UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended June 30, 2005

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

For the transition period from to

Commission File No: 0-17895

MAIR HOLDINGS, INC.

Incorporated under the laws of Minnesota

41-1616499

(I.R.S. Employer ID No.)

Fifth Street Towers, Suite 1360

150 South Fifth Street

Minneapolis, MN 55402

(612) 333-0021

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ý No o

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act).

Yes ý No o

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Class		Outstanding as of July 30, 2005
Common Stock Par value $.01 per share		20,574,340

Part I. FINANCIAL INFORMATION

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MAIR HOLDINGS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share information)

(Unaudited)

	June 30			March 31
	2005			2005
ASSETS

CURRENT ASSETS:
Cash and cash equivalents	$	66,516		$	57,968
Short-term investments	63,936			69,669
Accounts receivable, net of reserves of $570 and $601	27,678			31,176
Inventories, net	11,955			11,034
Prepaid expenses and deposits	5,586			5,808
Deferred income taxes and other	11,627			11,892
Total current assets	187,298			187,547

PROPERTY AND EQUIPMENT:
Flight equipment	94,871			93,645
Other property and equipment	41,749			40,248
Less: Accumulated depreciation and amortization	(98,549		)	(95,472		)
Net property and equipment	38,071			38,421

NONCURRENT ASSETS:
Long-term investments	42,118			43,240
Goodwill	2,503			2,503
Other intangible assets, net	2,717			2,819
Other assets, net	6,027			6,424
	$	278,734		$	280,954

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

MAIR HOLDINGS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS (Continued)

(in thousands, except share information)

(Unaudited)

	June 30			March 31
	2005			2005

LIABILITIES AND SHAREHOLDERS’ EQUITY

CURRENT LIABILITIES:
Accounts payable	$	16,128		$	19,151
Accrued liabilities:
Payroll	18,230			19,563
Maintenance	20,201			20,281
Deferred income	3,401			3,085
Other current liabilities	21,302			20,126
Total current liabilities	79,262			82,206

OTHER NONCURRENT LIABILITIES	5,480			6,069

COMMITMENTS AND CONTINGENCIES (Note 11)

SHAREHOLDERS’ EQUITY:
Undesignated preferred stock, no specified par value; 1,000,000 shares authorized, no shares issued and outstanding	—			—
Common stock, $.01 par value; 60,000,000 shares authorized, 20,574,340 shares issued and outstanding	206			206
Paid-in capital	54,378			54,356
Warrants	16,500			16,500
Accumulated other comprehensive loss	(165		)	(254		)
Retained earnings	123,073			121,871
Total shareholders’ equity	193,992			192,679
	$	278,734		$	280,954

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

MAIR HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share information)

(Unaudited)

	Three Months Ended
	June 30
	2005			2004
				(As restated- see Note 13)
OPERATING REVENUES:
Passenger	$	107,539		$	100,968
Freight and other	10,900			8,731
Total operating revenues	118,439			109,699

OPERATING EXPENSES:
Wages and benefits	39,388			35,300
Aircraft fuel	5,658			5,111
Aircraft maintenance	22,771			20,426
Aircraft rents	25,665			25,106
Landing fees	1,676			1,769
Insurance and taxes	1,893			2,073
Depreciation and amortization	3,802			3,753
Administrative and other	18,504			13,637
Total operating expenses	119,357			107,175
Operating income (loss)	(918		)	2,524

NONOPERATING INCOME (EXPENSE):
Interest income and other	1,012			385
Interest expense	(16		)	(18		)
Arbitration settlement	1,800			—
Nonoperating income, net	2,796			367
Income before provision for income taxes	1,878			2,891

PROVISION FOR INCOME TAXES	676			28
NET INCOME	$	1,202		$	2,863

NET INCOME PER SHARE:
Earnings per common share - basic	$	0.06		$	0.14
Earnings per common share - diluted	$	0.06		$	0.14

WEIGHTED AVERAGE SHARES OUTSTANDING:
Basic	20,574			20,452
Diluted	21,194			20,976

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

MAIR HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(Unaudited)

	Three Month Ended
	June 30
	2005			2004
				(As restated-
				see Note 13)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	1,202		$	2,863
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	3,802			3,753
Amortization of investments	465			521
Amortization of deferred credits	(348		)	(412		)
Stock-based compensation	22			(740		)
Changes in current operating items:
Accounts receivable	3,498			408
Inventories	(921		)	(723		)
Prepaid expenses and deposits	240			(1,853		)
Accounts payable and other	(2,979		)	(6,699		)
Net cash provided by (used in) operating activities	4,981			(2,882		)

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of investments	(11,441		)	(11,200		)
Sales of investments	18,002			12,383
Purchases of property and equipment	(2,964		)	(2,971		)
Net cash (used in) provided by investing activities	3,597			(1,788		)

CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of other noncurrent liabilities	(30		)	(33		)
Proceeds from issuance of common stock	—			530
Net cash provided by (used in) financing activities	(30		)	497

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	8,548			(4,173		)

CASH AND CASH EQUIVALENTS:
Beginning of period	57,968			52,661
End of period	$	66,516		$	48,488

SUPPLEMENTARY CASH FLOW INFORMATION:
Cash paid (refund received) during period for:
Interest	$	17		$	21
Income taxes	$	(420	)	$	463

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

MAIR HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The condensed consolidated financial statements included herein have been prepared by MAIR Holdings, Inc. (the “Company” or “Holdings”), without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). The information furnished in the condensed consolidated financial statements includes normal recurring adjustments and reflects all adjustments that are, in the opinion of management, necessary for a fair presentation of such condensed consolidated financial statements. The Company’s business is seasonal and, accordingly, interim results are not indicative of results for a full year. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements for the year ended March 31, 2005, and the notes thereto, included in the Company’s Annual Report on Form 10-K as filed with the SEC on June 14, 2005.

1. Basis of Presentation

The condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, Mesaba Aviation, Inc. (“Mesaba”) and Big Sky Transportation Co. (“Big Sky”). All significant intercompany transactions and balances have been eliminated in consolidation.

The preparation of the condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities, as well as the reported amounts of revenues and expenses. The most significant use of estimates relates to accrued maintenance expenses, aircraft property and equipment lives, inventory obsolescence reserves, valuation of goodwill and other intangible assets and accounting for income taxes. Ultimate results could differ from those estimates.

2. Business

Mesaba

Mesaba operates as a regional air carrier providing scheduled passenger service as “Mesaba Airlines/Northwest Airlink” and “Mesaba Airlines/Northwest Jet Airlink” under two separate agreements with Northwest Airlines, Inc. (“Northwest”), a wholly owned indirect subsidiary of Northwest Airlines Corporation. As of June 30, 2005, Mesaba served 110 cities in the United States and Canada from Northwest’s hub airports located in Minneapolis/St. Paul, Detroit and Memphis.

Under the Airline Services Agreement (the “Airlink Agreement”), Mesaba operates Saab 340 jet-prop aircraft (“Saab”) for Northwest. This agreement provides for exclusive rights to designated service areas and extends through June 30, 2007. Under the Airlink Agreement, Mesaba recognizes revenue for each completed “available seat mile” (the number of seats in an aircraft multiplied by the number of miles those seats are flown). Additionally, under the Airlink Agreement, Mesaba purchases fuel, ground handling and other services from Northwest. Mesaba, on a net basis, paid Northwest $3.3 million and $6.2 million for these services for the three months ended June 30, 2005 and 2004, respectively. Either Northwest or Mesaba may terminate the Airlink Agreement on 365 days notice. The Airlink Agreement may be terminated immediately by Mesaba or Northwest in the event that the other party is the subject of a bankruptcy or similar proceeding or is divested of a substantial part of its assets. Additionally, the non-defaulting party may terminate the agreement in the event of a breach of a non-monetary provision that remains uncured for a period of more than 30 days after receipt of written notification of such default, or the breach of a monetary provision that remains uncured for a period of more than ten days after receipt of written notification of such default. Northwest may also terminate the Airlink Agreement in the event of certain lease and other performance defaults; change in control events; revocation or failure to obtain Department of Transportation (“DOT”) certification; failure to elect a chief executive officer of the Company and Mesaba reasonably acceptable to Northwest; or if more than 50% of the aircraft subject to the agreement are not operated for more than seven consecutive days or 25% of such aircraft are not operated for more than 21 consecutive days, other than as a result of the Federal Aviation Administration (“FAA”) grounding all Saabs for all carriers.

