or proceeding was brought in an inconvenient court and agrees not to plead or claim the same;

(c) agrees that service of process in any such action or proceeding may be effected by mailing a copy thereof by registered or certified mail (or any substantially similar form of mail), postage prepaid, to the Borrower, at its address set forth in Section 7.2 or at such other address of which the Lender shall have been notified pursuant thereto;

(d) agrees that nothing herein shall affect the right to effect service of process in any other manner permitted by law or shall limit the right to sue in any other jurisdiction; and

(e) waives, to the maximum extent not prohibited by law, any right it may have to claim or recover in any legal action or proceeding referred to in this Section any special, exemplary, punitive or consequential damages.

7.10 Acknowledgements. The Borrower hereby acknowledges that:

(a) it has been advised by counsel in the negotiation, execution and delivery of this Agreement and the other Loan Documents; and

(b) no joint venture is created hereby or by the other Loan Documents or otherwise exists by virtue of the transactions contemplated hereby between the Borrower and the Lender.

7.11 Confidentiality. The Lender agrees to keep confidential all non-public information provided to it by any Loan Party pursuant to or in connection with this Agreement; provided that nothing herein shall prevent the Lender from disclosing any such information (a) to any affiliate of the Lender, (b) subject to an agreement to comply with the provisions of this Section, to any actual or prospective Assignee, (c) to its employees, directors, agents, attorneys, accountants and other professional advisors or those of any of its affiliates, (d) in response to any order of any court or other Governmental Authority or as may otherwise be required pursuant to any Requirement of Law, or (e) that has been publicly disclosed.

7.12 Waiver of Jury Trial. The Borrower and the Lender hereby irrevocably and unconditionally waive trial by jury in any legal action or proceeding relating to this Agreement or any other Loan Document and for any counterclaim therein.

7.13 Indemnity. The Borrower shall indemnify and hold harmless the Lender and its respective affiliates, directors, officers, employees, counsel, agents and attorneys-in-fact (collectively the “Indemnitees”) from and against any and all liabilities, obligations, losses, damages, penalties, claims, demands, actions, judgments, suits, costs, expenses and disbursements (including reasonably attorneys’ fees) of any kind or nature whatsoever which may at any time be imposed on, incurred by or asserted against any such Indemnitee in any way relating to or arising out of or in connection with (a) the enforcement of any Loan Document or any other agreement, letter or instrument delivered in connection with the transactions contemplated thereby or the consummation of the transactions contemplated thereby, (b) the Loan or the use or proposed use of the proceeds therefrom, or (c) any actual or prospective claim, litigation, investigation or proceeding relating to any of the foregoing, whether based on contract, tort or any other theory (including any investigation of, preparation for, or defense of any pending or threatened claim, investigation, litigation or proceeding) and regardless of whether any Indemnitee is a party thereto (all the foregoing, collectively, the “Indemnified Liabilities”), in all cases, whether or not caused by or arising, in whole or in part, out of the negligence of the Indemnitee; provided that such indemnity shall not, as to any Indemnitee, be available to the extent that such liabilities, obligations, losses, damages, penalties, claims, demands, actions, judgments, suits, costs, expenses or disbursements are determined by a court of competent jurisdiction by final and nonappealable judgment to have resulted from the negligence or willful misconduct of such Indemnitee.

[Signatures Follow]

CONFIDENTIAL

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered by their proper and duly authorized officers as of the day and year first above written.

	US AIRWAYS, INC.,
	as Borrower
	By:	/s/ Thomas T. Weir
		Name: Thomas T. Weir
		Title: Vice President and Treasurer

	REPUBLIC AIRWAYS HOLDINGS INC.,
	as Lender
	By:	/s/ Robert H. Cooper
		Name: Robert H. Cooper
		Title: Executive Vice President and Chief Financial Officer

EX-10.4(D) 5 exhibit10_4d.htm CHAUTAUQUA AIRLINES AND AMR CORPORATION AMENDED AIR SERVICES AGREEMENT exhibit10_4d.htm

EXHIBIT 10.4(d)

CONFIDENTIAL TREATMENT

REQUESTED PURSUANT TO RULE 24b-2

CONFIDENTIAL

AMENDMENT TO THE

AMENDED AND RESTATED AIR SERVICES AGREEMENT

This Amendment to the Amended and Restated Air Services Agreement (“Amendment”), is entered into effective as of October 23, 2008 between AMR Corporation, a Delaware corporation (“AMR”) and Chautauqua Airlines, Inc., a New York corporation (the “Contractor”).

