A physics-based model was developed for nanosecond-pulse discharges, including realistic air kinetics, electron energy transport, and compressible bulk gas flow. A reduced plasma kinetic model (23 species and 50 processes) was developed to capture the dominant species and reactions for energy storage and thermalization in the discharge. The kinetic model included electronically and vibrationally excited species, and several species of ions and ground state neutrals. The governing equations included the Poisson equation for the electric potential, diffusion equations for each neutral species, conservation equations for each charged species, and mass-averaged conservation equations for the bulk gas flow. The results of calculations with this model highlighted the path of energy transfer in the discharge. At breakdown, the input electrical energy was transformed over a timescale on the order of 1 ns into chemical energy of ions, dissociation products, and vibrationally and electronically excited particles. About 30% of this energy was subsequently thermalized over a timescale of 10 μs. Since the thermalization time scale was faster than the acoustic time scale, the heat release led to the formation of weak shock waves originating near the sheath edge, consistent with experimental observations.