Under the Regional Jet Services Agreement (the “Jet Agreement”), Mesaba operates Avro RJ85 regional jets (“RJ85”) for Northwest. The Jet Agreement extends through April 25, 2007. Under the Jet Agreement, Mesaba recognizes revenue for each “block hour” flown (the elapsed time between aircraft departing and arriving at a gate). Northwest provides fuel and airport and passenger related services at Northwest’s expense. Either Mesaba or Northwest may immediately terminate the Jet Agreement in the event that the other party is the subject of a bankruptcy or similar proceeding or is divested of a

substantial part of its assets. Additionally, the non-defaulting party may terminate the agreement in the event of a breach of a non-monetary provision that remains uncured for a period of more than 30 days after receipt of written notification of such default, or the breach of a monetary provision that remains uncured for a period of more than ten days after receipt of written notification of such default. Northwest may also terminate the Jet Agreement in the event of certain lease and other performance defaults; change in control events; revocation or failure to obtain DOT certification; failure to elect a chief executive officer of the Company and Mesaba reasonably acceptable to Northwest; if more than 25% of the aircraft subject to the agreement are not operated for more than seven consecutive days, other than as a result of the FAA grounding all RJ85 aircraft for all carriers; or if there is a strike, cessation or interruption of work involving Mesaba pilots, flight attendants or mechanics providing jet service.

Under the agreements, all scheduled flights that Mesaba operates are designated as Northwest flights using Northwest’s designator code in all computer reservation systems, including the Official Airline Guide, with an asterisk and a footnote indicating that Mesaba is the carrier providing the service. In addition, flight schedules of Mesaba and Northwest are closely coordinated to facilitate interline connections, and Mesaba’s passenger gate facilities at the Minneapolis/St. Paul International Airport, Detroit Metropolitan Airport and Memphis International Airport are integrated with Northwest’s facilities in the main terminal buildings, rather than at the more remote commuter air terminals. Mesaba’s RJ85 aircraft are painted in the colors of Northwest and the Saab aircraft are painted in a distinctive “Northwest Airlink” configuration, with a Northwest logo in addition to Mesaba’s name.

Mesaba, through the agreements, receives ticketing and certain check-in, baggage, freight and aircraft handling services from Northwest at certain airports. In addition, Mesaba receives its computerized reservations services from Northwest. Northwest also performs all marketing, scheduling, yield management and pricing services for Mesaba’s flights.

The Airlink and Jet Agreements provide for certain incentive payments from Northwest to Mesaba based on achievement of certain operational or financial goals. Such incentives totaled $1.4 million and $1.2 million for the three months ended June 30, 2005 and 2004, respectively, and are included in passenger revenues in the accompanying condensed consolidated statements of operations. Approximately $22.8 million, or 82.4%, and $25.9 million, or 83.0%, of the June 30, 2005 and March 31, 2005 accounts receivable balances in the accompanying condensed consolidated balance sheets were due from Northwest and were not collateralized.

For the years ended December 31, 2004, 2003 and 2002, Northwest’s net income (loss) was $(862) million, $248 million and $(798) million. As of March 31, 2005, Northwest had a stockholders’ equity deficit of $3.5 billion and negative working capital of $1.2 billion. If Northwest continues to incur operating losses, it may be unable to fulfill its financial obligations, including payments due to Mesaba under the Airlink Agreement and Jet Agreement. Additionally, the Company’s business could be adversely affected by events such as a reorganization by Northwest through Chapter 11 bankruptcy proceedings, an inability by Northwest to reduce labor expenses and other costs, continued and unsustainable operating losses at Northwest, changes in Northwest’s business plan or model, employee strike or job actions, significant curtailment of service (and thus curtailment of the utilization of the Company’s aircraft), continued volatility of fuel costs and terrorist events. Loss of the Company’s business relationship with Northwest or Northwest’s failure to make timely payment of amounts owed to the Company would have a material adverse effect on the Company’s operations, financial position and cash flows.

Pursuant to a non-binding letter of intent, Mesaba and Northwest are currently negotiating a new omnibus airline services agreement intended to replace the Airlink Agreement and Jet Agreement. See the “Recent Developments” section below.

Big Sky

Big Sky operates as a regional air carrier based in Billings, Montana, primarily providing scheduled passenger, airfreight, express package and charter services. As of June 30, 2005, Big Sky provided scheduled air service to 18 communities in Montana, Idaho, Oregon, Washington, Colorado and Wyoming. Big Sky operates daily scheduled flights providing interline and online connecting services and local market services. Big Sky also has code-sharing agreements with Alaska Airlines, Horizon Air, America West Airlines and Northwest, where its services are marketed jointly with those air carriers for connecting flights. Big Sky participates in the Essential Air Service (“EAS”) program with the DOT. The EAS program subsidizes air carriers to provide air service to designated rural communities throughout the country that could not otherwise economically justify that service based on their passenger traffic. The DOT pays EAS subsidies for each departure in a covered market. In the three months ended June 30 2005 and 2004, Big Sky recognized revenue from EAS subsidies of $2.0 million and $1.6 million. Big Sky purchased fuel from Northwest for $0.8 million and $0.4 million for the three months ended June 30, 2005 and 2004, respectively.

Recent Developments

On April 22, 2005, Holdings and Mesaba executed a non-binding letter of intent with Northwest to allow Mesaba to operate 15 Bombardier CRJ-200 regional jets (“CRJ”) under the Northwest Airlink banner, with exclusive rights to the next 20 CRJ-200 or CRJ-440 aircraft Northwest may order. Mesaba expects to lease the aircraft from Northwest and expects the first aircraft to enter service before the end of calendar 2005. Mesaba expects to enter into a new 10-year omnibus airline services agreement with Northwest covering the operation of the CRJs, Saabs and RJ85s that will replace the existing Airlink Agreement and the Jet Agreement, which are set to expire in 2007. As part of the letter of intent, Mesaba agreed to incur the costs necessary to bring the new CRJ fleet into service.

Holdings and Mesaba are currently negotiating the definitive new omnibus airline services agreement with Northwest, which is subject to final approval by all parties. Upon execution of the definitive agreement, Holdings expects to amend the currently outstanding warrants held by Northwest to reduce the number of shares of the Company’s common stock issuable upon exercise from 4,151,922 shares exercisable at prices from $7.25 to $21.25 per share to an aggregate of 4,112,500 shares exercisable at a price of $8.74 per share. The warrants are expected to expire ten years from the date of the definitive airline services agreement. Sixty percent of the shares are expected to become exercisable upon the delivery of the 15th CRJ aircraft to Mesaba, and an additional 4% of the shares are expected to become exercisable with each subsequent delivery of the next ten CRJ aircraft. Pursuant to the letter of intent, Holdings also agreed to enter into a registration rights agreement to register the shares of stock currently held by Northwest and the shares of stock that will be issuable to Northwest upon exercise of the warrants.

As of the date of this filing, the Company and Mesaba are continuing negotiations on the definitive new omnibus airline services agreement. Because the letter of intent is non-binding, the Company cannot provide assurance that the parties will ultimately execute a final agreement. In the first fiscal quarter, Mesaba incurred approximately $2.4 million in start-up costs related to adding the CRJ aircraft into its fleet, and Holdings incurred approximately $0.3 million in related start-up costs. If the parties do not execute a definitive agreement, Mesaba would be unable to earn revenue from the CRJ fleet to offset these and future start-up expenses. Additionally, Northwest is in a 30-day cooling off period with its mechanics, and the mechanics could strike as soon as August 19, 2005. Further, in the event Northwest continues to incur losses, it may file for bankruptcy. In such event, all of the Company’s contracts with Northwest will be at risk, as Northwest will have the option to accept or reject each of the Company’s contracts with Northwest. Northwest could also attempt to renegotiate the Company’s contracts through bankruptcy. For a detailed discussion of the risks associated with the Company’s airline services agreements with Northwest, please see “Certain Risk Factors Relating to the Company and the Airline Industry” in Item 2 of this Quarterly Report on Form 10-Q.

3. Goodwill and Other Intangibles

The excess of the Big Sky purchase price over the fair market value of the net assets acquired was allocated to certain identifiable intangible assets, including Big Sky’s pilot labor contract and an air carrier certificate, and to goodwill. Goodwill and other intangible assets and related accumulated amortization were as follows, in thousands:

	June 30, 2005							March 31, 2005
			Accumulated							Accumulated
	Gross		Amortization			Net		Gross		Amortization			Net
Indefinite-lived assets:
Air carrier certificate	$	925				$	925	$	925				$	925
Goodwill	2,503					2,503		2,503					2,503
Amortizable intangible asset:
Pilot labor contract	2,840		(1,048		)	1,792		2,840		(946		)	1,894
	$	6,268	$	(1,048	)	$	5,220	$	6,268	$	(946	)	$	5,322

The amortizable intangible asset is amortized over its estimated period of benefit. Intangible asset amortization expense for each of the three months ended June 30, 2005 and 2004 was $0.1 million. Goodwill and the intangible assets are evaluated for impairment annually, at a minimum, or on an interim basis if events or circumstances indicate a possible inability to realize the carrying amounts. The evaluation includes future cash flow projections, strategic modeling and other management assumptions. During the fourth quarter of each fiscal year, the Company completes its annual impairment test of goodwill and other intangible assets. The Company continues to monitor goodwill and the intangible assets at Big Sky for impairment.

4. Investments

Investments consist principally of municipal securities and are classified as available-for-sale. Fair value of investments are determined based on quoted market prices. The Company classifies investments with an original maturity of more than 90 days that mature within one year as short-term and greater than one year as long-term.

