[Adopted May 2000]

MAIR HOLDINGS, INC.

AUDIT COMMITTEE CHARTER

Revised May 18, 2004

Statement of Policy

        The Audit Committee (the "Audit Committee") of the Board of Directors of MAIR Holdings, Inc. (the "Company") shall provide assistance to the Directors in fulfilling their oversight responsibility to the shareholders, potential shareholders, and investment community relating to corporate accounting, reporting practices of the Company, and the quality, objectivity and integrity of financial reports of the Company. In doing so, it is the responsibility of the Audit Committee to maintain free and open communication between the Directors, the independent auditors and the financial management of the Company.

Organization

        The Audit Committee shall be comprised of at least three directors who are independent of management and the Company. A member of the Audit Committee shall be considered independent if he or she (a) is not an officer or employee of the Company or its subsidiaries, (b) has no relationship to the Company that may interfere with the exercise of his or her independence from management and the Company, and (c) meets the independence standards of the Nasdaq Stock Market or other listing standards applicable to the Company. Each Audit Committee member must be financially literate and at least one member must have sufficient accounting or related financial management expertise so as to qualify for designation by the Board of Directors as an "audit committee financial expert" as defined by applicable regulations and listing standards.

        The Audit Committee will meet at least four times a year and may convene additional meetings as circumstances require. All committee members are expected to attend each Audit Committee meeting, in person or by teleconference or videoconference. The Audit Committee will invite management, the independent auditors and others to attend meetings, as necessary. It will meet periodically with the independent auditors, without management present. It will also meet periodically in executive session.

Authority

        The Audit Committee has authority to conduct or authorize investigations into any matters within its scope of responsibility. It is empowered to:

Appoint, compensate and oversee the work of the independent auditor employed by the Company to conduct the annual audit. This independent auditor will report directly to the Audit Committee.

Resolve any disagreements between management and the independent auditors regarding financial reporting.

Pre-approve all auditing and permitted non-audit services performed by the independent auditors.

Retain and compensate independent counsel, accountants, or others to advise the Audit Committee or assist in the conduct of an investigation.

Responsibilities

        In carrying out its responsibilities, the Audit Committee believes its policies and procedures should remain flexible, in order to best react to changing conditions and to ensure to the Directors and shareholders that the Company's accounting and reporting practices are in accordance with all requirements and are of the highest quality. The Audit Committee is to act as the liaison between the Company's independent auditors and the full Board of Directors.

        The Audit Committee will carry out the following responsibilities:

Financial Statements

Review significant accounting and reporting issues and understand their impact on the financial statements. These issues include:


Complex or unusual transactions and highly judgmental areas.

Major issues regarding accounting principles and financial statement presentations, including any significant changes in the Company's selection or application of accounting principles.

The effect of regulatory and accounting initiatives, as well as off-balance sheet structures, on the financial statements of the Company.

Review analyses prepared by management or the independent auditors setting forth significant financial reporting issues and judgments made in connection with the preparation of the financial statements, including analyses of the effects of alternative GAAP methods on the financial statements.

Review with management and the independent auditors the results of the audit, including any difficulties encountered. This review will include any restrictions on the scope of the independent auditors' activities or on access to requested information, and any significant disagreements with management.

Discuss the annual audited financial statements and quarterly financial statements with management and the independent auditors, including the company's disclosures under "Management's Discussion and Analysis of Financial Condition and Results of Operations."

Review disclosures made by the Company's CEO and CFO in connection with their certification of the Form 10-K and Form 10-Q reports.

Review the scope and form of information contained in earnings press releases, particularly use of "pro forma," or "adjusted" non-GAAP information.

Internal Control

Consider the effectiveness of the Company's internal control systems, including information technology security and control.

Understand the scope of the independent auditors' review of internal control over financial reporting, and obtain reports on significant findings and recommendations, together with management's responses.

Review with management the charter, plans, activities, staffing, and organizational structure of any internal audit function adopted by the Company.

Review the effectiveness of the internal audit function.

 

On a regular basis, meet separately with the chief audit executive, if appointed, to discuss any matters that the Audit Committee or internal auditor believes should be discussed privately.

Independent Auditors

Review the performance of the independent auditors, and exercise final approval on the appointment or discharge of the independent auditors. In performing this review, the committee will:


At least annually, obtain and review a report by the independent auditors describing: the independent auditor's internal quality-control procedures; any material issues raised by the most recent internal quality-control review, or peer review, of the independent auditor; any inquiry or investigation by governmental or professional authorities, within the preceding five years, respecting one or more independent audits carried out by the independent auditor and all relationships between the independent auditor and the Company that may bear on the independence of the independent auditors.

Actively engage in a dialogue with the independent auditor with respect to any disclosed relationships or services that may affect the objectivity and independence of the independent auditor.

Review and evaluate the lead partner of the independent auditors.

Take, or recommend that the full board take, appropriate action to oversee the independence of the independent auditor.

Review the independent auditors' proposed audit scope and approach.

Ensure the rotation of the lead audit partner according to applicable regulations and consider whether there should be regular rotation of the audit firm itself.

Present its conclusions with respect to the independent auditors to the full board.

On a regular basis, meet separately with the independent auditors to discuss any matters that the Audit Committee or independent auditors believe should be discussed privately.

Compliance

Review the effectiveness of the system for monitoring compliance with laws and regulations and the results of management's investigation of any instances of noncompliance.

Establish procedures for: (i) the receipt, retention, and treatment of complaints received by the Company regarding accounting, internal accounting controls, or auditing matters; and (ii) the confidential, anonymous submission by employees of the Company of concerns regarding questionable accounting or auditing matters.

Review the findings of any examinations by regulatory agencies, and any auditor observations.

Obtain regular updates from management and legal counsel regarding compliance matters.

Reporting Responsibilities

Regularly report to the Board of Directors about Audit Committee activities and issues that arise with respect to the quality or integrity of the Company's financial statements, the Company's compliance with legal or regulatory requirements, the performance and independence of the Company's independent auditors, and the performance of any internal audit function.

 

Provide an open avenue of communication between internal audit, the independent auditors, and the Board of Directors.

Report annually to the shareholders, describing the Audit Committee's composition, responsibilities and how they were discharged, and any other information required by SEC and other regulations, including approval of non-audit services.

Review any other reports the Company issues that relate to Audit Committee responsibilities.

Other Responsibilities

Discuss with management the Company's major policies with respect to risk assessment and risk management.

Perform other activities related to this charter as requested by the Board of Directors.

Institute and oversee special investigations as needed.

Review and assess the adequacy of this charter annually, requesting Board approval for proposed changes, and ensure appropriate disclosure as may be required by law or regulation.

Confirm annually that all responsibilities outlined in this charter have been carried out.

Evaluate the Audit Committee's performance at least annually.

 

Safe Harbor for Audit Committee Financial Experts

A member of the Audit Committee who is determined to be an "audit committee financial expert" will not be deemed an "expert" for any purpose, including without limitation for purposes of section 11 of the Securities Act of 1933 (15 U.S.C. 77k), as a result of being designated or identified as an audit committee financial expert.

The designation or identification of a member of the Audit Committee as an audit committee financial expert shall not impose on such person any duties, obligations or liability that are greater than the duties, obligations and liability imposed on such person as a member of the Audit Committee and Board of Directors in the absence of such designation or identification.

The designation or identification of a member of the Audit Committee as an audit committee financial expert shall not affect the duties, obligations or liability of any other member of the Audit Committee or Board of Directors.