United States
                       Securities and Exchange Commission
                             Washington, D.C. 20549

                                    FORM 10-K

[X]  Annual  Report  Pursuant  to  Section  13 or 15(d)  of the  Securities
     Exchange Act of 1934 for the fiscal year ended December 31, 2001.

[ ]  Transition  Report  Pursuant to Section 13 or 15(d) of the  Securities
     Exchange    Act   of   1934   for   the    Transition    Period
     From --------------------------- to -------------------------.

                        Commission file number 000-21642

                                  AMTRAN, INC.

             (Exact name of registrant as specified in its charter)

                Indiana                                    35-1617970
 ----------------------------------------        ------------------------------
      (State or other jurisdiction of                   (I.R.S.  Employer
      incorporation or organization)                   Identification No.)

        7337 West Washington Street
           Indianapolis, Indiana                              46231
----------------------------------------         ------------------------------
(Address of principal executive offices)                  (Zip  Code)

                                 (317) 247-4000

              (Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

                            None

Securities registered pursuant to Section 12(g) of the Act:

                     Title of each class
                 Common Stock, No Par Value

     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  periods  that the
registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days. Yes X No ______

Indicate by check mark if disclosure of delinquent  filers  pursuant to Item 405
of Regulation  S-K is not contained  herein,  and will not be contained,  to the
best of registrant's  knowledge,  in definitive proxy or information  statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ X ]

The aggregate  market value of shares of the  registrant's  Common Stock held by
non-affiliates  of the  registrant  (based on closing  price of shares of Common
Stock on the NASDAQ  National  Market on February  28,  2002) was  approximately
$45.0 million.

              Applicable Only to Registrants Involved in Bankruptcy
                   Proceedings During the Preceding Five Years

Indicate  by check mark  whether  the  registrant  has filed all  documents  and
reports  required  to be filed by  Sections  12,  13 or 15(d) of the  Securities
Exchange Act of 1934 subsequent to the  distribution of securities  under a plan
confirmed  by the  court.  Yes  ______ No ______

                    Applicable Only to Corporate Registrants

Indicate the number of shares outstanding of each of the registrant's classes of
common stock, as of the latest practical date.

Common Stock, Without Par Value - 11,556,284 shares outstanding as of February
28, 2002.

List hereunder the following documents if incorporated by reference and the Part
of the Form 10-K into which the document is incorporated: (1) any annual report
to security holders; (2) any proxy or information statement; and (3) any
prospectus filed pursuant to Rule 424(b) or (c) under the Securities Act of
1933.

Portions of the Amtran, Inc. Proxy Statement to be filed within 120 days after
the close of the last fiscal year are incorporated by reference into Part III.
<PAGE>
<TABLE>
<CAPTION>
                                TABLE OF CONTENTS
                         FORM 10-K ANNUAL REPORT - 2001
                          AMTRAN, INC. AND SUBSIDIARIES
<S>      <C>         <C>                                                                                                <C>
                                                                                                                     Page #
PARTI    Item 1.     Business.............................................................................................3
         Item 2.     Properties..........................................................................................15
         Item 3.     Legal Proceedings...................................................................................16
         Item 4.     Submission of Matters to a Vote of Security Holders.................................................16
PART II
         Item 5.     Market for the Registrant's Common Stock and Related Security Holder Matters........................17
         Item 6.     Selected Consolidated Financial Data................................................................18
         Item 7.     Management's Discussion and Analysis of Financial Condition and Results of Operations...............19
         Item 7a.    Quantitative and Qualitative Disclosures About Market Risk..........................................54
         Item 8.     Financial Statements and Supplementary Data.........................................................56
         Item 9.     Changes in and Disagreements with Accountants on Accounting and Financial Disclosure................83
PART III
         Item 10.    Directors and Officers of the Registrant............................................................84
         Item 11.    Executive Compensation..............................................................................84
         Item 12.    Security Ownership of Certain Beneficial Owners and Management......................................84
         Item 13.    Certain Relationships and Related Transactions......................................................84
PART IV
         Item 14.    Exhibits, Financial Statement Schedule and Reports on Form 8-K......................................85
         Item 14d.   Valuation and Qualifying Accounts...................................................................87
</TABLE>

                                       2
<PAGE>

PART I

Item 1.   Business

Amtran,  Inc. (the "Company") owns American Trans Air, Inc.  ("ATA"),  the tenth
largest  passenger  airline in the United  States  (based upon 2001 capacity and
traffic) and a provider of  airline-related  services in selected  markets.  The
Company is the largest  commercial  charter  airline in the United  States based
upon  revenues  for the twelve  months  ended June 30,  2001,  and is one of the
largest providers of passenger airline services to the U.S. military, based upon
2001 revenue.  For the year ended December 31, 2001, the revenues of the Company
consisted of 64.3% scheduled service, 15.1% commercial charter service and 13.1%
military charter service,  with the balance derived from related  services.  The
Company was incorporated in Indiana in 1984.

Segment Information

The Company  identifies its business  segments on the basis of similar  products
and services. The airline segment derives its revenues principally from the sale
of scheduled  service,  commercial charter and  military/government  charter air
transportation.  The tour operator segment, ATA Leisure Corp. ("ATALC"), derives
its revenues  primarily from the sale of vacation  packages that, in addition to
scheduled service or commercial  charter air  transportation,  typically include
hotels,  rental  cars  and  other  ground  arrangements.  For  detailed  segment
disclosures,  see  "Financial  Statements  and  Supplementary  Data -  Notes  to
Consolidated Financial Statements - Note 14 - Segment Disclosures."

During 1999, the Company acquired several  independent tour operator  businesses
and combined  their  operations  with the Company's  existing  vacation  package
brand,  ATA Vacations  Inc.  ("ATA  Vacations"),  to form ATALC.  See "Financial
Statements and Supplementary Data - Notes to Consolidated Financial Statements -
Note 13 - Acquisition of Businesses."

Scheduled Service

The Company  provides  scheduled  service  through ATA to selected  destinations
primarily from its gateways at Chicago-Midway and Indianapolis and also provides
transpacific  services between the western United States and Hawaii.  During the
third and fourth quarters of 2001, the Company began  operating  nonstop flights
from  Chicago-Midway to Newark and Miami. The Company also began nonstop service
in the fourth  quarter of 2001 to San Juan from Miami.  The  Company  focuses on
routes  where it  believes it can be a leading  provider of nonstop  service and
targets leisure and value-oriented business travelers.

The Company believes that it has significant  competitive  advantages in each of
its primary markets.

o    Chicago-Midway,   the  Company's   largest  and  fastest  growing  gateway,
     represented  approximately  66.8% of the Company's total scheduled  service
     capacity in 2001.  The Company is the number one carrier in terms of market
     share,  based upon  second  quarter  2001  origin and  destination  revenue
     passengers,   on  16  of  the  20  nonstop   jet  routes  it  serves   from
     Chicago-Midway.  The Company  believes its service at this gateway would be
     difficult  to  replicate   because  of  limited  airport   capacity.   This
     competitive position is enhanced by Chicago-Midway's  proximity to downtown
     Chicago  and the fact that,  for a  substantial  portion of the  population
     within  the  metropolitan  region,  Chicago-Midway  is the most  convenient
     airport.  Based upon second  quarter  2001 origin and  destination  revenue
     passengers,  the Company also enjoys a strong competitive position relative
     to the entire  Chicago  metropolitan  area.  The  Company is the number one
     carrier in terms of market share on five of its 20 nonstop jet routes after
     taking  into  consideration  competitors'  flights  originating  from  both
     Chicago-Midway and O'Hare International Airport, and is one of the top five
     carriers  in terms of market  share on those  routes on which it is not the
     number one carrier. The Company's Chicago-Midway operations include service


                                       3
<PAGE>

     to  a  number  of  midwestern  cities  provided  by  its  commuter  airline
     subsidiary,  Chicago  Express  Airlines,  Inc.  ("Chicago  Express").  This
     service  provides an  increasingly  important  source of feeder traffic for
     longer-haul jet flights from Chicago-Midway.  The Company began jet service
     at Chicago-Midway in December 1992, and initiated its commuter operation in
     1997.

o    Hawaii  represented  approximately  18.6% of the Company's  total scheduled
     service  capacity  in 2001.  The  Company  believes  it is the  lowest-cost
     provider of scheduled service between the western United States and Hawaii,
     which is critical in this  price-sensitive,  predominantly  leisure market.
     Furthermore, a majority of the Company's capacity in the Hawaiian market is
     contracted to the nation's  largest  independent  Hawaiian  tour  operator,
     which assumes  capacity,  yield and most  fuel-price  risk. The Company has
     served the  Hawaiian  market  since 1974  through  its  commercial  charter
     operations and since 1987 through its scheduled service operations.

o    Indianapolis   represented   approximately  9.2%  of  the  Company's  total
     scheduled  service  capacity in 2001. The Company began  scheduled  service
     from  Indianapolis  in 1986  and  believes  that  it  benefits  from  being
     perceived as the hometown  airline.  The Company is the number one provider
     in terms of market  share,  based  upon  second  quarter  2001  origin  and
     destination  revenue  passengers,  in five of its  seven  jet  routes  from
     Indianapolis.  In  Indianapolis,  the Company operates  Ambassadair  Travel
     Club,  Inc.  ("Ambassadair"),   the  nation's  largest  travel  club,  with
     approximately  34,000  individual  or  family  memberships,  providing  the
     Company  with a local  marketing  advantage  similar  to a  frequent  flier
     program.

Commercial Charter Service

The Company provides  commercial  passenger charter airline services  throughout
the world, primarily through U.S. tour operators.  The Company seeks to maximize
the profitability of these operations by leveraging its leading market position,
diverse aircraft fleet and worldwide operating capability.  The Company believes
its  commercial  charter  services  are a  predictable  source of  revenues  and
operating profits in part because its commercial  charter contracts require tour
operators to assume capacity, yield and fuel price risk, and also because of the
Company's ability to re-deploy assets into alternate markets.

Military/Government Charter Service

The Company has provided  passenger  airline services to the U.S. military since
1983 and is currently one of the largest  commercial  airline providers of these
services.  The Company believes that because these operations are generally less
seasonal than leisure travel,  they have tended to have a stabilizing  impact on
the Company's  operating margins.  The U.S. Government awards one year contracts
for its military  charter business and  pre-negotiates  contract prices for each
type of aircraft that a carrier makes  available.  The Company believes that its
fleet of aircraft is well suited to the needs of the military.