As of June 30, 2005 and March 31, 2005, cash, cash equivalents, short-term and long-term investments totaled $172.6 million and $170.9 million.

Amortized cost, gross unrealized gains and losses and fair value of short and long-term investments classified as debt securities available-for-sale were as follows, in thousands:

	June 30, 2005			March 31, 2005
Amortized cost	$	106,319		$	113,346
Gross unrealized gains	14			3
Gross unrealized losses	(279		)	(440		)
Fair value	$	106,054		$	112,909

For the three months ended June 30, 2005 and 2004, gross realized gains and losses were insignificant as the Company generally holds the fully amortized bonds to maturity.

5. Stock Options

The Company accounts for its stock-based compensation plans using the intrinsic value method prescribed under Accounting Principles Board (“APB”) Opinion No. 25, “Accounting for Stock Issued to Employees,” and related interpretations. The Company has issued stock options to key employees and directors. As such, the Company records compensation expense for stock options and awards only if the exercise price is less than the fair market value of the stock on the measurement date.

For purposes of the pro forma disclosures of compensation expense under Statement of Financial Accounting Standards (“SFAS”) No. 123, “Accounting for Stock-Based Compensation” and SFAS No. 148, “Accounting for Stock-Based Compensation-Transition and Disclosure,” the Company uses the Black-Scholes option model to estimate the fair value of options not subject to variable plan accounting.

The following information summarizes the pro forma effects assuming compensation for such awards had been recorded based upon the estimated fair value for the periods ended June 30, in thousands, except per share information:

	Three Months Ended
	June 30
	2005			2004
Net income as reported	$	1,202		$	2,863
Add: Stock-based employee compensation expense (reduction) included in reported net income, net of related tax effects	14			(426		)
Deduct: Stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effects	(210		)	(474		)
Pro forma net income	$	1,006		$	1,963

Earnings per common share – basic:
As reported	$	0.06		$	0.14
Pro forma	$	0.05		$	0.10
Earnings per common share – diluted:
As reported	$	0.06		$	0.14
Pro forma	$	0.05		$	0.09

In December 2002, the Company repriced stock options to purchase 745,000 shares of the Company’s common stock with exercise prices ranging from $9.05 to $18.00 to an exercise price of $5.97, which represented the fair market value on the date of the repricing. As of June 30, 2005, 514,782 repriced options were outstanding. In accordance with Financial Accounting Standards Board (“FASB”) Interpretation No. 44, “Accounting for Certain Transactions Involving Stock Compensation,” the Company adopted variable plan accounting for these options from the date of the repricing. The Company recorded no compensation expense for the three months ended June 30, 2005 and the Company recorded a reduction in compensation expense of $0.7 million for the three months ended June 30, 2004.

6. Earnings Per Share

Basic earnings per common share is computed by dividing net income by the weighted average number of shares of common stock outstanding during the period. Diluted earnings per share is computed by dividing net income by the sum of the weighted average number of shares of common stock outstanding plus all additional common stock that would have been outstanding if potentially dilutive common shares related to stock options and warrants had been issued. Stock options and warrants with an exercise price exceeding the fair market value of the Company’s common stock are considered antidilutive and are excluded from the calculation.

The following table reconciles the number of shares utilized in the condensed consolidated earnings per share calculations for the periods ended June 30, in thousands, except per share information:

	Three Months Ended
	June 30
	2005		2004
Net income	$	1,202	$	2,863
For earnings per common share - basic:
Weighted average number of issued shares outstanding	20,574		20,452
Effect of dilutive securities:
Computed shares outstanding under the Company’s stock option plan utilizing the treasury stock method	435		387
Computed shares outstanding under warrants issued utilizing the treasury stock method	185		137
For earnings per common share - diluted:
Weighted average common shares and potentially dilutive common shares	21,194		20,976
Earnings per common share – basic	$	0.06	$	0.14
Earnings per common share – diluted	$	0.06	$	0.14

Antidilutive options and warrants	3,355		3,505

7. Consolidated Comprehensive Income

The following table presents the calculation of comprehensive income. The components of comprehensive income for the periods ended June 30 are as follows, in thousands:

	Three Months Ended
	June 30
	2005		2004
Net income	$	1,202	$	2,863
Unrealized gains (losses) on investments classified as available for sale, net of tax	89		(167		)
Comprehensive income	$	1,291	$	2,696

8. Segment Information

The Company follows the provisions of SFAS No. 131, “Disclosures about Segments of an Enterprise and Related Information.” SFAS No. 131 establishes annual and interim reporting standards for an enterprise’s business segments and related disclosures about its products, services, geographic areas and major customers. The method for determining what information to report is based upon the way management organizes the operating segments within the Company for making operating decisions and assessing financial performance. Operating segment information for Mesaba, Big Sky and Holdings for the periods ended June 30 were as follows, in thousands:

						Holdings and
	Mesaba		Big Sky			Eliminations			Consolidated
Three Months Ended June 30, 2005:
Operating revenues	$	113,899	$	4,540		$	—		$	118,439
Depreciation and amortization	3,578		220			4			3,802
Interest expense	—		65			(49		)	16
Income (loss) before income taxes	74		(880		)	2,684			1,878
Capital expenditures	2,671		281			12			2,964
Total assets at end of period	116,545		11,488			150,701			278,734
Three Months Ended June 30, 2004:
Operating revenues	106,090		3,609			—			109,699
Depreciation and amortization	3,542		207			4			3,753
Interest expense	—		77			(59		)	18
Income (loss) before income taxes	2,646		(1,089		)	1,334			2,891
Capital expenditures	2,936		35			—			2,971
Total assets at end of period	122,684		10,097			131,003			263,784

9. Nonoperating Income

In the first quarter of fiscal 2006, the Company recognized $1.8 million as nonoperating income as a result of a favorable arbitration settlement with a former investment advisor.

10. Income Taxes

During the first quarter of fiscal 2005, the Company received verification of a final settlement with the Internal Revenue Service (“IRS”) concerning the IRS’ examination of the Company’s fiscal 1995 and 1996 income tax returns. As a result of this settlement, the Company reduced its income tax payable and tax provision by $1.2 million in the first quarter of fiscal 2005.

11. Commitments and Contingencies

On October 4, 2002, Fairbrook Leasing, Inc., Lambert Leasing, Inc. and Swedish Aircraft Holdings AB (“Saab Leasing”) filed a declaratory judgment action against Mesaba relating to 20 Saab 340A (“340A”) aircraft leased by Mesaba. Saab Leasing sought a judicial declaration that the terms of the leases applicable to each of the 340A aircraft are governed by a March 7, 1996 term sheet proposal rather than the parties’ subsequent agreements and conduct. In a December 8, 2003 order, the District Court declared the term sheet proposal a binding preliminary agreement requiring Mesaba to negotiate in good faith toward the execution of long-term agreements for each of the 340A aircraft. Mesaba appealed the District Court’s ruling.

On August 13, 2004, relying on the District Court’s declaratory judgment ruling, Saab Leasing filed a separate action in the District Court alleging approximately $35 million in damages for past due and future aircraft lease obligations. Mesaba denies the allegations in Saab Leasing’s complaint and contends that it has fulfilled and will continue to fulfill its existing obligations.

On May 19, 2005, the U.S. Court of Appeals for the Eighth Circuit affirmed the District Court’s declaratory judgment ruling. Despite the Eighth Circuit’s ruling, Mesaba believes, based on advice from its legal counsel, that it has defenses in the damages case that will limit Saab Leasing’s ability to recover damages. Nevertheless, there can be no assurance that the District Court in the damages case will agree with Mesaba’s analysis. Therefore, the ultimate outcome of this dispute cannot be predicted with certainty.

As of June 30, 2005, the Company did not establish an accrual with regard to this litigation. Accordingly, an adverse outcome to this matter could have a material impact on the Company’s financial condition and results of operation.

12. New Accounting Pronouncements

In December 2004, the FASB issued SFAS 123(R), “Share-Based Payment,” which requires all public companies accounting for share-based payment transactions to account for these types of transactions using a fair-value-based method.

SFAS 123(R) eliminates the ability to account for share-based compensation transactions using APB Opinion No. 25. SFAS 123(R) also requires the tax benefits associated with these shared-based payments to be classified as financing activities in the statement of cash flows rather than operating activities as is currently permitted. SFAS No. 123(R) becomes effective as of the beginning of the first fiscal year beginning after June 15, 2005.

The Company expects to adopt SFAS No. 123(R) on April 1, 2006 using the modified-prospective method. Under this transition method, the Company will record compensation expense for all awards it grants on a straight-line basis over the vesting period. In addition, the Company will record compensation expense for the unvested portion of previously granted awards that remain outstanding at the date of the adoption. The Company has not completed its assessment of the impact of the standard on its financial condition or results of operations.