Recitals

AMR and Contractor entered into an Air Services Agreement dated June 11, 2001 (“Original Agreement”) for Contractor to operate Feeder Air Service utilizing regional jets. The Original Agreement was superseded by the Amended and Restated Air Services Agreement dated as of June 12, 2002 (as amended from time to time, “Agreement”). The Agreement was amended by a Side Letter agreement dated March 26, 2003 and by an Amendment to Amended and Restated Air Services Agreement dated October 28, 2003.

The Agreement provides that Contractor will operate Feeder Air Service utilizing 15 Embraer ERJ 140 aircraft and AMR now wants Contractor to reduce the number to 13 Embraer ERJ 140 aircraft.

The parties hereby amend the Agreement as described below:

1.	Removed Aircraft

Notwithstanding anything to the contrary in the Agreement (including without limitation Section 1.02), Contractor shall on and after June 1, 2009 provide Feeder Air Service under a monthly schedule based on utilizing 13 Approved Aircraft and all amounts (other than Rental Fees described below) that are payable by AA to Contractor under the Agreement shall be calculated based on Contractor utilizing 13 Approved Aircraft. Contractor hereby grants to AA rights, exercisable on [*] written notice to Contractor, to cause Contractor to again provide Feeder Air Service under a monthly schedule utilizing 14 or 15 Approved Aircraft so long as Contractor has not executed a binding agreement for a Disposition (defined below) of a Removed Aircraft (defined below) before receiving AA’s notice and so long as all amounts that are payable by AA to Contractor under the Agreement are calculated based on Contractor utilizing the additional Approved Aircraft. In the event AA provides such notice to Contractor, AA agrees to utilize such Removed Aircraft as an Approved Aircraft [*].

Notwithstanding that the Contractor may be providing Feeder Air Service under a monthly schedule based on utilizing fewer than all of the Approved Aircraft: (i) Contractor shall continue to keep all of the Approved Aircraft in airworthy condition and may utilize any Approved Aircraft to provide Feeder Air Service Flights; and (ii) AA shall pay to Contractor as Pass Through Costs the monthly rental fees owed by Contractor for each Approved Aircraft as shown in Annex A to this Amendment (“Rental Fees”). Contractor shall use, and AA’s obligation to pay the Rental Fees is conditioned upon Contractor using, its commercially reasonable efforts to sell, sublease or otherwise transfer ("Disposition") up to two of the Approved Aircraft that are not required under a monthly schedule based on utilizing less than 15 Approved Aircraft ("Removed Aircraft"). Any Disposition shall be on terms that eliminate any remaining Rental Fees owed to third parties for the Removed Aircraft and that are otherwise reasonably acceptable to Contractor and AA. AA shall have no obligation to pay Rental Fees to Contractor with respect to a Removed Aircraft after the earlier of (a) a Disposition of that Removed Aircraft and (b) the expiration or termination of the Agreement. After each Disposition, AA nevertheless will pay to Contractor each month, until the termination or expiration of the Agreement, an amount equal to [*] (“Incentive Payments”). The Rental Fees and Incentive Payments shall be pro rated daily for any partial periods.

2.	Termination Without Cause

Section 7.02(k) is hereby amended by deleting clauses (1) and (2) of the proviso and inserting the following new clauses (1) and (2):

(1) such notice may not be given prior to September 30, 2011, (2) AA will pay to Contractor the amount of [*] upon the termination of the Agreement pursuant to this Section 7.02(k),

*Confidential

3.	Exhibits and Schedules

(A)	Section 1.B. (Passenger Stipend) of Exhibit E (Charges Payable) shall be deleted in its entirety.

(B)

Effective April 1, 2009, Schedule E-1b (ERJ-140 Block Hour Payment Rate and Passenger Stipend Rate) to the Agreement shall be deleted in its entirety and replaced with Annex B to this Amendment (such replacement to occur immediately prior to any escalation of such amounts pursuant to Schedule E-4, it being acknowledged that such escalation of such replacement amounts shall occur on such date).