ATA Leisure Corp. (ATALC)

The  Company  has  provided  vacation  package  sales to its  scheduled  service
customers under the wholly owned brand of ATA Vacations since 1987. In addition,
the Company has served primarily vacation travelers in the Detroit  metropolitan
area for approximately 18 years in its commercial charter business.  In order to
grow and consolidate its vacation package business, the Company acquired several
Detroit-area tour operators in 1999 (see "Financial Statements and Supplementary
Data - Notes to  Consolidated  Financial  Statements - Note 13 - Acquisition  of
Businesses").  The Company operates all of its vacation package brands as ATALC,
with administrative offices in Detroit.

                                       4
<PAGE>

Strategy

The Company  intends to enhance its position as a leading  provider of passenger
airline  services to selected markets where it can capitalize on its competitive
strengths. The key components of this strategy are:

Participate  in Markets Where it Can Be a Leader
The  Company  focuses on  marketswhere  it can be a leading  provider of airline
services.  In scheduled service, the Company concentrates on routes where it can
be the  number one or number two  carrier.  The  Company  achieves  this  result
principally through nonstop schedules, value-oriented pricing, focused marketing
efforts and certain  airport and aircraft  advantages.  The Company is a leading
provider of commercial  and military  charter  services in large part because of
its  variety  of  aircraft  types,  superior  operational  performance  and  its
worldwide service capability.

Maintain Low-Cost Position
For 2001, 2000 and 1999, the Company's consolidated operating cost per available
seat mile ("CASM") of 8.45(cent),  7.86(cent) and 6.84(cent),  respectively, was
one of the lowest among large U.S.  passenger  airlines.  The Company's  airline
segment CASM was 7.98(cent),  7.19(cent) and 6.17(cent),  respectively,  for the
same  annual  periods.  The  Company  believes  that its lower  costs  provide a
significant  competitive  advantage,  allowing  it to operate  profitably  while
pricing  competitively  in the  scheduled  service and  commercial  and military
charter markets. The Company believes its low-cost position is primarily derived
from its  simplified  product,  route  structure  and low  overhead  costs.  See
"Management's  Discussion  and  Analysis of Financial  Condition  and Results of
Operations - Results of Operations in Cents per ASM."

In May 2000,  the Company  entered into a series of agreements to acquire 39 new
Boeing 737-800 aircraft and 10 new Boeing 757-300  aircraft.  These aircraft are
scheduled to replace the Company's  older fleets of Lockheed  L-1011-50 and 100,
and Boeing  727-200  aircraft.  Fourteen  of the Boeing  727-200  aircraft  were
retired from service in 2001,  and the remainder will be retired from service in
2002.  Three  Lockheed  L-1011  aircraft were also retired in 2001.  The Company
expects to achieve  significant  operating cost savings with the introduction of
new  aircraft,  including  (1) reduced fuel  consumption;  (2)  transition  from
three-person to two-person cockpit crews; (3) lowered maintenance costs; and (4)
improved utilization and dispatch reliability.  The Company accepted delivery of
14 Boeing  737-800  aircraft and five Boeing  757-300  aircraft in 2001, and the
remainder of new aircraft are expected to be in service by 2004.

Target Growth Opportunities
The  Company  intends to expand its  operations  selectively  in areas  where it
believes it can achieve attractive financial returns.

Scheduled  Service  Expansion at  Chicago-Midway.  The Company plans to increase
frequencies and potentially add new destinations  from  Chicago-Midway  over the
next 12 months. The Company will also occupy additional gates upon completion of
the new terminal at Chicago-Midway to facilitate these expanding operations.  In
the third and fourth  quarters of 2001,  the  Company  began  operating  nonstop
service from Chicago-Midway to Newark and Miami, and between Miami and San Juan.
The Company has also begun new nonstop service between Chicago-Midway and Aruba,
Cancun, Grand Cayman and Guadalajara in the first quarter of 2002.

Selected  Strategic  Transactions.  The Company  continually  evaluates possible
acquisitions  of  related   businesses  or  interests  therein  to  enhance  its
competitive  position in its market segments.  In addition,  the Company has and
will  continue  to  evaluate  other  possible  business  combinations  or  other
strategic   transactions,   some  of  which  could  result  in  an  increase  in
indebtedness, a change of control in the Company, or both.

                                       5
<PAGE>

Industry Overview

Scheduled  Airline  Service
The Company is a leading  provider of targeted  scheduled  airline  services and
charter airline services to leisure and other value-oriented  travelers,  and to
the U.S. military. The Company, through its principal subsidiary,  ATA, has been
operating  for 29 years and is the tenth  largest U.S.  airline in terms of 2001
capacity  and  traffic.  ATA  provides  scheduled  service  through  nonstop and
connecting  flights  from the gateways of  Chicago-Midway  and  Indianapolis  to
popular  vacation  destinations  such as Hawaii,  Phoenix,  Las Vegas,  Florida,
California,  Mexico  and  the  Caribbean,  as well  as to New  York's  LaGuardia
Airport,  Philadelphia,  Denver,  Dallas-Ft.  Worth,  Washington,  D.C., Boston,
Seattle,  Minneapolis-St.  Paul, Miami and Newark. Chicago Express also provides
commuter   passenger   service   between   Chicago-Midway   and  the  cities  of
Indianapolis,  Milwaukee,  Des Moines, Dayton, Grand Rapids, Madison, South Bend
and  Springfield.   ATA  also  provides  charter  service  to  independent  tour
operators, specialty charter customers and the U.S. military.

On September  11, 2001,  four  commercial  aircraft,  operated by two other U.S.
airlines, were hijacked and destroyed in terrorist attacks on the United States.
In  response  to  these   attacks,   on  September  11,  the  Federal   Aviation
Administration,  ("FAA")  temporarily  suspended all commercial flights to, from
and within the United  States until  September 13. The Company  resumed  limited
flight  operations  on September  13, with the  exception of flights to and from
Chicago-Midway  Airport which commenced partial operations on September 14. From
September 11 to September 14, the Company  canceled over 800 scheduled  flights.
Upon  resuming its  pre-attack  flight  schedule  the week of September  17, the
Company experienced significantly lower passenger traffic and unit revenues than
prior to the  attacks.  In  response  to this,  the  Company  reduced its flight
schedule by approximately 20%, as compared to the schedule operated  immediately
prior to  September  11, and  furloughed  approximately  1,100  employees by the
middle of  October  2001.  By  December  31,  2001,  the  Company  had  recalled
approximately half of the furloughed  employees and had added some capacity back
to its flight schedule.

The Company's  operations were significantly  disrupted by the terrorist attacks
during and after the  FAA-mandated  shut down of the air  traffic  system.  Load
factors were significantly lower immediately after the attacks,  and fare levels
declined,  and have  remained  lower due to reduced  consumer  demand.  Consumer
demand  improved in the fourth  quarter of 2001;  however,  the  Company  cannot
predict when consumer demand will return to pre-attack  levels. The attacks have
had a  significant  impact on the Company's  results of operations  for the year
ended December 31, 2001,  producing  $66.3 million in  attack-related  costs and
revenue  losses  between  September 11 and December 31, which are expected to be
reimbursed through a U.S.  Government grant, $44.5 million of which was received
in cash in the third and fourth  quarters  of 2001.  The Company  also  recorded
asset impairment losses of $112.3 million relating to its Lockheed L-1011-50 and
100, and Boeing 727-200 fleets.

For additional details with respect to the impact of the terrorist attacks,  see
"Financial  Statements and Supplementary Data - Notes to Consolidated  Financial
Statements - Note 2 - Impact of Terrorist  Attacks on September  11,  2001." For
the Company's  discussion of possible  future  effects from these  attacks,  see
"Forward-Looking Information and Risk Factors."

Commercial and Military/Government Charter Airline Service
In the United States,  the passenger charter airline business is served by major
scheduled  airlines  and  a  number  of  U.S.  and  non-U.S.  charter  airlines.
Historically,  charter  airlines  have  supplemented  the  service  provided  by
scheduled airlines by providing  additional capacity at times of peak demand and


                                       6
<PAGE>

on a longer-term  basis to supplement the U.S.  military's own passenger  fleet.
Based upon the most recently available U.S. Department of Transportation ("DOT")
statistics, total charter flights by all U.S. airlines represented approximately
2.2% of all available  seat miles ("ASMs") flown within the United States during
the 12 months ended June 30, 2001.

The Company  estimates  that it lost  approximately  $1.4 million in  commercial
charter  revenues  as a  result  of  flight  cancellations  attributable  to the
terrorist attacks on September 11, 2001, representing a relatively small portion
of the total decline in commercial charter revenues of $54.5 million in 2001, as
compared to 2000. The majority of this revenue  decline is  attributable  to the
retirement of Lockheed L-1011-50 aircraft, and Boeing 727-200 aircraft,  both of
which  have  been  traditionally  used  by the  Company  in  commercial  charter
applications due to their low ownership costs relative to newer aircraft.  Since
aircraft  utilization (or the number of hours of revenue flying per aircraft per
month) is much lower for commercial  charter  flying than for scheduled  service
flying,  the Company's  replacement  fleets of Boeing 737-800 and Boeing 757-300
aircraft are economically  disadvantaged  when used in the charter business,  as
high monthly utilization is needed to recover their much higher  fixed-ownership
costs. For this reason, and also due to higher maintenance and fuel costs on the
Lockheed and Boeing aging aircraft remaining in service, the Company is becoming
less cost  competitive in the charter  business  segment than in past years. For
this reason, the Company expects that commercial charter flying will continue to
decline as a percentage of consolidated revenues in 2002 and beyond.

The   Company   estimates   that  it  lost   approximately   $1.0   million   in
military/government  charter  revenues  due  to  the  events  of  September  11,
representing  a  relatively  small  portion of the decline in these  revenues of
$21.1 million in 2001, as compared to 2000. The majority of this revenue decline
was attributable to changes in teaming arrangements used by both the Company and
some of the Company's  competitors,  which  resulted in a decline in fixed-award
flying  allocated to the Company for the contract year ended September 30, 2001.
Based  upon  possible  changes in  competitive  teaming  arrangements  and other
factors, the Company currently expects its military/government  charter revenues
to increase slightly in the contract year ending September 30, 2002, as compared
to the prior contract year. The Company will continue to use primarily its fleet
of five Lockheed  L-1011-500  aircraft to support this military business,  since
this aircraft has  competitive  operating  costs relative to other  suppliers of
military  flying,  and has a range and seating  configuration  preferred  by the
military.