13. Restatement

Subsequent to the issuance of its consolidated financial statements for the year ended March 31, 2004, the Company determined that it had incorrectly accounted for certain aircraft leases that contained reduced rent obligations over a portion of the lease term. This resulted in an understatement of other assets, net, other noncurrent liabilities and aircraft rents and an overstatement of retained earnings, shareholders’ equity and net income in prior periods. Although the Company does not believe that this error resulted in a material misstatement of the Company’s consolidated financial statements for any prior periods, the effects of correcting the error as of December 31, 2004, would have had a material effect on the Company’s results of operations for that period. As a result, the condensed consolidated financial statements for the quarter ended June 30, 2004 have been restated from the amounts previously reported.

A summary of the significant effects of the restatement on the Company’s financial statements for June 30, 2004 is as follows, in thousands, except per share information:

	Three Months Ended
	June 30, 2004
	As Previously		As
	Reported		Restated
Consolidated balance sheets:
Other assets, net	$	7,482	$	7,958
Total assets	263,308		263,784
Other noncurrent liabilities	5,889		7,077
Retained earnings	118,091		117,379
Total shareholders’ equity	187,751		187,039
Statements of operations:
Aircraft rents	25,032		25,106
Total operating expenses	107,101		107,175
Operating income	2,598		2,524
Income before provision for income taxes	2,965		2,891
Net income	2,907		2,863
Earnings per common share - basic	0.14		0.14
Earnings per common share - diluted	0.14		0.14

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Management’s Discussion and Analysis of Financial Condition and Results of Operations has been updated to give effect to the restatement as discussed in Note 13 to the condensed consolidated financial statements included in Item 1, and should be read in conjunction with the accompanying condensed consolidated financial statements. The Company’s operations and financial results are subject to various risks and uncertainties associated with the airline industry. See “Certain Risk Factors Relating to the Company and the Airline Industry” at the end of this Item 2.

RESULTS OF OPERATIONS

Three Months Ended June 30, 2005 and 2004

The Company’s consolidated net income for the quarter ended June 30, 2005 was $1.2 million, or $0.06 per diluted share, compared with net income of $2.9 million, or $0.14 per diluted share, for the quarter ended June 30, 2004. Comparative information on operations for the three months ended June 30 was as follows:

Mesaba

Mesaba’s operating statistics for the three months ended June 30 were as follows:

	2005			2004
Passengers	1,501,045			1,396,338
Available seat miles (000s)	766,019			714,715
Revenue passenger miles (000s)	514,809			480,199
Load factor	67.2		%	67.2		%
Block hours flown	71,734			68,863
Departures	53,037			50,421
Revenue per ASM	$	0.149		$	0.148
Cost per ASM	$	0.149		$	0.145
Aircraft in service (average)	98			97

Mesaba Operating Revenues Total operating revenues increased 7.4% in the first quarter of fiscal 2006 to $113.9 million from $106.1 million in the prior year quarter. The increase is attributed to: $3.0 million from a 9.4% increase in RJ-85 flying due to the return to service of 5 RJ-85s that had been grounded in the prior year; $3.0 million due to a 2.3% increase in additional Saab ASMs and an increase in the Saab reimbursement rate quarter over quarter; and $1.8 million in additional ground handling revenue in Detroit and Minneapolis/St. Paul.

Mesaba Operating Expenses Total operating expenses increased 10.3% in the first quarter of fiscal 2006 to $114.0 million from $103.4 million in the prior year quarter. The increase in expenses was due to the additional RJ85 and Saab flying and $2.4 million in start up expenses associated with Mesaba adding the CRJ aircraft to its fleet. Mesaba’s operating costs per ASM for the three months ended June 30 were as follows:

	2005		2004
Wages and benefits	4.9	¢	4.8	¢
Aircraft fuel	0.6		0.6
Aircraft maintenance	2.9		2.8
Aircraft rents	3.3		3.4
Landing fees	0.2		0.2
Insurance and taxes	0.2		0.2
Depreciation and amortization	0.5		0.5
Administrative and other	2.3		2.0
Total	14.9	¢	14.5	¢

Wages and benefits increased 9.3% to $37.3 million in the first quarter of fiscal 2006 from $34.1 million in the prior year quarter, primarily due to increased ground handling wages from additional ground handling activity which did not result in any additional ASMs, increased wages due to additional flying and increased health and dental expense. These increases were partially offset by favorability quarter over quarter in costs associated with the 401(k) benefit plan due to increased costs in the prior year.

Aircraft fuel increased 3.0% to $4.7 million in the first quarter of fiscal 2006 from $4.6 million in the prior year quarter primarily due to the 1.5% increase in the number of Saab block hours flown. Provisions of the Airlink Agreement with

Northwest protect Mesaba from changes in fuel prices. Mesaba’s actual cost of fuel, including taxes and pumping fees, was 83.5 cents per gallon for both periods. Northwest is responsible for fuel for Mesaba’s RJ85 operations.

Aircraft maintenance, excluding wages and benefits, increased 11.7% to $22.1 million in the first quarter of fiscal 2006 from $19.7 million in the prior year quarter, partially due to a 4.3% increase in total block hours. The increase is also due to increased costs associated with expendable parts and repair costs incurred to continue to maintain the fleet as it ages.

Aircraft rents increased 2.8% to $25.2 million in the first quarter of fiscal 2006 from $24.6 million in the prior year quarter due to the return to service of five RJ85 aircraft that were grounded in first quarter of fiscal 2005.

Landing fees decreased 5.9% to $1.6 million in the first quarter of fiscal 2006 from $1.7 million in the prior year quarter due to a rate reduction in Detroit. Northwest is responsible for landing fees for Mesaba’s RJ85 operations.

Insurance and taxes decreased 4.9% to $1.7 million in the first quarter of fiscal 2006 from $1.8 million in the prior year quarter due primarily to a 5% decrease in hull and passenger liability insurance rates.

Depreciation and amortization remained relatively constant quarter-over-quarter due to steady state operation.

Administrative and other expenses increased 33.6% to $17.9 million in the first quarter of fiscal 2006 from $13.4 million in the prior year quarter primarily due to increased consulting costs and training costs incurred for CRJ certification as well as higher ground handling costs.

Big Sky

Big Sky’s operating statistics for the three months ended June 30 were as follows:

	2005			2004
Passengers	26,227			21,174
Available seat miles (000s)	17,139			15,241
Revenue passenger miles (000s)	7,500			5,491
Load factor	43.8		%	36.0		%
Block hours flown	4,601			4,170
Departures	5,033			4,888
Revenue per ASM	$	0.265		$	0.237
Cost per ASM	$	0.313		$	0.305
Aircraft in service (average)	9			12

Big Sky Operating Revenues Total operating revenues increased 25.8% to $4.5 million in the first quarter of fiscal 2006 from $3.6 million in the prior year quarter due to a $0.5 million quarter over quarter increase in passenger revenue as a result of increased passengers and average passenger fares and a $0.3 million increase in EAS subsidies resulting from new service, increased rates and improved operations.

Big Sky Operating Expenses Total operating expenses increased 15.3% in the first quarter of fiscal 2006 to $5.3 million from $4.6 million in the prior year quarter due to an increased level of flying year over year and the impact of higher fuel prices.

Consolidated

Nonoperating Income (Expense) Nonoperating income increased to $2.8 million in the first quarter of fiscal 2006 from $0.4 million in the prior year quarter due to a $1.8 million arbitration settlement with an investment advisor and interest income that increased as a result of additional funds invested at higher interest rates.

Provision for Income Taxes The Company’s effective tax rate was 36.0% in the first quarter of fiscal 2006 as compared to 1.0% in the prior year quarter. The Company adjusts its effective tax rate quarterly based on forecasted operating results in the fiscal year. The rate is affected principally by the level of nondeductible expenses relative to projected taxable income.

In the first quarter of fiscal 2005, the Company reduced its income tax payable and tax provision by $1.2 million as it received verification of a final settlement with the IRS concerning its examination of the Company’s fiscal 1995 and 1996 tax returns. Without this adjustment, the Company’s effective tax rate would have been 42.4%.

LIQUIDITY AND CAPITAL RESOURCES

Cash, cash equivalents and investments increased 1.0% to $172.6 million at June 30, 2005 from $170.9 million at March 31, 2005. The Company’s working capital increased to $108.0 million with a current ratio of 2.4 at June 30, 2005 compared to working capital of $105.3 million and a current ratio of 2.3 at March 31, 2005.

Investments consist principally of municipal securities and are classified as available-for-sale. Available-for-sale investments are reported at fair value with unrealized gains and losses excluded from operations and reported as a separate component of shareholders’ equity, except for other-than-temporary impairments, which are reported as a charge to current operations and result in a new cost basis for the investment. The Company classifies investments with an original maturity date of more than 90 days that mature within one year as short-term and greater than one year as long-term.