(C)	Section 1.A. of Schedule E-3 (Pass Through Costs) to the Agreement is hereby deleted in its entirety and replaced with the following:

Fuel (into-plane) – The Block Hour charge includes cost reimbursement to Contractor for Jet A fuel at an average gross (into-plane, including taxes and servicing) cost of [*] per gallon (“Base Fuel Cost”).

If Contractor’s actual average gross cost per gallon of Jet A fuel purchased for Feeder Air Service during any calendar month (“Actual Fuel Cost”) exceeds the Base Fuel Cost, then AA shall pay to Contractor with respect to the next succeeding calendar month, in the manner provided in Section 3.B of Exhibit F, an advance payment of the estimated excess fuel cost for that month (“Fuel Advance”). The Fuel Advance shall be determined by [*].

If Contractor’s actual cost for fuel purchased for Feeder Service Flights during a calendar month (“Monthly Fuel Cost”) exceeds the sum of (a) the Fuel Advance for that month, and (b) the Base Fuel Cost multiplied by the Block Hours for that month, then [*].

[*]

(D)	Section 3.B of Exhibit F (Accounting Procedures) to the Agreement is hereby deleted in its entirety and replaced by the following:

AA shall pay Contractor for Feeder Air Services, via wire transfer, according to the provisions set forth below:

(1) AA shall estimate the monthly Block Hour charges based upon the published flight schedule for that month and shall pay Contractor [*] of the estimated Block Hour charges in the following installments:

(2) On the 5th day of the month, or the next business day, AA shall pay Contractor [*]of the sum of the estimated Block Hour charge and the Fuel Advance for the current month.

(3) On the 10th day of the month, or the next business day, AA shall pay Contractor [*] of the sum of the estimated Block Hour charge and the Fuel Advance for the current month.

(4) On the 25th day of the month, or the next business day, AA shall pay Contractor: (i) [*] of the sum of the estimated Block Hour charge and the Fuel Advance for the current month, plus (ii) any amounts due Contractor for Freight and Small Package shipments under Section 6 of Exhibit F below, plus (iii) the reconciliation of the prior month’s Block Hours charges, except that AA may offset against those prior month’s reconciliation items any amounts due to AA by Contractor.

(E)	Because there remain no unamortized training costs, Exhibit M (Training Costs Table) to the Agreement is hereby deleted in its entirety.

4.	Miscellaneous.

All capitalized terms not defined in this Amendment have the meanings ascribed to them in the Agreement.

*Confidential

The Agreement, as amended by this Amendment, constitutes the entire understanding of the parties with respect to its subject matter and supersedes any other prior or contemporaneous agreements, whether written or oral, with respect to its subject matter.

This Amendment may be executed in any number of counterparts, each of which shall be deemed an original and all of which, taken together, shall constitute one and the same instrument.

All terms of the Agreement remain in full force and effect except as amended by this Amendment.

The parties signed this Amendment to the Amended and Restated Air Services Agreement on the dates written below.

Chautauqua Airlines, Inc.			AMR Corporation

/s/ Bryan Bedford			/s/ Gary D. Foss
Name: Bryan Bedford			Name: Gary D. Foss
Title: President & CEO			Title: VP Planning & Marketing
Dated: October 23, 2008			Dated: October 23, 2008

ANNEX A

Pass-Through Costs for ERJ140 Aircraft Rental

Rental Fees

Tail #	Monthly Rent
N295SK	[*]
N297SK	[*]
N299SK	[*]
N371SK	[*]
N372SK	[*]
N373SK	[*]
N374SK	[*]
N375SK	[*]
N376SK	[*]
N377SK	[*]
N378SK	[*]
N379SK	[*]
N380SK	[*]
N381SK	[*]
N382SK	[*]

