MMMAAAIIIRRR HHHooollldddiiinnngggsss,,, IIInnnccc... 2006 Annual Report BIG SKY AIRLINES MESABA AIRLINES MAIR HOLDINGS, INC. Letter to the Shareholders Your Company’s results for fiscal 2006 are best described as a story with two chapters: the first set in the period before Northwest Airlines filed for Chapter 11 bankruptcy protection in September 2005 and the second set in the period following that event. The first chapter began prior to the Northwest bankruptcy when our Mesaba Airlines subsidiary was engaged in adding the CRJ aircraft to its certificate and in completing a new omnibus airline services agreement (“ASA”) with Northwest. As a result of those efforts, on August 29, 2005, a new ASA was executed that extended the airline’s Saab and Avro flying to 2015 and provided for the addition of 15 new CRJ aircraft, two of which were added to Mesaba’s fleet in the first week of September 2005. Just a few days later, the second chapter of fiscal 2006 began on September 12, 2005, when Northwest missed its first payment due to Mesaba under the newly executed ASA. Subsequently, Northwest filed for Chapter 11 bankruptcy protection, missed an additional payment to Mesaba and implemented a number of changes to Mesaba’s fleet. Those fleet changes include Northwest’s plans to idle all of the Mesaba-operated Avros and to reduce Mesaba’s fleet to operate only 49 Saabs. Northwest has also requested bids from regional airlines for the operation of CRJ aircraft, and if Mesaba is not awarded the CRJ business, Northwest will remove the CRJs from Mesaba’s fleet as well. Northwest’s missed payments and its subsequent changes to Mesaba’s fleet adversely affected Mesaba and ultimately resulted in Mesaba filing for bankruptcy protection on October 13, 2005. Since then, Mesaba’s focus has been on implementing a bankruptcy strategy to reduce its labor and non-labor costs with the goal of emerging as a competitive, low-cost supplier of quality regional airline services. As I write this letter, those efforts are continuing. This near instantaneous reversal of field, from growth to forced consolidation, has been challenging for all involved, and its effects are reflected in our financial results for the year. To describe those results as “disappointing” would be an exercise in understatement, particularly when considering the optimism that prevailed prior to last September. Nonetheless, we continue to believe that both Mesaba and Big Sky, which in fiscal 2006 completed its fleet transition from Metros to Beechcraft 1900Ds, can be sustainable businesses. As we did in fiscal 2006, the management team at MAIR Holdings will continue to evaluate investment opportunities in its subsidiaries and explore additional growth opportunities through acquisitions to diversify both within and outside the airline industry. Thank you for your support of MAIR Holdings. Paul F. Foley President and Chief Executive Officer MAIR HOLDINGS, INC. Corporate Information Address Annual Meeting Chairman of the Board MAIR Holdings, Inc. The annual meeting of Robert C. Pohlad 150 South Fifth Street shareholders will be held at Chairman and Chief Suite 1360 10:00 am on Wednesday, Executive Officer Minneapolis, Minnesota 55402 August 16, 2006, at the PepsiAmericas, Inc. Crowne Plaza Hotel Minneapolis, Minnesota. Transfer Agent Directors Wells Fargo Shareowner Services Corporate Paul F. Foley South Saint Paul, Minnesota Officers President and Chief Executive Officer Auditors Paul F. Foley MAIR Holdings, Inc. President and Chief Deloitte & Touche LLP Executive Officer Donald E. Benson Minneapolis, Minnesota Executive Vice President Robert E. Weil and Director Chief Financial Officer Marquette Financial Companies Ruth M. Timm James A. Lee General Counsel Financial Consultant Pierson M. Grieve Form 10-K Member Palladium Equity Partners LLC A copy of the Company’s annual report on Form 10-K Carl R. Pohlad will be provided free of charge President and Director to any shareholder upon Marquette Financial Companies written request to: Raymond W. Zehr, Jr. Chief Investment Manager MAIR Holdings, Inc. and Chief Financial Manager Attn: Investor Relations CRP Holdings, LLC 150 South Fifth Street Suite 1360 Minneapolis, Minnesota 55402 MAIR HOLDINGS, INC. 150 South Fifth Street, Suite 1360 – Minneapolis, MN 55402 - Telephone (612) 333-0021 Mesaba Airlines Route Map Big Sky Route Map MAP of XJ MAP of GQ About MAIR Holdings: MAIR Holdings’ primary business units are its regional airline subsidiary Mesaba Aviation, Inc., d/b/a Mesaba Airlines, and its regional airline subsidiary Big Sky Transportation Co., d/b/a Big Sky Airlines. MAIR Holdings, Inc. is traded under the symbol MAIR on the NASDAQ National Market. More information about MAIR Holdings is available on the Internet at www.mairholdings.com. Mesaba operates as a Northwest Jet Airlink and Airlink partner under an airline service agreement with Northwest Airlines. The airline serves 99 cities in the United States and Canada from Northwest's and Mesaba’s three major hubs: Detroit, Minneapolis/St. Paul and Memphis. Mesaba operates an advanced fleet of regional jet and jet-prop aircraft, consisting of the 69 passenger Avro RJ85, the 30-34 passenger Saab SF340 and the 50 passenger Canadair Regional Jet. Mesaba filed for Chapter 11 bankruptcy protection on October 13, 2005 and continues to operate as a debtor-in- possession. Mesaba maintains a web site at www.mesaba.com. Big Sky currently serves 20 communities in Montana, Colorado, Idaho, Oregon, Washington and Wyoming with a fleet of 19 passenger Beechcraft 1900D aircraft. Big Sky is based in Billings, Montana and has codeshare agreements with Northwest Airlines, Alaska Airlines, Horizon Air and America West Airlines which allows customers the convenience of traveling with one ticket, through baggage checking and economical through fares, to destinations throughout the world. Big Sky is a provider of air service under the Essential Air Service program administered by the Department of Transportation. Big Sky maintains a web site at www.bigskyair.com..