Approximately $22.8 million or 82.4% of Mesaba’s accounts receivable balance as of June 30, 2005 was due from Northwest, and this receivable is not collateralized. The Company’s business is sensitive to events and risks affecting Northwest. Northwest has incurred significant losses in the last several years, including a net loss of $862 million in calendar 2004 and a net loss of $683 million in the first two quarters of calendar 2005. If Northwest continues to incur operating losses, it may be unable to fulfill its financial obligations, including payments due to Mesaba under the Airlink Agreement and Jet Agreement. Loss of Mesaba’s affiliation with Northwest or Northwest’s failure to make timely payment of amounts owed to Mesaba or to otherwise materially perform under the Airlink or Jet Agreement for any reason would have a material adverse effect on the Company’s results of operations and financial condition. For a detailed discussion of the Company’s risks related to Northwest, see “Certain Risk Factors Related to the Company and the Airline Industry” at the end of this Item 2.

As of June 30, 2005, Mesaba’s fleet consisted of 98 aircraft covered under operating leases with remaining terms of up to 11 years and aggregate monthly lease payments of approximately $8.5 million. Mesaba leases or subleases its Saab aircraft, either directly from aircraft leasing companies or through Pinnacle Airlines Corp. (“Pinnacle”), under operating leases with initial terms of up to seven years or through subleases with Northwest under operating leases with initial terms of up to 17 years. Mesaba leases its RJ85 aircraft from Northwest under operating leases with initial terms of up to ten years. The Company believes that Mesaba’s revenues from the Airlink and Jet Agreements will continue to be sufficient to fund its aircraft lease obligations. If the Airlink Agreement terminates, the Company’s obligation to continue to pay Saab aircraft leases will simultaneously terminate. Likewise, if the Jet Agreement terminates, the Company’s obligation to continue to pay RJ85 aircraft leases will simultaneously terminate.

As of June 30, 2005, Big Sky’s operating fleet consisted of nine operating aircraft and four nonoperating aircraft covered under operating leases with remaining terms of four months to 59 months and aggregate monthly lease payments of approximately $0.2 million. Big Sky leases all of its aircraft. Five of the leases for two operating and three nonoperating aircraft, allow Big Sky to return the aircraft to the lessor upon the occurrence of certain events and contain purchase options. Funding of the monthly minimum lease payments is dependent on continued passenger boardings, Big Sky’s operations and potentially, funding from the Company.

The Company’s aircraft operating leases do not contain any guaranteed lease residual provisions for which there would be a potential contingency at the termination of the lease period.

The Company has historically relied on cash and cash equivalents, investments and internally generated funds to support its working capital requirements. Absent adverse factors outside the control of the Company, management believes current liquidity and funds from operations will provide adequate resources for meeting current operations and non-aircraft capital needs through the remainder of fiscal 2006.

Cash and cash equivalents increased 14.7% to $66.5 million at June 30, 2005 from $58.0 million at March 31, 2005. A summary of cash flow activity is as follows:

Operating Activities

Net cash provided by operations for the three months ended June 30, 2005 was $5.0 million. The primary source of cash was from operations, which generated $1.2 million of net income and $3.9 million of non-cash expenses, primarily depreciation and amortization. The primary use of cash was $0.1 million of net payments for current operating items.

Investing Activities

Net cash provided by investing for the three months ended June 30, 2005 was $3.6 million. The sources of cash for investing activities were the net sales of short-term investments and operating activities. The primary uses of cash were the net purchases of short and long-term investments, including variable securities classified as cash equivalents and purchases of property, plant and equipment of $3.0 million.

Financing Activities

Net cash used by financing for the three months ended June 30, 2005 was insignificant.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The preparation of the Company’s consolidated financial statements in conformity with generally accepted accounting principles requires the use of estimates, judgments and assumptions that affect the reported amounts of assets and liabilities as of the date of the consolidated financial statements, revenues and expenses during the reporting period and related disclosures of contingent assets and liabilities in the consolidated financial statements and the accompanying notes. The SEC has defined a company’s most critical accounting policies as the ones that are most important to the portrayal of the company’s financial condition and results, and which require the company to make its most difficult and subjective judgments, often as a result of the need to make estimates of matters that are inherently uncertain. Based on this definition, the Company has identified its critical accounting policies to include those discussed in the following paragraphs. The Company also has other key accounting policies, which involve the use of estimates, judgments and assumptions.

Management believes that its estimates and assumptions are reasonable, based on information presently available; however, changes in these estimates, judgments and assumptions will occur as a result of future events, and, accordingly, actual results could differ from amounts estimated.

Aircraft Property and Equipment—Estimated lives are used to record depreciation on aircraft property and equipment. Aircraft utilization, Airlink and Jet Agreement contractual lives, technology and changes in business strategy may affect the economic lives used to record depreciation by Mesaba or Big Sky. The foregoing may also affect depreciation rates, impairment or both. Management of Mesaba and Big Sky regularly review the estimated useful lives and salvage values for aircraft property and equipment.

Excess and Obsolete Inventories—Estimated recovery percentages are used to record obsolescence reserves for parts inventories. Aircraft utilization, parts availability and changes in parts cost may affect the valuation of parts inventories and obsolescence reserve levels. Management of Mesaba and Big Sky regularly review recovery percentages, reserve levels and inventory valuations for parts inventories.

Aircraft Maintenance—Estimated maintenance costs and anticipated aircraft activity are used to determine maintenance reserves. Changes in maintenance contracts, parts and labor costs and aircraft activity may affect the maintenance reserves. Management of Mesaba and Big Sky regularly review airplane activity, expected aircraft return dates, changes in maintenance contracts and parts and labor costs for maintenance reserves.

Goodwill and Other Intangible Assets—The excess of the Big Sky purchase price over the fair market value of the net assets acquired was allocated to certain identifiable intangible assets, including Big Sky’s pilot labor contract and its air carrier certificate and goodwill. The recoverability of goodwill ($2.5 million) and other intangible assets ($2.7 million) is evaluated annually, at a minimum, or on an interim basis if events or circumstances indicate a possible inability to realize the carrying amounts. The evaluation includes future cash flow projections, strategic modeling and other management assumptions. During the fourth quarter of fiscal 2005, the Company completed its annual impairment test of goodwill and other intangible assets and determined that no impairment charge was necessary.

Income Taxes—The Company’s effective tax rate was 32.9%, 46.8% and 51.7% in fiscal 2005, 2004 and 2003. The Company’s effective tax rate is based on expected income, statutory tax rates and tax planning opportunities available in the various jurisdictions in which the Company operates. In the event that there is a significant unusual or one-time item recognized, or expected to be recognized, in the Company’s operating results, the tax attributable to that item would be separately calculated and recorded at the same time as the unusual or one-time item. Significant judgment is required in determining the Company’s effective tax rate and in evaluating its tax positions. The Company establishes reserves when, despite its belief that the tax return positions are fully supportable, certain positions are likely to be challenged and may not succeed. The Company adjusts these reserves in light of changing facts and circumstances, such as the closing of a tax audit. The effective tax rate includes the impact of reserve provisions and changes to reserves that are considered appropriate, as well as related interest. This rate is then applied to the Company’s quarterly operating results.

Workers Compensation Insurance—The Company estimates the ultimate cost of an on-the-job injury at the time of the injury to determine its workers compensation insurance reserves. The Company uses the services of its insurance carrier and outside broker to assist in determining the reserve levels. Injury severity, cost of care and the insurance contract affect the ultimate cost and ultimate reserves recorded. Management of Mesaba and Big Sky regularly review workers compensation activity with outside consultants for any changes in the workers compensation reserve.

Health and Dental Insurance—The Company estimates the amount of incurred but not reported health and dental claims to determine its health and dental insurance reserves. The Company uses the services of its insurance carrier and outside broker to assist in determining the reserve levels. Historical claims experience, claims severity and cost of care affect the ultimate cost and ultimate reserves recorded. Management of Mesaba and Big Sky regularly review health and dental claims activity with outside consultants for any changes in the health and dental insurance reserve.

Property Taxes—Estimated property tax values and assessments are used to record property tax reserves for the various jurisdictions in which the Company operates. Aircraft and parts values, aircraft flight activity, ground equipment values and the location of personnel may affect the ultimate property tax obligation. Management of Mesaba and Big Sky periodically review the above items for any changes in the property tax reserves.

NEW ACCOUNTING PRONOUNCEMENTS

In December 2004, the FASB issued SFAS No. 123(R), “Share-Based Payment,” which requires all public companies accounting for share-based payment transactions to account for these types of transactions using a fair-value-based method. SFAS No. 123(R) eliminates the ability to account for share-based compensation transactions using APB Opinion No. 25. SFAS No. 123(R) also requires the tax benefits associated with these shared based payments to be classified as financing activities in the statement of cash flows rather than operating activities as is currently permitted. SFAS No. 123(R) becomes effective as of the beginning of the first fiscal year beginning after June 15, 2005.

Certain Risk Factors Relating to the Company and the Airline Industry

The Company’s operations and financial results are subject to various risks and uncertainties, some of which are described below. The Company could also be adversely affected by additional risks and uncertainties not presently known or believed to be material.