*Confidential

Annex A – Page 1

ANNEX B

Schedule E-1b – ERJ-140 Block Hour Payment Rate

Effective April 1, 2009





	Scheduled	New Block
	Utilization	Hour Rate
Minimum	[*]	[*]
	[*]	[*]
	[*]	[*]
	[*]	[*]
	[*]	[*]
	[*]	[*]
	[*]	[*]
	[*]	[*]
	[*]	[*]
	[*]	[*]
	[*]	[*]
	[*]	[*]
	[*]	[*]
	[*]	[*]
	[*]	[*]
	[*]	[*]
	[*]	[*]
	[*]	[*]
	[*]	[*]
	[*]	[*]
	[*]	[*]
	[*]	[*]
	[*]	[*]
	[*]	[*]
	[*]	[*]
	[*]	[*]
	[*]	[*]
	[*]	[*]
	[*]	[*]
	[*]	[*]
	[*]	[*]
	[*]	[*]
	[*]	[*]
	[*]	[*]
	[*]	[*]
	[*]	[*]
	[*]	[*]
	[*]	[*]
	[*]	[*]
	[*]	[*]
	[*]	[*]
	[*]	[*]
	[*]	[*]
	[*]	[*]
	[*]	[*]
	[*]	[*]
	[*]	[*]
	[*]	[*]
	[*]	[*]
	[*]	[*]
	[*]	[*]
	[*]	[*]
	[*]	[*]
	[*]	[*]
	[*]	[*]
	[*]	[*]
	[*]	[*]
	[*]	[*]
Maximum	[*]	[*]

*Confidential

Annex B – Schedule E-1b – Page

EX-10.39(V) 6 exhibit10_39v.htm AMENDMENT NO. 22 TO PURCHASE AGREEMENT WITH EMBRAER exhibit10_39v.htm

EXHIBIT 10.39(v)

CONFIDENTIAL TREATMENT

REQUESTED PURSUANT TO RULE 24b-2

AMENDMENT No. 22 TO PURCHASE AGREEMENT DCT-014/2004

This Amendment No. 22 to Purchase Agreement DCT-014/2004, dated as of September 5th, 2008 (“Amendment No. 22”) relates to the Purchase Agreement DCT-014/2004 (the “Purchase Agreement”) between Embraer - Empresa de Brasileira Aeronáutica S.A. (“Embraer”) and Republic Airline Inc. (“Buyer”) dated March 19, 2004 as amended from time to time (collectively referred to herein as “Agreement”). This Amendment No. 22 is between Embraer and Buyer, collectively referred to herein as the “Parties”.

This Amendment No. 22 sets forth additional agreements between Embraer and Buyer relative to change in the escalation indices.

Except as otherwise provided for herein all terms of the Purchase Agreement shall remain in full force and effect. All capitalized terms used in this Amendment No. 22, which are not defined herein, shall have the meaning given in the Purchase Agreement. In the event of any conflict between this Amendment No. 22 and the Purchase Agreement the terms, conditions and provisions of this Amendment No. 22 shall control.

NOW, THEREFORE, for good and valuable consideration which is hereby acknowledged Embraer and Buyer hereby agree as follows:

1. Changes in the Escalation Formula

Due to the fact that the [*] Indices [*] are no longer published [*] the Purchase Price for all Aircraft shall be calculated as described below.

[*]

2. Miscellaneous: All other provisions of the Agreement which have not been specifically amended or modified by this Amendment No. 22 shall remain valid in full force and effect without any change.

* Confidential

IN WITNESS WHEREOF, EMBRAER and BUYER, by their duly authorized officers, have entered into and executed this Amendment No. 22 to Purchase Agreement to be effective as of the date first written above.

EMBRAER – Empresa Brasileira de Aeronáutica S.A.			Republic Airline Inc.

/s/ Antonio Luiz Pizarro Manso			/s/ Bryan Bedford
Name: Antonio Luiz Pizarro Manso			Name:
Title: Executive Vice-President Finance & CFO			Title:


/s/ José Luís D. Molina			Date: September 5, 2008
Name: José Luís D. Molina			Place: Indianapolis, Indiana
Title: Vice President Contracts Airline Market

Date: September 8th, 2008
Place: São José Dos Campos, SP, Brazil

Witness: /s/ Carlos Martins Dutra			Witness: /s/ Lars-Erik Arnell
Name: Carlos Martins Dutra			Name: Lars-Erik Arnell

ATTACHMENT "D1" - ESCALATION FORMULA

[*]

*Confidential

EX-10.40(O) 7 exhibit10_40o.htm AMENDMENT NO. 15 TO LETTER AGREEMENT WITH EMBRAER exhibit10_40o.htm

EXHIBIT 10.40(o)