The Company's Airline Operations

Services Offered
The following  table provides a summary of the Company's  major revenue  sources
for the periods indicated:

<TABLE>
<CAPTION>
                                              Year Ended December 31,

                                            2001             2000            1999             1998            1997
                                               (Dollars in millions)
<S>                                    <C>              <C>              <C>               <C>             <C>
Scheduled Service                      $   820.7        $   753.3        $  624.6          $ 511.3         $ 371.8
                                       ---------        ---------        --------          -------         -------


Commercial Charter                         192.2            246.7           263.8            222.6           228.1
Military Charter                           167.5            188.6           126.2            121.9           131.1
                                       ---------        ---------        --------          -------         -------

      Total Charter Service                359.7            435.3           390.0            344.5           359.2
                                       ---------        ---------        --------          -------         -------


Other                                       95.1            103.0           107.8             63.6            52.2
                                       ---------        ---------        --------          -------         -------

      Total                            $ 1,275.5        $ 1,291.6        $1,122.4          $ 919.4         $ 783.2
                                       ---------        ---------        --------          -------         -------
</TABLE>

                                       7
<PAGE>

Scheduled Service
The Company  provides  scheduled  airline  services on selected  routes where it
believes that it can be one of the leading  carriers in those markets,  focusing
primarily on low-cost, nonstop or direct flights. The Company currently provides
scheduled  service  primarily  from its  gateway  cities of  Chicago-Midway  and
Indianapolis to popular vacation and business destinations. Virtually all of the
Company's  scheduled service revenue growth has resulted from expanded flying to
and from Chicago-Midway.

Beginning in April 1997,  the Company had entered  into a  code-share  agreement
with   Chicago   Express  to  operate   passenger   airline   services   between
Chicago-Midway  and other  midwestern  cities using  Jetstream 31s. On April 30,
1999, the Company  acquired all of the issued and  outstanding  stock of Chicago
Express.  Chicago  Express'  results of operations,  beginning in May 1999, were
consolidated  into  those of the  Company,  replacing  the fixed fee per  flight
previously  recorded  by the  Company.  This  generated  no  material  change to
operating  revenues or expenses.  Chicago  Express  began service to South Bend,
Indiana  in October  2000 and  Springfield,  Illinois  in August  2001.  Chicago
Express  ceased  flying to  Lansing,  Michigan in November  2000.  During  2000,
Chicago Express placed nine Saab 340B aircraft into service in conjunction  with
the retirement from service of the Jetstream 31s. Chicago Express  purchased two
additional Saab 340B aircraft in August 2001.

Included in the Company's jet scheduled  service are bulk-seat sales  agreements
with tour operators. Under these arrangements, which are very similar to charter
sales, the tour operator takes up to 87% of an aircraft as a bulk-seat purchase.
The seats that the Company  retains are sold through its own  scheduled  service
distribution  network.  Under  bulk-seat  sales  arrangements,  the  Company  is
obligated to provide transportation to the tour operators' customers even in the
event of  non-payment  to the  Company by tour  operators.  To reduce its credit
exposure under these  arrangements,  the Company  requires bonding or a security
deposit for a portion of the  contract  price.  Bulk-seat  revenues  amounted to
$107.9  million,  $84.5  million  and  $71.2  million  in 2001,  2000 and  1999,
respectively,  which  represented  8.5%,  6.5% and  6.3%,  respectively,  of the
Company's consolidated revenues for such periods.

Commercial Charter
Commercial  charter  represented 15.1%,  19.1% and 23.5%,  respectively,  of the
Company's consolidated revenues for 2001, 2000 and 1999. The Company's principal
customers  for  commercial  charter are tour  operators,  sponsors of  incentive
travel packages and specialty charter customers.

Tour Operator Programs.  These leisure-market  programs are generally contracted
for repetitive,  round-trip patterns, operating over varying periods of time. In
such  an  arrangement,  the  tour  operator  pays a fixed  price  for use of the
aircraft,  including the crew and all necessary  passenger and aircraft handling
services,  and  assumes  responsibility  and  risk  for the  actual  sale of the
available aircraft seats.  Under most of its contracts with tour operators,  the
Company passes through  increases in fuel costs from a contracted  price. If the
fuel price increase  causes the tour  operator's  fuel cost to rise in excess of
10%, the tour  operator has the option of canceling  the  contract.  The Company
experienced no significant  contract  cancellations  in 2001,  2000 or 1999 as a
result of fuel price  increases.  The Company is required to absorb increases in
fuel costs that occur within 14 days of flight time.

Incentive  Travel   Programs.   Many   corporations   offer  travel  to  leisure
destinations  or special  events as incentive  awards for their  employees.  The
Company  has  historically  provided  air  travel for many  corporate  incentive
programs.  Incentive  travel customers range from national  incentive  marketing
companies who arrange such programs for corporate clients, to large corporations
that handle their incentive travel programs on an in-house basis.

                                       8
<PAGE>

Specialty  Charters.  The Company  operates a  significant  number of  specialty
charter flights.  These programs are normally  contracted on a single round-trip
basis and vary  extensively  in  nature.  These  flights  allow the  Company  to
increase aircraft utilization during off-peak periods.

Largest Tour Operator Customers
Although the Company  serves tour  operators on a worldwide  basis,  its primary
customers are  U.S.-based.  The Company's  five largest tour operator  customers
represented approximately 18.0%, 17.5% and 17.2%, respectively, of the Company's
consolidated  revenues for 2001, 2000 and 1999. Such tour operator  revenues are
derived from both  scheduled  service  bulk-seat  sales and  commercial  charter
contracts.  None of these  customers  accounts for more than 10% of consolidated
revenues.

Military/Government Charter
In 2001,  2000 and  1999,  sales to the U.S.  military  and  other  governmental
agencies  were  approximately  13.1%,  14.6%  and  11.2%,  respectively,  of the
Company's consolidated revenues.  Traditionally, the Company's focus has been on
short-term military "contract  expansion" business which is routinely awarded by
the U.S.  Government  based on  availability of appropriate  aircraft.  The U.S.
Government  awards  one-year  contracts  for its military  charter  business and
pre-negotiates  contract  prices  for each  type of  aircraft  a  carrier  makes
available.  Such  contracts are awarded based upon the  participating  airlines'
average costs.  The short-term  expansion  business is awarded pro rata to those
carriers with aircraft  availability  who have been awarded the most fixed-award
business, and then to any additional carrier that has aircraft available.

The overall amount of military flying that the Company  performs in any one year
is dependent upon several factors,  including (1) the percentage of mobilization
value points represented by the Company's team as compared to total mobilization
value  points of all  providers  of  military  service;  (2) the  percentage  of
passenger  capacity of the Company with respect to its own team;  (3) the amount
of  fixed-award  and  expansion  flying  required  by the U.S.  military in each
contract year; and (4) the availability of the Company's  aircraft to accept and
fly expansion awards. Under its current teaming arrangement, the Company expects
its  military/government  charter revenues to increase slightly for the contract
year ending  September  2002, as compared to the contract year ending  September
2001.

The Company is subject to biennial inspections by the U.S. Department of Defense
as a condition of retaining its eligibility to perform military charter flights.
The last such inspection was successfully completed in November 2001.

Other Business
In  addition  to its  charter  and  scheduled  service  businesses,  the Company
operates   several  other  smaller   businesses   that  complement  its  airline
businesses.  The Company  sells  ground  arrangements  (hotels,  car rentals and
attractions)  through its Ambassadair and ATALC subsidiaries;  provides airframe
and  power  plant  mechanic   training   through  American  Trans  Air  Training
Corporation; and provides helicopter charter services through its ExecuJet, Inc.
subsidiary.  Additionally,  the Company, through its subsidiary ATA Cargo, Inc.,
("ATA  Cargo")  markets  cargo  services  primarily in the  Company's  scheduled
service  operations.  In aggregate,  these businesses,  together with incidental
revenues   associated  with  core  commercial   charter  and  scheduled  service
operations,  accounted for 7.5%,  8.0% and 9.6%,  respectively,  of consolidated
revenues in 2001, 2000 and 1999.

                                       9
<PAGE>

Aircraft Fleet

As of December  31,  2001,  ATA was  certified to operate a fleet of 15 Lockheed
L-1011s, 10 Boeing 727-200ADVs,  14 Boeing 737-800s, 15 Boeing 757-200s and five
Boeing  757-300s.  The  Company's  commuter  affiliate,   Chicago  Express,  was
separately  certified to operate 11 Saab 340B propeller  aircraft.  All of these
aircraft  conform to the FAA's  Stage 3 noise  regulations.  See  "Environmental
Matters."

Lockheed L-1011 Aircraft
The Company's 15 Lockheed L-1011 aircraft are wide-body aircraft, seven of which
have a range  of 2,971  nautical  miles,  three  of which  have a range of 3,425
nautical miles,  and five of which have a range of 5,577 nautical  miles.  These
aircraft have a low ownership cost relative to other  wide-body  aircraft types.
They have an average age of approximately 25 years. As of December 31, 2001, the
Company  owned 14 of these  aircraft and one was under an  operating  lease that
expires in December 2005, due to a lease extension  signed in March 2001. All of
the Lockheed  L-1011  aircraft owned by the Company are subject to mortgages and
other  security  interests  granted  in  favor  of the  Company's  lenders.  See
"Management's  Discussion  and  Analysis of Financial  Condition  and Results of
Operations - Liquidity and Capital Resources."

Boeing 727-200ADV Aircraft
The Company's 10 Boeing  727-200ADV  aircraft are narrow-body  aircraft equipped
with high-thrust, JT8D-17/-17A engines and have a range of 2,050 nautical miles.
These aircraft have an average age of approximately 21 years. As of December 31,
2001, the Company owned six of these aircraft,  while leasing the remaining four
aircraft  with  initial  lease  terms  that  expire  between  December  2001 and
September 2002,  subject to the Company's right to extend each lease for varying
terms or purchase the aircraft.  All of the Boeing 727-200 aircraft owned by the
Company are subject to mortgages and other security  interests  granted in favor
of the Company's lenders. See "Management's Discussion and Analysis of Financial
Condition  and Results of  Operations  - Liquidity  and Capital  Resources."  In
addition to the four leased  aircraft in revenue  service at December  31, 2001,
the Company is also obligated on three  additional  leased aircraft which are no
longer in revenue service.