Risks Related to the Mesaba’s Airlink Agreement and Jet Agreement

Mesaba is dependent on its relationship with Northwest as its major customer, and the loss of this relationship would substantially harm the Company’s financial results.

During fiscal 2005, Northwest accounted for 92.7% of Mesaba’s operating revenues. Additionally, Mesaba consistently carries a receivable due from Northwest between $20 million to $30 million that is not collateralized. Northwest has incurred significant losses in the last several years, including a net loss of $862 million in calendar 2004 and a net loss of $683 million in the first two quarters of calendar 2005. If Northwest continues to incur operating losses, it may be unable to fulfill its financial obligations and may be forced to initiate bankruptcy proceedings. Additionally, Northwest is in a thirty-day cooling off period with its mechanics, and the mechanics could strike as soon as August 19, 2005. Because Holdings has no commitment to fund Mesaba’s operations, if Northwest defaults or otherwise fails to make a payment to Mesaba and subsequently files for bankruptcy, Mesaba would hold an unsecured prepetition bankruptcy claim that it may be unable to collect. Further, all of Mesaba’s contracts with Northwest would be at risk, as Northwest would have the option to accept or reject each of such contracts. Northwest could also attempt to renegotiate Mesaba’s contracts through bankruptcy. In the event Northwest is unable to pay Mesaba, if Mesaba is unable to secure alternate financing, Mesaba could be forced to file for bankruptcy protection.

The Company’s business could also be adversely affected by events at Northwest outside of bankruptcy, such as an inability by Northwest to reduce labor expenses and other costs, continued and unsustainable operating losses at Northwest, changes

in Northwest’s business plan or model, employee strike or job actions, significant curtailment of service (and thus curtailment of the utilization of Mesaba’s aircraft), continued volatility of fuel costs and terrorist events. Loss of the Company’s business relationship with Northwest or Northwest’s failure to make timely payment of amounts owed to the Company would have a material adverse effect on the Company’s operations, financial position and cash flows.

In connection with the Company’s non-binding letter of intent with Northwest, Mesaba has incurred, and will continue to incur, significant expenses in connection with bringing the CRJ aircraft into its fleet, and it may not be reimbursed for these expenses if a definitive agreement is not signed.

The Company’s non-binding letter of intent with Northwest provides that Mesaba will place the first CRJ aircraft in service by October 15, 2005. Although the parties have not yet signed a definitive agreement, Holdings and Mesaba have incurred approximately $2.7 million in expenses in the first fiscal quarter related to adding the CRJ aircraft to its fleets, and these expenses will continue in the next several months until all aircraft contemplated under the agreement are delivered and placed into revenue service. However, if an agreement with Northwest is not finalized, there is no assurance that Mesaba will realize revenue in the future to offset these start-up expenses.

If Mesaba’s Airlink Agreement or Jet Agreement with Northwest is terminated, the Company could lose either or both of its significant sources of revenue and earnings, Mesaba’s aircraft, access to airport facilities and the services Northwest provides.

Any termination of the Airlink Agreement or Jet Agreement by Northwest, through bankruptcy or otherwise, would allow Northwest the right to terminate Mesaba’s aircraft leases and subleases covered by the agreements. Northwest would also be allowed to take immediate possession of the aircraft. As a result, the Company would have no significant sources of revenue or earnings. Additionally, Mesaba risks losing the use of Northwest’s systems, airport facilities and other services that support Mesaba’s operations. Mesaba may not be able to find replacement services, or it may not be able to find such services on terms or conditions as favorable as those received from Northwest.

Northwest has not guaranteed that it will grow Mesaba’s regional fleet and Northwest could opt to utilize other regional airlines.

Neither the Airlink Agreement nor Jet Agreement provide that Mesaba’s fleet will grow beyond its existing size. Additionally, the agreements do not prohibit Northwest from contracting with other regional airlines to provide the same services that Mesaba currently provides. Finally, the Company’s letter of intent with Northwest is non-binding, so there is no guarantee that Northwest will place the new CRJ aircraft with Mesaba. Northwest currently has an airline services agreement with Pinnacle, and Pinnacle serves many of the same cities as Mesaba. Northwest could choose to expand its agreement with Pinnacle in competition with Mesaba. Northwest could also choose to establish relationships with other regional airlines.

The Airlink Agreement and Jet Agreement place constraints on Mesaba’s ability to provide airline services to airlines other than Northwest.

Both the Airlink Agreement and Jet Agreement provide that Mesaba cannot use any of its officers, employees, facilities, equipment or aircraft that it uses to provide airline services to Northwest in any new operations with another airline without the prior written consent of Northwest. Any services provided to another airline would have to be provided by a subsidiary independent of Mesaba, and doing so could result in significant costs to the Company.

Risks Related to the Company’s Business and Operations

The Company’s success is dependent on its ability to obtain all necessary aircraft, engines, parts and related maintenance and support from various aircraft manufacturers and vendors.

The Company is dependent on various aircraft manufacturers and other vendors to provide sufficient parts and related maintenance and support services on a timely basis. Additionally, the Company relies on various engine manufacturers for parts, repair and overhaul services and other types of support services. The failure of aircraft or engine manufacturers and other vendors to provide parts or related services on a timely, cost-effective basis could materially and adversely affect the Company’s business, financial condition and results of operations.

Because the Company is unable to pass along increased operating costs, the Company’s earnings will be negatively affected as its fleets continue to age.

As the Company’s fleet of aircraft age, the cost of maintaining the aircraft will likely increase. Because many aircraft components are required to be replaced after specified numbers of flight hours or take-off and landing cycles, and because new aviation technology may be required to be retrofitted, the cost to maintain aging aircraft will generally exceed the cost to maintain newer aircraft. Any material increase in such costs will have a material adverse effect on the Company’s business, financial condition and results of operations.

If Mesaba loses certain of its ground handling business, the Company’s results of operations could be materially affected.

Mesaba performs various ground handling services for Northwest and Pinnacle at Minneapolis, Detroit and certain other airport locations. The ground handling business is highly competitive, and airlines are constantly reviewing their cost structures to locate the most cost-effective ground handling providers. Mesaba does not have any long-term agreements with Northwest or Pinnacle. If Northwest or Pinnacle terminate Mesaba’s ground handling services, the Company’s financial results would be materially affected, both through a loss of revenue and increased transition expenses.

The Company could incur significant costs if it experiences difficulty finding, training and retaining employees.

The Company’s business is labor-intensive, and the Company requires large numbers of pilots, flight attendants, maintenance technicians and other personnel. The airline industry has from time to time experienced a shortage of qualified personnel, specifically pilots and maintenance technicians. In addition, as is common with most of the Company’s competitors, the Company has faced turnover of its employees. For example, the Company’s pilots, flight attendants and maintenance technicians occasionally leave to work for larger airlines, which generally offer higher salaries and more extensive benefit programs than regional airlines are financially able to offer. In the event of a significant increase in the turnover of employees, the Company would incur significantly higher training costs than would otherwise be necessary. The Company cannot provide assurance that it will be able to recruit, train and retain the qualified employees it requires to carry out its business plan.

The Company could be adversely affected by the highly competitive nature of the airline industry.

The airline industry is highly competitive, and Northwest competes not only with other regional carriers, but also with low-cost airlines and major airlines on many of its routes, including the routes that Mesaba flies. Some of these competitors are significantly larger and possess greater resources than Northwest. Moreover, any new entry in the markets Mesaba serves could lessen the economic benefits Northwest derives from servicing these markets. Finally, Big Sky also competes with low-cost and regional carriers on its routes, and it faces the same competitive challenges described above.

The Company’s ability to diversify within the airline industry may be limited by the terms of various collective bargaining agreements and by other airlines’ business agreements.

Mesaba’s labor collective bargaining agreement with its own pilots limits the types of aircraft Big Sky may fly. Mesaba’s and Big Sky’s ability to provide regional service to other major air carriers may also be limited by those carriers’ existing relationships with other regional operators. Additionally, many of the labor collective bargaining agreements of major airlines, including Northwest, contain scope clause restrictions that limit the airlines’ ability to add new regional jets. These factors could prevent the Company from pursuing future diversification opportunities.

The Company’s compliance with various regulations governing the airline industry can be costly, and the Company could be harmed if it fails to comply with such regulations.

Airlines are subject to extensive regulatory and legal requirements that involve significant compliance costs that result in increased costs for passengers and the Company. The FAA, DOT and TSA periodically propose additional laws, regulations, taxes and airport rates and charges. Such measures could have the effect of raising ticket prices, reducing revenue, increasing costs or reducing demand for air travel. The Company expects to continue incurring expenses to comply with existing and future regulations. Moreover, if the Company fails to comply with applicable regulations, it may be subject to sanctions, including the following:

• warning letters;

• fines;

• injunctions;

• orders relating to grounding of aircraft, inspection of aircraft, installation of new safety-related items and removal and replacement of certain aircraft parts; or

• criminal prosecutions.

Future terrorist attacks, other world events, general economic conditions and other factors beyond the Company’s control could substantially harm the Company.