CONFIDENTIAL TREATMENT

REQUESTED PURSUANT TO RULE 24b-2

AMENDMENT No. 15 TO LETTER AGREEMENT DCT-015/2004

This Amendment No.15 to Letter Agreement DCT-015/2004, dated as of September 5th, 2008 (“Amendment No. 15”) relates to the Letter Agreement DCT-015/2004 (the “Letter Agreement”) between Embraer - Empresa Brasileira de Aeronáutica S.A. (“Embraer”) and Republic Airline Inc. (“Buyer”) dated March 19, 2004 and which concerns the Purchase Agreement DCT-014/2004 (the “Purchase Agreement”), as amended from time to time (collectively referred to herein as “Agreement”). This Amendment No. 15 is between Embraer and Buyer, collectively referred to herein as the “Parties”.

This Amendment No. 15 sets forth additional agreements between Embraer and Buyer related to the confirmation that the last 4 firm order EMBRAER 175 Delta Aircraft shall be [*].

Except as otherwise provided for herein all terms of the Letter Agreement shall remain in full force and effect. All capitalized terms used in this Amendment No. 15 that are not defined herein shall have the meaning given in the Letter Agreement. In the event of any conflict between this Amendment No. 15 and the Letter Agreement the terms, conditions and provisions of this Amendment No. 15 shall control.

NOW, THEREFORE, for good and valuable consideration which is hereby acknowledged Embraer and Buyer hereby agree as follows:

1. Article 6 (Certain EMBRAER 175 [*]) of Amendment No. 13 to Letter Agreement shall be entirely canceled and is of no force and effect as if such Article 6 had never been included in the Amendment No. 13 to Letter Agreement.

IN WITNESS WHEREOF, EMBRAER and BUYER, by their duly authorized officers, have entered into and executed this Amendment No. 15 to Purchase Agreement to be effective as of the date first written above.

EMBRAER – Empresa Brasileira de Aeronáutica S.A.			Republic Airline Inc.

/s/ Antonio Luiz Pizarro Manso			/s/ Bryan Bedford
Name: Antonio Luiz Pizarro Manso			Name:
Title: Executive Vice-President Finance & CFO			Title:


/s/ José Luís D. Molina			Date: September 5, 2008
Name: José Luís D. Molina			Place: Indianapolis, Indiana
Title: Vice President Contracts Airline Market

Date: September 8th, 2008
Place: São José Dos Campos, SP, Brazil

Witness: /s/ Carlos Martins Dutra			Witness: /s/ Lars-Erik Arnell
Name: Carlos Martins Dutra			Name: Lars-Erik Arnell

*Confidential

EX-31.1 8 exhibit31_1.htm CERTIFICATION BY CEO exhibit31_1.htm

EXHIBIT 31.1

CERTIFICATION

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

I, Bryan K. Bedford, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Republic Airways Holdings Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: November 4, 2008

	/s/ Bryan K. Bedford
	Bryan K. Bedford
	Chairman of the Board, Chief Executive Officer and President

EX-31.2 9 exhibit31_2.htm CERTIFICATION BY CFO exhibit31_2.htm

EXHIBIT 31.2

CERTIFICATION

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

I, Robert H. Cooper, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Republic Airways Holdings Inc.;

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: November 4, 2008

	/s/ Robert H. Cooper
	Robert H. Cooper
	Executive Vice President and Chief Financial Officer

EX-32.1 10 exhibit32_1.htm CERTIFICATION BY CEO exhibit32_1.htm

EXHIBIT 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Republic Airways Holdings Inc. (the "Company") on Form 10-Q for the quarter ended September 30, 2008 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Bryan K. Bedford, Chairman of the Board, Chief Executive Officer and President of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

	By:	/s/ Bryan K. Bedford
		Bryan K. Bedford
		Chairman of the Board, Chief Executive
		Officer and President
		November 4, 2008

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32.2 11 exhibit32_2.htm CERTIFICATION BY CFO exhibit32_2.htm

EXHIBIT 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Republic Airways Holdings Inc. (the "Company") on Form 10-Q for the quarter ended September 30, 2008 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Robert H. Cooper, Executive Vice President and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

	By:	/s/ Robert H. Cooper
		Robert H. Cooper
		Executive Vice President and Chief Financial Officer
		November 4, 2008

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