Boeing 737-800 Aircraft
The Company's 14 Boeing  737-800  aircraft are  narrow-body  aircraft and have a
range of 2,500 nautical miles. These aircraft,  all of which are leased, are new
aircraft  delivered in 2001. The Company's Boeing 737-800s have higher ownership
costs than the Company's  Lockheed L-1011 and Boeing  727-200ADV  aircraft,  but
lower  operational   costs  resulting  from  reduced  fuel  consumption,   lower
maintenance  and cockpit crew costs,  and improved  operating  reliability.  The
leases for the Company's  Boeing 737-800 aircraft have initial terms that expire
on various dates between June 2016 and December 2021.

Boeing 757-200 Aircraft
The Company's 15 Boeing 757-200 aircraft are narrow-body aircraft,  all of which
have a range of 3,679 nautical miles.  These aircraft,  all of which are leased,
have an average age of  approximately  four years. The Company's Boeing 757-200s
have  higher  ownership  costs  than the  Company's  Lockheed  L-1011 and Boeing
727-200ADV  aircraft,  but lower operational  costs. In addition,  the Company's
Boeing 757-200s have the capacity to operate on extended flights over water. The
leases for the Company's  Boeing 757-200 aircraft have initial terms that expire
on various  dates  between  January 2002 and May 2022,  subject to the Company's
right to extend each lease for varying terms.

                                       10
<PAGE>

Boeing 757-300 Aircraft
The Company's five Boeing 757-300  aircraft are narrow-body  aircraft and have a
range of 2,700 nautical miles. These aircraft,  all of which are leased, are new
aircraft  delivered in 2001. The Company's Boeing 757-300s have higher ownership
costs than the Company's  Lockheed L-1011 and Boeing  727-200ADV  aircraft,  but
lower  operational  costs.  The leases for the Company's Boeing 757-300 aircraft
have  initial  terms that expire on various  dates  between  August and December
2021.

Saab 340B Aircraft
The  Company's 11 Saab 340B aircraft are commuter  aircraft with twin  turboprop
engines. These 34-seat aircraft have an average age of approximately 11.5 years.
As of December 31, 2001, the Company owned two of these aircraft,  while leasing
the  remaining  nine  aircraft  with  initial  lease terms that  expire  between
September 2009 and June 2011.

Although  Lockheed  L-1011 and Boeing 727-200  aircraft are subject to the FAA's
Aging Aircraft  program,  the Company does not currently expect that its cost of
compliance for these aircraft will be material.

Flight Operations

Worldwide  flight  operations are planned and controlled by the Company's Flight
Operations Group based in Indianapolis,  Indiana,  which is staffed on a 24-hour
basis, seven days a week.  Logistical support necessary for extended  operations
away  from  the  Company's  fixed  bases  is  coordinated   through  its  global
communications  network. The Company has the ability to dispatch maintenance and
operational personnel and equipment as necessary to support temporary operations
around the world.

Aircraft Maintenance and Support

The Company's  Maintenance  and  Engineering  Center is located at  Indianapolis
International  Airport.  This 150,000 square-foot  facility was designed to meet
the  maintenance  needs of the Company's  fleet and to provide  supervision  and
control of purchased maintenance  services.  The Company has approximately 1,174
employees  supporting  its  aircraft  maintenance   operations,   and  currently
maintains  14  permanent  maintenance  facilities,  including  its  Indianapolis
facility.

Fuel Price Risk Management

The  Company has fuel  reimbursement  clauses and  guarantees  which  applied to
approximately 32.0%, 33.5% and 34.8%, respectively,  of consolidated revenues in
2001, 2000 and 1999. The Company engaged in a fuel-hedging  program from 1998 to
mid-1999, which hedged a portion of its scheduled service fuel price risk during
that time period.  The Company  reestablished  its  fuel-hedging  program in the
third quarter of 2000 and continued this program in 2001. See  "Quantitative and
Qualitative  Disclosures  About Market Risk," and  "Management's  Discussion and
Analysis of Financial Condition and Results of Operations - Operating Expenses -
Fuel and Oil."


                                       11
<PAGE>

Competition

The Company's  products and services encounter varying degrees of competition in
the markets it serves.

Competition for Scheduled Services
In scheduled service, the Company competes both against the large U.S. scheduled
service  airlines and, from time to time,  against smaller  regional or start-up
airlines.  Competition  is  generally  on  the  basis  of  price,  schedule  and
frequency, quality of service and convenience.

Competition for Commercial Charter Services
In the commercial  charter market,  the Company  competes both against the major
U.S. scheduled  airlines and against small U.S. charter airlines.  The scheduled
carriers  compete for leisure  travel  customers  with the Company's  commercial
charter operations in a variety of ways, including wholesaling  discounted seats
on  scheduled  flights to tour  operators,  promoting  packaged  tours to travel
agents  for  sale to  retail  customers  and  selling  discounted,  airfare-only
products  to the  public.  As a result,  all  charter  airlines,  including  the
Company,  generally  are  required to compete for  customers  against the lowest
revenue-generating seats of the scheduled airlines.

The Company also competes against several U.S. and foreign charter airlines.  In
the United States,  these charter airlines are smaller in size than the Company.
In Europe,  several  charter  airlines  are as large or larger than the Company.
Certain European charter airlines are affiliates of large scheduled  airlines or
tour operators.

Competition for Military/Government Charter Services
The Company competes for military and other  government  charters with primarily
smaller U.S.  airlines.  The  allocation  of U.S.  military  air  transportation
contracts  is based  upon the number  and type of  aircraft a carrier,  alone or
through a teaming  arrangement,  makes available for use to the military,  among
other factors.

Insurance

The Company  carries  types and amounts of  insurance  customary  in the airline
industry, including coverage for public liability, passenger liability, property
damage,  aircraft  loss or damage,  baggage  and cargo  liability  and  workers'
compensation.  Under the Company's  current insurance  policies,  it will not be
covered by such insurance  were it to fly,  without the consent of its insurance
provider, to certain high-risk countries.  The Company will support certain U.S.
Government  operations  in areas  where its  insurance  policy  does not provide
coverage when the U.S. Government provides replacement insurance coverage.

As a result of the September 11, 2001 terrorist attacks,  the Company's aviation
insurers, and other air carriers' aviation insurers,  have significantly reduced
the maximum amount of insurance  coverage they will  underwrite for liability to
persons  other than  employees or passengers  resulting  from acts of terrorism,
war,  hijacking or other similar perils (war-risk  coverage).  In addition,  the
Company, and other air carriers, are being charged significantly higher premiums
for  this  reduced  coverage  as  well  as  other  aviation  insurance.  The Air
Transportation   Safety  and  System  Stabilization  Act  ("Act")  provided  for
reimbursement to air carriers of incremental  costs of the war-risk coverage for
a 30-day  period  ended  October 31,  2001.  In  addition,  and pursuant to this
legislation,  the U.S. Government has issued  supplemental  war-risk coverage to
U.S.  air  carriers,  including  the  Company,  through  May  20,  2002.  It  is
anticipated  that,  after this date a commercial  product for war-risk  coverage
will become available,  but the Company expects to incur significant  additional
costs for this coverage.

                                       12
<PAGE>

Employees

As of December 31, 2001, the Company had approximately  7,000 full and part-time
employees,  approximately  2,600  of  whom  were  represented  under  collective
bargaining  agreements.  The Company's flight  attendants are represented by the
Association of Flight  Attendants  ("AFA"),  and the Company's cockpit crews are
represented by the Air Line Pilots Association ("ALPA").  The current collective
bargaining  agreement  with the AFA was  ratified  in April 2000 and will become
subject  to  amendment  in  October  2004.  The  current  collective  bargaining
agreement  with  ALPA  became  subject  to  amendment,  but did not  expire,  in
September 2000. The Company began  negotiations  with ALPA in the second quarter
of 2000 to amend the  collective  bargaining  agreement,  and  negotiations  are
currently in progress.  The Company's flight  dispatchers are represented by the
Transport  Workers  Union  ("TWU").  This  collective  agreement was ratified in
August 2000, and will become subject to amendment in August 2004.

On  February  14,  2001,  the  Company's  ramp  service  agents  elected  to  be
represented by the International  Association of Machinists ("IAM"). The Company
began negotiations with the IAM in May 2001. On February 15, 2002, the Company's
aircraft mechanics elected to be represented by the Aircraft Mechanics Fraternal
Association ("AMFA"). The Company has not begun negotiations with the AMFA.

While the Company  believes that  relations  with its  employees  are good,  any
prolonged dispute with employees,  whether or not represented by a union,  could
have an adverse impact on the Company's operations.

Regulation

The  Company is subject to a wide range of  governmental  regulation,  including
that of the DOT and the FAA.

The DOT principally regulates economic matters affecting air service, including:
air  carrier  certification  and  fitness;   insurance;   leasing  arrangements;
allocation of route rights and  authorization of proposed  scheduled and charter
operations;   allocation  of  landing  slots  and  departing   slots;   consumer
protection;  and  competitive  practices.  The FAA  primarily  regulates  flight
operations,  especially  matters affecting air safety,  including  airworthiness
requirements for each type of aircraft and crew certification.  The FAA requires
each carrier to obtain an operating  certificate  and operations  specifications
authorizing the carrier to fly to specific airports using specified equipment.

Several aspects of airline  operations are subject to regulation or oversight by
federal  agencies  other than the DOT and FAA. The United States Postal  Service
has jurisdiction over certain aspects of the  transportation of mail and related
services  provided by the Company through ATA Cargo.  Labor relations in the air
transportation  industry are  generally  regulated  under the Railway Labor Act,
which vests in the  National  Mediation  Board  certain  regulatory  powers with
respect to disputes  between  airlines and labor unions arising under collective
bargaining agreements. The Company is subject to the jurisdiction of the Federal
Communications  Commission regarding the utilization of its radio facilities. In
addition, the Immigration and Naturalization  Service, the U.S. Customs Service,
and the  Animal  and  Plant  Health  Inspection  Service  of the  Department  of
Agriculture  have  jurisdiction  over  inspection  of  the  Company's  aircraft,
passengers and cargo to ensure the Company's  compliance with U.S.  immigration,
customs and import  laws.  Also,  while the  Company's  aircraft  are in foreign
countries,  they must comply with the  requirements  of similar  authorities  in
those countries. The Commerce Department also regulates the export and re-export
of the Company's U.S.-manufactured aircraft and equipment.