The terrorist attacks of September 11, 2001 and the prolonged unrest in the Middle East materially affected and continue to affect the airline industry. Concerns about further terrorist attacks have had a negative impact on air travel demand. In addition, security procedures introduced at airports since the attacks have increased the inconvenience of air travel, both in reality and in customer perception, leading to further reduction in demand. Additional terrorist attacks, the fear of such attacks or continued conflict in Iraq or other countries could further affect the airline industry and could cause general instability in financial markets.

Because a substantial portion of air travel, including business travel, is discretionary, the industry tends to experience adverse financial results during general economic downturns. Soft economic conditions continue to put pressure on the profitability of the industry. Any general decline in passenger traffic may harm the Company’s business.

The Company’s operations are also subject to delays caused by factors beyond its control, including air traffic congestion at airports, adverse weather conditions and increased security measures. Such delays frustrate passengers, reduce aircraft utilization and increase costs, all of which may affect profitability and harm the Company’s financial condition and results of operations.

The Company is increasingly dependent upon technology in its operations, and any failure of such technology could adversely affect the Company.

The Company has made, and will continue to make, substantial investments in technology to manage its operations. In particular, the systems operations control centers, which oversee daily flight operations, are dependent on a number of technology systems to operate effectively. These technology systems may be vulnerable to various sources of interruption due to events beyond the Company’s control, including natural disasters, terrorist attacks, computer viruses and hackers. In addition, large-scale interruption in technology on which the Company depends, such as power, telecommunications or the Internet, could substantially disrupt the Company’s operations.

Any airline accident in which the Company is involved could subject the Company to substantial liability and seriously harm the Company’s financial condition and results of operations.

An accident involving Mesaba or Big Sky aircraft could result in injuries and loss of life, and the Company could experience significant claims from injured persons and surviving relatives. An accident could also result in substantial property damage, loss of aircraft from service and adverse publicity for the Company. Airlines are required by the DOT to carry liability insurance. Although the Company believes its liability insurance is in amounts and of the type generally consistent with industry practice, substantial claims resulting from an accident in excess of insurance coverage would harm the Company’s business and financial results. Any resulting claims would also be costly to defend and could harm the Company’s reputation. Moreover, any aircraft accident, even if fully insured or not directly involving Mesaba or Big Sky, could cause a public perception that flying is less safe or reliable than other transportation alternatives, which could harm the Company’s financial condition and results of operations.

The Company is subject to collective bargaining agreements with several of its employee groups, and any failure to successfully negotiate these agreements could subject the Company to strikes and increased labor costs, either of which could negatively impact the Company’s financial performance.

Labor costs are a significant component of the Company’s expenses, comprising 33.2% of total operating expenses in fiscal 2005. Several of Mesaba’s and Big Sky’s employee groups have separate bargaining agreements and may make demands that would increase operating expenses, adversely affecting profitability. Mesaba is currently negotiating with its mechanics for a new agreement. The existing agreement became amendable in August 2003. Moreover, Mesaba’s mechanics are represented by the Aircraft Mechanics Fraternal Association, the same union to which Northwest’s mechanics belong. Northwest’s mechanics are in a 30-day cooling off period and could strike as soon as August 19, 2005. Although Mesaba’s mechanics have a separate contract, the Company cannot guarantee that Mesaba’s mechanics will not honor a Northwest strike or engage in other job actions in solidarity with Northwest’s mechanics. Mesaba is also currently negotiating with its dispatchers, whose agreement became amendable in May 2005. The Company cannot predict the outcome of these

negotiations. If Mesaba or Big Sky is unable to reach agreement on the terms of any collective bargaining agreement or experiences widespread employee dissatisfaction, there could be work slowdowns or stoppages. Any sustained work stoppages could adversely affect Mesaba’s ability to fulfill its obligations under the Airlink Agreement and Jet Agreement and could have an adverse effect on the Company’s financial condition and results of operations.

Risks Related to the Company’s Stock

Together, certain of the Company’s shareholders own or have the right to acquire a significant portion of the Company’s stock and could ultimately control decisions regarding the Company.

Northwest owns 27.5% of the Company’s common stock. Northwest also owns warrants to purchase an aggregate of 4,151,922 shares of the Company’s common stock. Additionally, several other shareholders also own significant blocks of the Company’s common stock. Because the parties described above currently own a large portion of the Company’s stock, they may be able to determine or significantly influence the outcome of corporate actions requiring shareholder approval. As a result, these parties may be in a position to control matters affecting the Company, including decisions as to the Company’s direction and policies; future issuances of securities; incurrence of debt; amendments to the Company’s articles of incorporation and bylaws; payment of dividends on the Company’s common stock; and acquisitions, sales of the Company’s assets, mergers or similar transactions, including transactions involving a change of control. As a result, some investors may be unwilling to purchase the Company’s common stock. In addition, if the demand for the Company’s common stock is reduced because of these shareholders’ control of the Company, the price of the Company’s common stock could be materially depressed.

Future sales of the Company’s common stock by its shareholders could depress the price of the Company’s stock.

Sales of a large number of shares of the Company’s common stock or the availability of a large number of shares for sale could adversely affect the market price of the Company’s common stock. As of June 30, 2005, the Company had 20,574,340 shares of common stock outstanding. Several of the Company’s shareholders own substantial blocks of the Company’s common stock. Additionally, along with the shares of stock it currently owns, Northwest could own an additional large block of the Company’s common stock upon exercise of its warrants. In connection with the letter of intent with Northwest, the Company has agreed to enter into a registration rights agreement to register the shares of stock owned by Northwest (including those shares underlying its warrants). Following such registration, future sales of those shares, or future sales of other large blocks of the Company’s common stock that are already registered, could substantially depress the Company’s stock price.

Any future exercises of warrants by Northwest could substantially dilute the Company’s common stock.

As of June 30, 2005, Northwest held warrants exercisable for an aggregate of 4,151,922 shares of the Company’s common stock at prices ranging from $7.25 per share to $21.25 per share. As described in the previous “Recent Developments” section, if the Company enters into an omnibus airline services agreement, it expects to amend these warrants to change the exercise price to $8.74 per share and to decrease the number of shares issuable upon exercise to 4,112,500 shares. Holders of the Company’s common stock, therefore, could experience substantial ownership dilution if Northwest elects to exercise these warrants.

The Company’s stock price may continue to be volatile.

In the past two fiscal years, the market price of the Company’s common stock has ranged from a low of $5.52 per share to a high of $10.11 per share. Because the Company’s stock is thinly traded, its market price is sensitive and may continue to experience substantial fluctuations due to a variety of factors, including the following:

• failure of the Company’s operating results to meet analysts’ or investors’ expectations in any quarter;

• securities analysts’ estimates;

• material announcements by the Company, Northwest or the Company’s competitors;

• public sales of a substantial number of shares of the Company’s common stock;

• regulatory actions; or

• general market conditions.

Anti-takeover provisions of the Company’s articles of incorporation and bylaws and of Minnesota law could discourage, delay or prevent a change in control.

The Company’s articles of incorporation and bylaws, along with Minnesota law, could discourage, delay or prevent persons from acquiring or attempting to acquire the Company. The Company’s articles of incorporation authorize the board of directors, without action by the Company’s shareholders, to designate and issue preferred stock in one or more series, with such rights, preferences and privileges as the board of directors shall determine. The Company’s articles of incorporation and bylaws also mandate a classified board of directors, which makes changing control of the board more difficult. The Company’s bylaws grant the board of directors the authority to adopt, amend or repeal all or any of such bylaws, subject to the power of the shareholders to change or repeal such bylaws. The Company’s bylaws also limit who may call meetings of the Company’s shareholders.

As a public corporation, the Company is prohibited by the Minnesota Business Corporation Act, except under certain specified circumstances, from engaging in any merger, significant sale of stock or assets or business combination with any shareholder or group of shareholders who own at least 10% of the Company’s common stock.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company’s principal market risks are the availability and price of jet fuel and changes in interest rates.

The Company believes its arrangements for fuel, primarily with Northwest, assure an adequate supply of fuel for current and future operations for both Mesaba and Big Sky, provided that Northwest does not experience a supply shortage. As a part of the Airlink Agreement, Northwest bears the economic risk of fuel price fluctuations for Mesaba’s fuel requirements. As part of the Jet Agreement, Northwest provides all fuel at its expense to support Mesaba’s RJ85 operations. Big Sky is subject to fluctuations in fuel prices, but currently fuel expense is not a material cost in relation to the Company’s total operating expenses. The Company expects that its results of operations will not be materially affected by fuel price volatility.

The Company does not hold long-term interest-sensitive assets and therefore is not exposed to significant interest rate fluctuations for its assets. The Company does not purchase or hold any derivative financial instruments for trading or speculative purposes.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls Procedures

As of June 30, 2005, the Company conducted an evaluation under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, regarding the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as that term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended). Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures are effective as of the date of such evaluation.