                                       13
<PAGE>

On  November  19,  2001,  President  Bush  signed  into  law  the  Aviation  and
Transportation  Security Act ("Aviation  Security  Act").  This law provides for
placing  substantially  all aspects of civil  aviation  passenger  security  and
screening  under  federal  control,  to be phased in during  2002 and 2003,  and
creates a new Transportation  Security Administration under the DOT. The cost of
the  provisions  set forth in the Aviation  Security Act will be funded by a new
security fee of $2.50 per passenger enplanement,  limited to $5 per one-way trip
and $10 per round trip. Air carriers,  including the Company,  began  collecting
the new fee on ticket sales  beginning  February 1, 2002. The Aviation  Security
Act will also be funded by financial  assessments to each air carrier  beginning
in the second  quarter  of 2002.  The amount of the air  carrier  assessment  is
limited to the amount each air carrier spent on aviation security in 2000.

In addition to various federal regulations, local governments and authorities in
certain markets have adopted  regulations  governing various aspects of aircraft
operations,  including noise abatement,  curfews and use of airport  facilities.
Many U.S. airports have adopted or are considering adopting a Passenger Facility
Charge of up to $4.50  generally  payable by each  passenger  departing from the
airport and remitted by the Company to the applicable airport authority.


Based upon  bilateral  aviation  agreements  between the U.S. and other nations,
and, in the absence of such agreements,  comity and reciprocity principles,  the
Company,  as a charter carrier,  is generally not restricted as to the frequency
of its flights to and from most foreign destinations.  However, these agreements
generally  restrict  the  Company to the  carriage  of  passengers  and cargo on
flights  which either  originate in the U.S. and  terminate in a single  foreign
nation,  or which originate in a single foreign nation and terminate in the U.S.
The civil  aeronautics  authorities  in the relevant  countries  must  generally
specifically  approve proposals for any additional charter service.  Approval of
such requests is typically based on considerations of comity and reciprocity and
cannot be guaranteed.

The Company  believes it is in  compliance  with all  requirements  necessary to
maintain in good standing its operating authority granted by the DOT and its air
carrier-operating  certificate issued by the FAA. A modification,  suspension or
revocation  of any of the Company's DOT or FAA  authorizations  or  certificates
could have a material adverse effect upon the Company.

Environmental Matters

Under the Airport  Noise and Capacity  Act of 1990 and related FAA  regulations,
the Company's  aircraft must comply with certain Stage 3 noise  restrictions  by
certain  specified  deadlines.  In  general,  the  Company  is  prohibited  from
operating any Stage 2 aircraft after December 31, 1999. As of December 31, 2001,
the Company's entire fleet met Stage 3 requirements.

In addition to the  aircraft  noise  regulations  administered  by the FAA,  the
Environmental  Protection  Agency  regulates  operations,  including air carrier
operations,  which affect the quality of air in the United  States.  The Company
believes it has made all necessary  modifications to its operating fleet to meet
fuel-venting requirements and smoke-emissions standards.

At the Company's aircraft  maintenance  facilities,  materials are used that are
regulated  as  hazardous  under  federal,  state or local  laws.  The Company is
required to maintain  programs  to protect the safety of the  employees  who use
these  materials and to manage and dispose of any waste  generated by the use of
these materials in compliance  with these laws.  More generally,  the Company is
also  subject  at these  facilities  to  federal,  state and  local  regulations
relating to protection of the  environment and to discharge of material into the
environment.  The Company does not expect that the costs associated with ongoing


                                       14
<PAGE>

compliance  with any of these  regulations  will have a  material  impact on the
Company's capital expenditures, earnings or competitive position.

Item 2.    Properties

The Company leases three adjacent office buildings in Indianapolis consisting of
approximately 136,000 square feet. These buildings are located approximately one
mile  from  the  Indianapolis  International  Airport  terminal  and are used as
principal business offices and for the Indianapolis reservations center.

The Company's Maintenance and Engineering Center is also located at Indianapolis
International  Airport. This  150,000-square-foot  facility was designed to meet
the base maintenance  needs of the Company's  operations,  as well as to provide
support services for other maintenance locations.  The Indianapolis  Maintenance
and  Engineering  Center  is an  FAA-certificated  repair  station  and  has the
capability  to perform  routine and  non-routine  maintenance  on the  Company's
aircraft.  In  addition,  the  Company  utilizes  a 120,000  square-foot  office
building  immediately  adjacent to the Company's  Indianapolis  Maintenance  and
Engineering  Center which is occupied by its Maintenance and Engineering  office
staff along with the Company's operations center.

In 1995,  the Company  leased  Hangar No. 2 at Chicago's  Midway  Airport for an
initial lease term of ten years,  subject to two five-year renewal options.  The
Company has completed significant improvements to this leased property, which is
used to provide line maintenance for the Boeing 757-200,  Boeing 727-200, Boeing
757-300  and Boeing  737-800  narrow-body  fleets.  The  Company  also leases an
18,700-square-foot reservation facility located near Chicago's O'Hare Airport.

The Company routinely leases various properties at airports for use by passenger
service, flight operations and maintenance staffs.

At December 31, 2001, ATA and Chicago  Express were certified to operate a fleet
of 70 aircraft. The following table summarizes the ownership  characteristics of
each aircraft type operated by units of the Company as of the end of 2001.

<TABLE>
<CAPTION>
                                                  Owned (Encumbered-
                                   Owned           Pledged on Bank       Operating-Lease    Operating-Lease
                               (Unencumbered)   Facility or Other Debt)  (Fixed Buy-out)      (No Buy-out)    Total
<S>                                  <C>                  <C>                   <C>                <C>         <C>
Lockheed L-1011-50/100               -                     9                    -                  1           10

Lockheed L-1011-500                  -                     5                    -                  -            5

Boeing 727-200ADV                    -                     6                    3                  1           10

Boeing 737-800                       -                     -                    8                  6           14

Boeing 757-200                       -                     -                    13                 2           15

Boeing 757-300                       -                     -                    5                  -            5

Saab 340B                            2                     -                    9                  -           11
                                     -                     -                    -                  -           --

           TOTAL                     2                    20                    38                 10          70
                                     =                    ==                    ==                 ==          ==
</TABLE>

                                       15
<PAGE>

Item 3.    Legal Proceedings

Various  claims,  contractual  disputes and lawsuits  against the Company  arise
periodically  involving  complaints  which are  routine  and  incidental  to the
Company's business. The majority of these lawsuits are covered by insurance.  To
the knowledge of management,  none of these claims involve  damages in excess of
10 percent of the assets of the Company, nor are any a material proceeding under
federal or state  environmental  laws, nor are any an  environmental  proceeding
brought by a governmental  authority  involving  potential monetary sanctions in
excess of $100,000.

Item 4.     Submission of Matters to a Vote of Security Holders

No matter was submitted to a vote of security  holders  during the quarter ended
December 31, 2001.


                                       16
<PAGE>

PART II

Item 5. Market for the  Registrant's  Common Stock and Related  Security  Holder
Matters

The  Company's  common stock is quoted on the Nasdaq  National  Market under the
symbol   "AMTR."  The  Company   had  262  and  255   registered   shareholders,
respectively, at December 31, 2001 and 2000.

<TABLE>
<CAPTION>
                                    Market Prices of Common Stock
                                    Year Ended December 31, 2001
                                        (Amounts in dollars)

                      First Quarter        Second Quarter        Third Quarter       Fourth Quarter
                      -------------        --------------        -------------       --------------

<S>                      <C>                  <C>                   <C>                  <C>
High                     14.75                22.20                 22.75                15.20

Low                       9.44                 9.00                  7.60                 5.50

Close                     9.63                21.89                  8.60                14.95
</TABLE>

<TABLE>
<CAPTION>
                                    Market Prices of Common Stock
                                    Year Ended December 31, 2000
                                        (Amounts in dollars)

                      First Quarter        Second Quarter        Third Quarter       Fourth Quarter

<S>                       <C>                  <C>                   <C>                  <C>
High                      19.38                18.44                 13.88                15.00

Low                       13.63                 8.63                 10.00                 9.00

Close                     17.88                12.44                 10.94                14.50
</TABLE>

No  dividends  have been  paid on the  Company's  common  stock  since  becoming
publicly held.

In the last half of 2000,  the  Company  issued  and sold 300 shares of Series B
convertible   redeemable   preferred   stock,   without  par  value  ("Series  B
Preferred"), at a price and liquidation amount of $100,000 per share. The Series
B Preferred  is  convertible  into  shares of the  Company's  common  stock at a
conversion  rate of  6,381.62  shares  of  common  stock  per  share of Series B
Preferred at a conversion price of $15.67 per share of common stock,  subject to
antidilution adjustments. The Series B Preferred is optionally redeemable by the
Company  under  certain  conditions,  but the  Company  must redeem the Series B
Preferred no later than September 20, 2015.  Optional  redemption by the Company
may occur at 103.6% of the  liquidation  amount  beginning  September  20, 2003,
decreasing 0.3% of the liquidation  amount per year to 100.0% of the liquidation
amount at the mandatory redemption date of September 20, 2015.

Also, in the last half of 2000, the Company issued and sold 500 shares of Series
A redeemable  preferred  stock,  without par value ("Series A Preferred"),  at a
price and  liquidation  amount of $100,000 per share.  The Series A Preferred is
optionally  redeemable by the Company under certain conditions,  but the Company
must  redeem the  Series A  Preferred  in equal  semiannual  payments  beginning
December 28, 2010,  and ending  December 28, 2015.  Optional  redemption  by the
Company  may  occur  at a  redemption  premium  of 50.0%  of the  dividend  rate
beginning December 28, 2003,  decreasing 10.0% per year to 20.0% of the dividend
rate  commencing  December  28,  2006,  and to 0.0% after the seventh  year from
issuance. Prior to the third anniversary of issuance, the Company may redeem the
Series A Preferred  with the net proceeds of a public  offering of the Company's
common stock.

The  issuance  and sale of the Series A and Series B  Preferred  was exempt from
registration  requirements under Section 4(2) of the Securities and Exchange Act
of 1933, which applies to private  offerings of securities.  The proceeds of the
issuances of the Series A and Series B Preferred  were used to finance  aircraft
pre-delivery  deposits on Boeing 757-300 and Boeing 737-800  aircraft ordered by
the  Company.  See  "Financial  Statements  and  Supplementary  Data - Notes  to
Consolidated Financial Statements - Note 10 - Redeemable Preferred Stock."


                                       17
<PAGE>

Item 6.  Selected Consolidated Financial Data - (Unaudited)

The  unaudited  selected  consolidated  financial  data in this  table have been
derived  from the  consolidated  financial  statements  of the  Company  for the
respective  periods  presented.  The data should be read in conjunction with the
consolidated financial statements and related notes.

<TABLE>
<CAPTION>
                                                        Amtran, Inc.
                                                      Five-Year Summary
                                                   Year Ended December 31,
---------------------------------------------------------------------------------------------------------------------------
(Dollars in thousands, except per share data and ratios)    2001          2000            1999          1998         1997
---------------------------------------------------------------------------------------------------------------------------

<S>                                                      <C>           <C>             <C>           <C>           <C>
Statement of Operations Data:
  Operating revenues                                     $ 1,275,484   $ 1,291,553     $1,122,366    $ 919,369     $783,193
  Operating expenses                                       1,367,354     1,288,983      1,032,339      843,996      769,709
  Operating income (loss)    (1)                             (91,870)        2,570         90,027       75,373       13,484
  Income (loss) before taxes                                (116,067)      (19,931)        77,797       67,210        6,027
  Net income (loss) available to common shareholders (2)     (81,885)      (15,699)        47,342       40,081        1,572
  Net income (loss) per share - basic                          (7.14)        (1.31)          3.86         3.41         0.14
  Net income (loss) per share - diluted                        (7.14)        (1.31)          3.51         3.07         0.13

Balance Sheet Data (at end of period):
  Property and equipment, net                              $ 314,943     $ 522,119      $ 511,832    $ 329,332     $267,681
  Total assets                                             1,002,962     1,032,430        815,281      594,549      450,857
  Total debt                                                 497,592       457,949        347,871      246,671      191,804
  Redeemable preferred stock                                  80,000        80,000              -            -            -
  Shareholders' equity                                        44,132       124,654        151,376      102,751       56,990
  Ratio of total debt to shareholders' equity                  11.28          3.67           2.30         2.40         3.37
  Ratio of total liabilities to shareholders' equity           19.91          6.64           4.39         4.79         6.91

Selected Consolidated Operating Statistics: (3)

  Revenue passengers carried (thousands)                     8,635.2       8,006.1        7,044.6      6,168.3      5,307.4
  Revenue passenger miles (millions)                        11,675.7      11,816.8       10,949.0      9,758.1      8,986.0
  Available seat miles (millions)                           16,187.7      16,390.1       15,082.6     13,851.7     12,647.7
  Passenger load factor                                        72.1%         72.1%          72.6%        70.5%        71.0%
</TABLE>

(1)  During 2001, several  nonrecurring  events resulted in significant  charges
     and credits to operating loss. See "Financial  Statements and Supplementary
     Data - Notes to  Consolidated  Financial  Statements  - Note 2 - Impact  of
     Terrorist  Attacks on September  11, 2001" and  "Financial  Statements  and
     Supplementary Data - Notes to Consolidated Financial Statements - Note 16 -
     Asset Impairment."

(2)  Preferred stock dividends of $375,000 were paid in 2000 and preferred stock
     dividends of $5.6 million were paid in 2001. No common stock dividends were
     paid in any periods presented.

(3)  Operating  statistics  pertain  only to ATA and Chicago  Express and do not
     include information for other operating subsidiaries of the Company.


                                       18
<PAGE>

Item 7. Management's  Discussion and Analysis of Financial Condition and Results
of Operations

Overview

The Company is a leading  provider of targeted  scheduled  airline  services and
charter airline services to leisure and other value-oriented  travelers,  and to
the U.S. military. The Company, through its principal subsidiary,  ATA, has been
operating  for 29 years and is the tenth  largest U.S.  airline in terms of 2001
capacity  and  traffic.  ATA  provides  scheduled  service  through  nonstop and
connecting  flights  from the gateways of  Chicago-Midway  and  Indianapolis  to
popular  vacation  destinations  such as Hawaii,  Phoenix,  Las Vegas,  Florida,
California,  Mexico  and  the  Caribbean,  as well  as to New  York's  LaGuardia
Airport,  Philadelphia,  Denver,  Dallas-Ft.  Worth,  Washington,  D.C., Boston,
Seattle,  Minneapolis-St.  Paul, Miami and Newark. Chicago Express also provides
commuter   passenger   service   between   Chicago-Midway   and  the  cities  of
Indianapolis,  Milwaukee,  Des Moines, Dayton, Grand Rapids, Madison, South Bend
and  Springfield.   ATA  also  provides  charter  service  to  independent  tour
operators, specialty charter customers and the U.S. military.

On September  11, 2001,  four  commercial  aircraft,  operated by two other U.S.
airlines, were hijacked and destroyed in terrorist attacks on the United States.
In response to these attacks, on September 11, the FAA temporarily suspended all
commercial flights to, from and within the United States until September 13. The
Company resumed limited flight operations on September 13, with the exception of
flights to and from Chicago-Midway airport which commenced partial operations on
September 14. From  September 11 to September 14, the Company  canceled over 800
scheduled  flights.  Upon resuming its  pre-attack  flight  schedule the week of
September 17, the Company experienced  significantly lower passenger traffic and
unit  revenues  than prior to the  attacks.  In  response  to this,  the Company
reduced its flight  schedule by  approximately  20%, as compared to the schedule
operated  immediately prior to September 11, and furloughed  approximately 1,100
employees by the middle of October 2001.  By December 31, 2001,  the Company had
recalled  approximately  half of the  furloughed  employees  and had added  some
capacity back to its flight schedule.

The Company's  operations were significantly  disrupted by the terrorist attacks
during and after the  FAA-mandated  shutdown  of the air  traffic  system.  Load
factors were significantly lower immediately after the attacks,  and fare levels
declined,  and have remained lower,  due to reduced  consumer  demand.  Consumer
demand  improved in the fourth  quarter of 2001;  however,  the  Company  cannot
predict when consumer demand will return to pre-attack  levels. The attacks have
had a  significant  impact on the Company's  results of operations  for the year
ended December 31, 2001,  producing  $66.3 million in  attack-related  costs and
revenue  losses  between  September 11 and December 31, which are expected to be
reimbursed through a U.S.  Government grant, $44.5 million of which was received
in cash in the third and fourth quarters of 2001.

For additional details with respect to the impact of the terrorist attacks,  see
"Financial  Statements and Supplementary Data - Notes to Consolidated  Financial
Statements - Note 2 - Impact of Terrorist  Attacks on September  11,  2001." For
the Company's  discussion of possible  future  effects from these  attacks,  see
"Forward-Looking Information and Risk Factors."

The Company had an operating loss of $91.9  million,  and a net loss after taxes
of $76.3 million,  for the year ended December 31, 2001.  Profitability  in 2001
was severely  impacted by the terrorist  attacks on September  11, 2001,  and by
non-cash  impairment  charges  associated  with the Boeing  727-200 and Lockheed
L-1011-50 and 100 fleets totaling $73.8 million, net of tax.


                                       19
<PAGE>

In May 2000, the Company placed an order for 39 new Boeing 737-800  aircraft and
ten new Boeing  757-300  aircraft.  These  aircraft are equipped  with  Boeing's
latest technology and equipment,  and are significantly more fuel-efficient than
certain of the  Company's  three-engine  aging  aircraft.  The Company  accepted
delivery of 14 Boeing 737-800 aircraft and five Boeing 757-300 aircraft in 2001.
The Company  expects to accept  delivery of another 16 Boeing  737-800s and five
Boeing 757-300s in 2002, with the remainder of new aircraft on order expected to
be in service by 2004.

Critical Accounting Policies

"Management's  Discussion  and  Analysis of Financial  Condition  and Results of
Operations" discusses the Company's  consolidated  financial  statements,  which
have been prepared in accordance with accounting  principles  generally accepted
in the United States.  The  preparation of these financial  statements  requires
management to make judgments and estimates  that affect the reported  amounts of
assets,  liabilities,  revenues and expenses,  and the disclosures of contingent
assets and liabilities.

The Company discusses  significant  accounting policies in "Financial Statements
and Supplementary Data - Notes to Consolidated  Financial  Statements - Note 1 -
Significant  Accounting  Policies."  Not  all of  these  significant  accounting
policies require management to make difficult,  subjective or complex judgments.
Those  that do  require  management  to make  difficult,  subjective  or complex
judgments are considered critical accounting policies.

The  Company has  identified  the  accounting  policy for fleet  impairments  as
critical.  In applying Financial  Accounting  Standards Board ("FASB") Financial
Accounting  Standard No. 121, Accounting for the Impairment of Long-Lived Assets
and  Long-Lived  Assets to be Disposed of ("FAS  121"),  significant  subjective
estimates  are  required to  calculate  expected  future cash flows and the fair
market values to which assets are adjusted.

The Company has also identified the accounting policy for U. S. Government grant
reimbursements  for direct and incremental  losses associated with the terrorist
attacks of September 11, 2001 as critical.  Due to limited guidance  provided by
the legislation and  interpretive  rules of the DOT, the Company made subjective
and  judgmental   estimates  in  calculating  the  amount  of  reimbursement  to
recognize.

See "Management's  Discussion and Analysis of Financial Condition and Results of
Operations - Year Ended  December 31, 2001 Versus Year Ended December 31, 2000 -
Operating  Expenses" for a further  discussion  of estimates  and  uncertainties
relating to asset impairments and U.S. Government grant reimbursements.


                                       20
<PAGE>

Results of Operations in Cents Per ASM

The  following  table  sets  forth,  for  the  periods  indicated,  consolidated
operating revenues and expenses expressed as cents per ASM.