Changes in Internal Controls

During the quarter ended June 30, 2005, there were no changes in internal controls over financial reporting that had a material affect on internal control over financial reporting or were reasonably likely to have a material effect on internal control over financial reporting.

The Company’s management does not expect that its disclosure controls and procedures will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, control may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

ITEM 6. EXHIBITS

Exhibit Number		Document Description

3.1		Amended and Restated Articles of Incorporation. Incorporated by reference to Exhibit 4.1 to the Company’s Form 8-K filed on August 27, 2003.
3.2		Bylaws. Incorporated by reference to Exhibit 3.2 to the Company’s Form 10-K filed June 14, 2005.
4.1		Specimen certificate for shares of the Common Stock of the Company. Incorporated by reference to Exhibit 4.2 to the Company’s Form 8-K filed August 27, 2003.
4.2		Common Stock Purchase Warrant dated October 25, 1996 issued to Northwest Airlines, Inc. Incorporated by reference to Exhibit 4A to the Company’s 10-Q for the quarter ended September 30, 1996.
4.3		Common Stock Purchase Warrant dated October 17, 1997 issued to Northwest Airlines, Inc. Incorporated by reference to Exhibit 4A to the Company’s 10-Q for the quarter ended September 30, 1997.
4.4		Common Stock Purchase Warrant dated April 1, 1998 issued to Northwest Airlines, Inc. Incorporated by reference to Exhibit 4A to the Company’s 10-Q for the quarter ended June 30, 1998.
4.5		Common Stock Purchase Warrant dated June 2, 1998 issued to Northwest Airlines, Inc. Incorporated by reference to Exhibit 4B to the Company’s 10-Q for the quarter ended June 30, 1998.
10.1		1994 Stock Option Plan. Incorporated by reference to Exhibit 10.1 to the Company’s Form 10-K filed June 14, 2005.
10.2		1996 Directors’ Option Plan. Incorporated by reference to Exhibit 10.2 to the Company’s Form 10-K filed June 14, 2005.
10.3		2000 Stock Incentive Plan. Incorporated by reference to Exhibit 10.3 to the Company’s Form 10-K filed June 14, 2005.
10.4		Mesaba Aviation, Inc. 2003 Incentive Award Plan. Incorporated by reference to Exhibit 10.4 to the Company’s Form 10-K filed June 14, 2005.
10.5		Airline Services Agreement between Mesaba Aviation, Mesaba Holdings, Inc. and Northwest Airlines, Inc. dated July 1, 1997 (certain potions of this agreement are subject to an order granting confidential treatment pursuant to Rule 24b-2). Incorporated by reference to Exhibit 10A to the Company’s Form 10-Q for the quarter ended September 30, 1997.
10.6		Regional Jet Services Agreement between Mesaba Holdings, Inc., Mesaba Aviation, Inc. and Northwest Airlines, Inc., dated October 25, 1996 (certain provisions of this agreement are subject to an order granting confidential treatment pursuant to Rule 24b-2). Incorporated by reference to Exhibit 10A to the Company’s Form 10-Q for the quarter ended September 30, 1996.
10.7		Special Facilities Lease dated as of August 1, 1990 between Charter County of Wayne, State of Michigan and Mesaba Aviation, Inc. Incorporated by reference to Exhibit 10B to the Company’s Form 10-Q for the quarter ended September 30, 1990.
10.8		Ground Lease dated August 1, 1990 between Charter County of Wayne, State of Michigan and Mesaba Aviation, Inc. Incorporated by reference to Exhibit 10C to the Company’s Form 10-Q for the quarter ended September 30,1990.
10.9		Letter Agreement dated December 24, 1992 relating to the repurchase of shares of Common Stock from Northwest Aircraft, Inc. Incorporated by reference to Exhibit 10EE to the Company’s Form 10-K for the year ended March 31, 1993.
10.10		Stock Purchase Agreement between the Company and Carl R. Pohlad dated as of October 18, 1993. Incorporated by reference to Exhibit 10.10 to the Company’s Form 10-K filed June 14, 2005.
10.11		Term Sheet Proposal for the Acquisition of Saab 340 Aircraft by Mesaba Aviation, Inc. dated March 7, 1996 (certain portions of this document have been deleted pursuant to an application for confidential treatment under Rule 24b-2). Incorporated by reference to Exhibit 10U to the Company’s Form 10-K/A for the year ended March 31, 1996.

Exhibit Number		Document Description

10.12		Letter Agreement regarding Saab 340B Plus Acquisition Financing dated March 7, 1996 (certain portions of this document have been deleted pursuant to an application for confidential treatment under Rule 24b-2). Incorporated by reference to Exhibit 10V to the Company’s Form 10-K/A for the year ended March 31, 1996.
10.13		Letter Agreement of October 25, 1996 relating to Regional Jet Services Agreement between Mesaba Aviation, Inc. and Northwest Airlines, Inc. (certain portions of this document have been deleted pursuant to an application for confidential treatment under Rule 24b-2). Incorporated by reference to Exhibit 10A to the Company’s Form 10-Q/A for the quarter ended September 30, 1996.
10.14		Amendment No. 1 to Regional Jet Services Agreement dated April 1, 1998 between Mesaba Holdings, Inc., Mesaba Aviation, Inc. and Northwest Airlines, Inc. (certain portions of this document have been deleted pursuant to an application for confidential treatment under rule 24b-2). Incorporated by reference to Exhibit 10A to the Company’s Form 10-Q for the quarter ended June 30, 1998.
10.15		Amendment No. 2 to Regional Jet Services Agreement dated June 2, 1998 between Mesaba Holdings, Inc., Mesaba Aviation, Inc. and Northwest Airlines, Inc. (certain portions of this document have been deleted pursuant to an application for confidential treatment under rule 24b-2). Incorporated by reference to Exhibit 10B to the Company’s Form 10-Q for the quarter ended June 30, 1998.
10.16		Lease Agreement, dated as of July 1, 1999, between Kenton County Airport Board and Mesaba Aviation, Inc. Incorporated by reference to Exhibit 10AA to the Company’s Form 10-K for the year ended March 31, 2000.
10.17		Ground Lease, dated as of September 1, 1999, between Kenton County Airport Board and Mesaba Aviation, Inc. Incorporated by reference to Exhibit 10BB to the Company’s Form 10-K for the year ended March 31, 2000.
10.18		Letter Agreement, dated November 20, 2001, between Mesaba Holdings, Inc., Mesaba Aviation, Inc. and Northwest Airlines, Inc. relating to service expansion and rate reductions. Incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed November 23, 2001.
10.19		Aircraft Hangar Facility Lease Agreement between Metropolitan Airports Commission Minneapolis — St. Paul and Mesaba Aviation, Inc. dated September 30, 2002. Incorporated by reference to Exhibit 10Y to the Company’s Form 10-Q for the quarter ended June 30, 2003.
10.20		Lease between Spectrum Investment Group, L.L.C. and Mesaba Aviation, Inc. entered into as of April 25, 2003. Incorporated by reference to Exhibit 10Z to the Company’s Form 10-Q for the quarter ended June 30, 2003.
10.21		Amendment to Regional Jet Services Agreement by and among MAIR Holdings, Inc., Mesaba Aviation, Inc. and Northwest Airlines, Inc., dated October 7, 2003. Incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K/A filed October 9, 2003.
10.22		Amendment to Regional Jet Services Agreement by and among MAIR Holdings, Inc., Mesaba Aviation, Inc. and Northwest Airlines, Inc., dated December 15, 2003. Incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed on December 15, 2003.
10.23		Amendment to Regional Jet Services Agreement by and among MAIR Holdings, Inc., Mesaba Aviation, Inc. and Northwest Airlines, Inc., dated February 2, 2004. Incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed February 3, 2004.
10.24		Management Compensation Agreement between the Company and Paul F. Foley, dated October 1, 2004. Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on October 22, 2004.
10.25		Amendment to Airline Services Agreement by and among MAIR Holdings, Inc., Mesaba Aviation, Inc. and Northwest Airlines, Inc., dated April 15, 2005 (certain portions of this document have been deleted pursuant to an application for confidential treatment under rule 24b-2). Incorporated by reference to Exhibit 10.25 to the Company’s Form 10-K filed June 14, 2005.
10.26		Amendment to Regional Jet Services Agreement by and among MAIR Holdings, Inc., Mesaba Aviation, Inc. and Northwest Airlines, Inc., dated April 15, 2005 (certain portions of this document have been deleted pursuant to an application for confidential treatment under rule 24b-2). Incorporated by reference to Exhibit 10.26 to the Company’s Form 10-K filed June 14, 2005.
31.1		Chief Executive Officer Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. Filed herewith.

Exhibit Number		Document Description

31.2		Chief Financial Officer Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. Filed herewith.
32.1		Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. Filed herewith.

	MAIR Holdings, Inc.


Dated: August 9, 2005	By:	/s/ Robert E. Weil
	Robert E. Weil
	Vice President, Chief Financial Officer and Treasurer (principal financial officer and an authorized signatory)

Common Stock Par value $.01 per share

20,574,340