<TABLE>
<CAPTION>
                                                                             Cents per ASM
                                                                        Year Ended December 31,
                                                         ----------------------------------------------------
                                                            2001                 2000                 1999
                                                         ----------           ----------           ----------
<S>                                                      <C>                  <C>                  <C>
Consolidated operating revenues                             7.88                 7.88                 7.44

Consolidated operating expenses:
     Salaries, wages and benefits                           2.01                 1.81                 1.67
     Fuel and oil                                           1.55                 1.68                 1.13
     Depreciation and amortization                          0.75                 0.76                 0.64
     Aircraft rentals                                       0.61                 0.44                 0.39
     Handling, landing and navigation fees                  0.55                 0.59                 0.59
     Aircraft maintenance, materials and repairs            0.38                 0.43                 0.37
     Crew and other employee travel                         0.37                 0.40                 0.33
     Passenger service                                      0.27                 0.28                 0.26
     Ground package cost                                    0.26                 0.31                 0.33
     Other selling expenses                                 0.26                 0.22                 0.19
     Commissions                                            0.21                 0.24                 0.26
     Advertising                                            0.16                 0.13                 0.12
     Facilities and other rentals                           0.13                 0.10                 0.09
     Special charges                                        0.14                 0.00                 0.00
     Impairment loss                                        0.69                 0.00                 0.00
     U.S. Government grant                                 (0.41)                0.00                 0.00
     Other                                                  0.52                 0.47                 0.47
                                                         ----------           ----------           ----------
Total consolidated operating expenses                       8.45                 7.86                 6.84
                                                         ----------           ----------           ----------
Consolidated operating income (loss)                       (0.57)                0.02                 0.60
                                                         ==========           ==========           ==========

ASMs (in thousands)                                      16,187,687           16,390,101           15,082,630
</TABLE>

The following table sets forth, for the periods  indicated,  operating  revenues
and expenses for each reportable segment, in thousands of dollars, and expressed
as cents per ASM.

<TABLE>
<CAPTION>
                                                                      Year Ended December 31,
                                                          --------------------------------------------------
                                                              2001               2000               1999
                                                              ----               ----               ----
<S>                                                        <C>                <C>                <C>
Airline and Other
     Operating revenue (000s)                              $1,201,560         $1,192,984         $ 1,022,541
     RASM (cents)                                                7.42               7.28                6.78
     Operating expense (000s)                              $1,291,342         $1,178,737           $ 929,898
     CASM (cents)                                                7.98               7.19                6.17
     Adjusted CASM (cents)     (Note 1)                          7.56               7.19                6.17

ATALC
     Operating revenue (000s)                                $ 73,924           $ 98,569            $ 99,825
     RASM (cents)                                                0.46               0.60                0.66
     Operating expense (000s)                                $ 76,012          $ 110,246           $ 102,441
     CASM (cents)                                                0.47               0.67                0.67
</TABLE>

Note 1 - Airline  adjusted CASM excludes  special  charges,  impairment loss and
U.S. Government grant compensation from operating expenses in 2001.


                                       21
<PAGE>

Year Ended December 31, 2001, Versus Year Ended December 31, 2000

Consolidated Flight Operations and Financial Data

The following table sets forth, for the periods indicated, certain key operating
and financial data for the consolidated  flight operations of the Company.  Data
shown for "Jet"  operations  include  the  consolidated  operations  of Lockheed
L-1011,  Boeing  727-200,  Boeing  737-800,  Boeing  757-200 and Boeing  757-300
aircraft  in all of the  Company's  business  units.  Data shown for  "J31/Saab"
operations  include  the  operations  of  Jetstream  31 and Saab 340B  propeller
aircraft by Chicago Express as the ATA Connection.

<TABLE>
<CAPTION>
                                                        Twelve Months Ended December 31,
                                             -----------------------------------------------------------
                                                 2001           2000         Inc (Dec)      % Inc (Dec)
                                                 ----           ----         ---------      -----------
<S>                                          <C>            <C>               <C>                 <C>
Departures Jet                                   56,962         55,714           1,248             2.24
Departures J31/Saab (a)                          26,836         18,985           7,851            41.35
                                             -----------------------------------------------------------
     Total Departures (b)                        83,798         74,699           9,099            12.18
                                             -----------------------------------------------------------

Block Hours Jet                                 172,207        172,824            (617)           (0.36)
Block Hours J31/Saab                             24,836         18,708           6,128            32.76
                                             -----------------------------------------------------------
     Total Block Hours (c)                      197,043        191,532           5,511             2.88
                                             -----------------------------------------------------------

RPMs Jet (000s)                              11,581,733     11,760,135        (178,402)           (1.52)
RPMs J31/Saab (000s)                             94,009         56,669          37,340            65.89
                                             -----------------------------------------------------------
     Total RPMs (000s) (d)                   11,675,742     11,816,804        (141,062)           (1.19)
                                             -----------------------------------------------------------

ASMs Jet (000s)                              16,041,928     16,295,730        (253,802)           (1.56)
ASMs J31/Saab (000s)                            145,759         94,371          51,388            54.45
                                             -----------------------------------------------------------
     Total ASMs (000s) (e)                   16,187,687     16,390,101        (202,414)           (1.23)
                                             -----------------------------------------------------------

Load Factor Jet                                   72.20          72.17            0.03             0.04
Load Factor J31/Saab                              64.50          60.05            4.45             7.41
                                             -----------------------------------------------------------
     Total Load Factor (f)                        72.13          72.10            0.03             0.04
                                             -----------------------------------------------------------

Passengers Enplaned Jet                       8,058,886      7,686,077         372,809             4.85
Passengers Enplaned J31/Saab                    576,339        320,062         256,277            80.07
                                             -----------------------------------------------------------
     Total Passengers Enplaned (g)            8,635,225      8,006,139         629,086             7.86
                                             -----------------------------------------------------------

Revenue $ (000s)                              1,275,484      1,291,553         (16,069)           (1.24)
RASM in cents (h)                                  7.88           7.88               -                -
CASM in cents (i)                                  8.45           7.86            0.59             7.51
Yield in cents (j)                                10.92          10.93           (0.01)           (0.09)
</TABLE>

 See footnotes (c) through (j) on page 23.

(a) Chicago Express  provides service between  Chicago-Midway  and the cities of
Indianapolis,  Milwaukee,  Des Moines, Dayton, Grand Rapids, Madison, South Bend
and  Springfield  as the ATA  Connection,  currently  using  34-seat  Saab  340B
propeller  aircraft.  During 1999 and the first three quarters of 2000,  Chicago
Express  operated up to nine 19-seat  Jetstream 31 ("J31") aircraft as it phased
in the Saab fleet.  As of September 30, 2000,  all J31 aircraft had been removed
from revenue service.

(b) A departure is a single  takeoff and landing  operated by a single  aircraft
between an origin city and a destination  city.

                                       22
<PAGE>

(c) Block hours for any aircraft  represent  the elapsed time  computed from the
moment  the  aircraft  first  moves  under its own power  from the  origin  city
boarding  ramp to the moment it comes to rest at the  destination  city boarding
ramp.

(d) Revenue  passenger  miles (RPMs)  represent the number of seats  occupied by
revenue passengers multiplied by the number of miles those seats are flown. RPMs
are an industry measure of the total seat capacity actually sold by the Company.

(e) Available seat miles (ASMs) represent the number of seats available for sale
to revenue  passengers  multiplied by the number of miles those seats are flown.
ASMs are an industry  measure of the total seat capacity offered for sale by the
Company, whether sold or not.

(f) Passenger  load factor is the  percentage  derived by dividing RPMs by ASMs.
Passenger load factor is relevant to the evaluation of scheduled service because
incremental  passengers  normally provide  incremental revenue and profitability
when  seats  are  sold  individually.  In the  case of  commercial  charter  and
military/government  charter,  load factor is less relevant  because the Company
sells an entire  aircraft  instead  of  individual  seats.  Since both costs and
revenues are largely fixed for these types of charter  flights,  changes in load
factor  have less  impact on  business  unit  profitability.  Consolidated  load
factors  and  scheduled  service  load  factors for the Company are shown in the
appropriate tables for industry  comparability,  but load factors for individual
charter businesses are omitted from applicable tables.

(g) Passengers  enplaned are the number of revenue passengers who occupied seats
on the  Company's  flights.  This  measure is also  referred  to as  "passengers
boarded."

(h) Revenue per ASM (expressed in cents) is total  operating  revenue divided by
total ASMs.  This  measure is also  referred  to as "RASM."  RASM  measures  the
Company's  unit revenue  using total  available  seat  capacity.  In the case of
scheduled  service,  RASM is a measure of the combined impact of load factor and
yield (see (j) below for the definition of yield).

(i) Cost per ASM  (expressed  in cents) is total  operating  expense  divided by
total ASMs.  This  measure is also  referred  to as "CASM."  CASM  measures  the
Company's unit cost using total available seat capacity.

(j) Revenue per RPM (expressed in cents) is total  operating  revenue divided by
total RPMs.  This measure is also  referred to as "yield."  Yield is relevant to
the  evaluation of scheduled  service  because yield is a measure of the average
price paid by customers  purchasing  individual seats. Yield is less relevant to
the commercial  charter and  military/government  charter businesses because the
entire  aircraft  is sold at one time for one  price.  Consolidated  yields  and
scheduled  service  yields  are shown in the  appropriate  tables  for  industry
comparability,  but yields for  individual  charter  businesses are omitted from
applicable tables.

Operating Revenues

Total operating  revenues in 2001 decreased 1.3% to $1.275 billion,  as compared
to $1.292 billion in 2000. This decrease was due to a $54.5 million  decrease in
commercial  charter  revenues,  a $21.1 million decrease in  military/government
charter revenues, a $7.6 million decrease in ground package revenues, and a $0.3
million decrease in other revenues, partially offset by a $67.4 million increase
in scheduled service revenues.

                                       23
<PAGE>

Scheduled  Service  Revenues.  The following  table sets forth,  for the periods
indicated,  certain key operating and financial  data for the scheduled  service
operations of the Company.  Data shown for "Jet" operations include the combined
operations of Lockheed L-1011,  Boeing 727-200,  Boeing 757-200,  Boeing 757-300
and Boeing  737-800  aircraft in scheduled  service.  Data shown for  "J31/Saab"
operations  include  the  operations  of  Jetstream  31 and Saab 340B  propeller
aircraft by Chicago Express as the ATA Connection.

<TABLE>
<CAPTION>
                                                       Twelve Months Ended December 31,
                                             -----------------------------------------------------------
                                                 2001           2000         Inc (Dec)      % Inc (Dec)
                                                 ----           ----         ---------      -----------
<S>                                          <C>            <C>              <C>                  <C>
Departures Jet                                   45,951         40,892           5,059            12.37
Departures J31/Saab (a)                          26,836         18,985           7,851            41.35
                                             -----------------------------------------------------------
     Total Departures (b)                        72,787         59,877          12,910            21.56
                                             -----------------------------------------------------------

Block Hours Jet                                 131,495        118,473          13,022            10.99
Block Hours J31/Saab                             24,836         18,708           6,128            32.76
                                             -----------------------------------------------------------
     Total Block Hours (c)                      156,331        137,181          19,150            13.96
                                             -----------------------------------------------------------

RPMs Jet (000s)                               8,600,314      7,700,639         899,675            11.68
RPMs J31/Saab (000s)                             94,009         56,669          37,340            65.89
                                             -----------------------------------------------------------
     Total RPMs (000s) (d)                    8,694,323      7,757,308         937,015            12.08
                                             -----------------------------------------------------------

ASMs Jet (000s)                              11,297,545     10,025,603       1,271,942            12.69
ASMs J31/Saab (000s)                            145,759         94,371          51,388            54.45
                                             -----------------------------------------------------------
     Total ASMs (000s) (e)                   11,443,304     10,119,974       1,323,330            13.08
                                             -----------------------------------------------------------

Load Factor Jet                                   76.13          76.81           (0.68)           (0.89)
Load Factor J31/Saab                              64.50          60.05            4.45             7.41
                                             -----------------------------------------------------------
     Total Load Factor (f)                        75.98          76.65           (0.67)           (0.87)
                                             -----------------------------------------------------------

Passengers Enplaned Jet                       6,703,150      5,873,598         829,552            14.12
Passengers Enplaned J31/Saab                    576,339        320,062         256,277            80.07
                                             -----------------------------------------------------------
     Total Passengers Enplaned (g)            7,279,489      6,193,660       1,085,829            17.53
                                             -----------------------------------------------------------

Revenue $ (000s)                                820,666        753,301          67,365             8.94
RASM in cents (h)                                  7.17           7.44           (0.27)           (3.63)
Yield in cents (j)                                 9.44           9.71           (0.27)           (2.78)
Revenue per segment $ (k)                        112.74         121.62           (8.88)           (7.30)
</TABLE>

See footnotes (a) through (j) on pages 22 and 23.

(k) Revenue per segment flown is determined by dividing total scheduled  service
revenues  by the number of  passengers  boarded.  Revenue per segment is a broad
measure  of the  average  price  obtained  for  all  flight  segments  flown  by
passengers in the Company's scheduled service route network.

Scheduled  service revenues in 2001 increased 8.9% to $820.7 million from $753.3
million in 2000. Scheduled service revenues were 64.3% of consolidated  revenues
in 2001, as compared to 58.3% of consolidated revenues in 2000.

As  described  in  "Financial  Statements  and  Supplementary  Data -  Notes  to
Consolidated  Financial  Statements  - Note 2 - Impact of  Terrorist  Attacks on
September 11, 2001," the Company's  scheduled service  operations were adversely
affected by the terrorist attacks of September 11. The Company estimates that it


                                       24
<PAGE>

lost approximately $80.0 million in scheduled service revenues between September
11 and December 31, 2001, as a result of flights which were  canceled,  and as a
result of flights  operated  with lower load  factors and  yields.  In the eight
months ended August 31, 2001, the Company's scheduled service RASM was virtually
unchanged at 7.72 cents,  as compared to 7.71 cents in the comparable  period of
2000.  However,  due to the  decrease  in  scheduled  service  demand  after the
terrorist  attacks,  resulting in lower load factors and yields,  the  Company's
scheduled  service  RASM in the last  four  months  of 2001 was  5.92  cents,  a
decrease of 14.3%, as compared to 6.91 cents in the last four months of 2000.

The Company's  scheduled service at  Chicago-Midway  accounted for approximately
66.8% of scheduled  service ASMs and 86.6% of scheduled  service  departures  in
2001,  as compared to 63.5% and 83.5%,  respectively,  during  2000.  During the
third and fourth quarters of 2001, the Company began  operating  nonstop flights
to Newark and Miami.  During the second and third  quarters of 2000, the Company
began operating  nonstop flights to Ronald Reagan  Washington  National Airport,
Boston,  Seattle and Minneapolis-St.  Paul. In addition to this new service, the
Company  served the  following  existing  jet markets in both years:  Dallas-Ft.
Worth,  Denver,  Ft. Lauderdale,  Ft. Myers, Las Vegas, Los Angeles,  New York's
LaGuardia  Airport,  Orlando,   Philadelphia,   Phoenix,  St.  Petersburg,   San
Francisco, San Juan and Sarasota.

In April 1999, the Company  acquired all of the issued and outstanding  stock of
Chicago  Express which then  operated  19-seat  Jetstream 31 propeller  aircraft
between  Chicago-Midway and the cities of Indianapolis,  Milwaukee,  Des Moines,
Dayton,  Grand  Rapids,  Lansing and Madison.  Chicago  Express began service to
South Bend, Indiana and Springfield, Illinois, respectively, in October 2000 and
August 2001,  and ceased flying to Lansing,  Michigan,  in November 2000. In the
first three quarters of 2000,  Chicago Express completed the replacement of nine
19-seat  Jetstream 31 aircraft  with nine 34-seat  Saab 340B  aircraft.  Chicago
Express  purchased  two  additional  Saab 340B  aircraft in the third quarter of
2001.

The Company  anticipates  that its  Chicago-Midway  operation  will represent an
increasing  proportion of its scheduled service business in 2002 and beyond. The
Company operated 109 peak daily jet and commuter  departures from Chicago-Midway
in 2001,  as compared  to 94 in 2000,  and served 28  destinations  on a nonstop
basis in 2001, as compared to 25 nonstop  destinations  served in 2000. In order
to accommodate the growth in jet departures in the existing terminal, in October
2000 Chicago Express  established a remote boarding  operation at Chicago-Midway
Airport  with  shuttle bus  service  between  the remote  location  and the main
terminal.  This change has  allowed  the  Company to convert the former  Chicago
Express gate to a jet departure gate.

The Company's  anticipated  growth at  Chicago-Midway  will be  accomplished  in
conjunction  with the  construction  of new terminal and gate  facilities at the
Chicago-Midway Airport. In March 2001, the Company occupied 24 newly constructed
ticketing and passenger check-in spaces in the new terminal, an increase from 16
ticketing  and  passenger   check-in  spaces  previously   occupied.   Once  all
construction is complete in 2004, the Company expects to occupy 12 jet gates and
one commuter aircraft gate at the new airport concourses. One of the gates which
the Company will occupy  opened on October 30, 2001.  The Company moved to seven
additional new gates in the first quarter of 2002, and five additional gates are
expected  to be  available  for  use  by  the  Company  in  2004.  In  addition,
construction of a Federal  Inspection Service ("FIS") facility at Chicago-Midway
was  completed  in  the  first  quarter  of  2002.  The  Company  began  nonstop
international  services from this facility in early 2002 to Aruba, Cancun, Grand
Cayman and Guadalajara.

The Company's Hawaii service  accounted for 18.6% of scheduled  service ASMs and
3.9% of scheduled  service  departures  in 2001,  as compared to 17.0% and 4.3%,
respectively,  in 2000. The Company  provided nonstop service in both years from


                                       25
<PAGE>

Los  Angeles,  Phoenix  and  San  Francisco  to both  Honolulu  and  Maui,  with
connecting  service  between  Honolulu  and Maui.  The  Company  provides  these
services through a marketing alliance with the largest independent tour operator
serving  leisure  travelers  to  Hawaii  from the  United  States.  The  Company
distributes  the  remaining  seats on these  flights  through  normal  scheduled
service  distribution  channels.  The Company believes it has superior operating
efficiencies  in west  coast-Hawaii  markets  due to the  high  daily  hours  of
utilization obtained for both aircraft and crews.

The Company's  Indianapolis service accounted for 9.2% of scheduled service ASMs
and 6.5% of scheduled service departures in 2001, as compared to 12.2% and 8.8%,
respectively,  in 2000. In both years,  the Company  operated nonstop to Cancun,
Ft. Lauderdale,  Ft. Myers, Las Vegas, Orlando, St. Petersburg and Sarasota. The
Company has served Indianapolis for 29 years through the Ambassadair Travel Club
and through scheduled service since 1986.

The Company  continuously  evaluates the  profitability of its scheduled service
markets and expects to adjust its schedule and flight  frequencies  from time to
time,  particularly  with  reference  to the  ongoing  impacts of the  terrorist
attacks.  Although unit revenues did partially  recover  toward the end of 2001,
unit  revenues  in the first  quarter  of 2002 are  expected  to be below  first
quarter 2001 levels. Weak revenues are related to both the ongoing impact of the
September 11, 2001 terrorist attacks on the demand for air travel, and continued
weakness in the U.S. domestic  economy.  The Company is adding a small amount of
capacity to its  scheduled  service  network in the first  quarter of 2002 as it
continues to accept new aircraft  deliveries.  The Company  cannot  predict when
year-over-year  unit  revenue  growth  will  resume  in  its  scheduled  service
business.

Commercial  Charter  Revenues.  The Company's  commercial  charter  revenues are
derived  principally  from  independent  tour  operators and  specialty  charter
customers.  The Company's  commercial charter product provides  full-service air
transportation  to  customer-designated   destinations   throughout  the  world.
Commercial charter revenues accounted for 15.1% of consolidated revenues in 2001
as compared to 19.1% in 2000.

The impact of the September 11, 2001 terrorist  attacks was less  significant on
the commercial charter business than on scheduled service. The Company estimates
that it lost  approximately  $1.4 million in  commercial  charter  revenues as a
result of flight  cancellations during the FAA-mandated air system shutdown from
September 11 until  September 13, and decreased  demand for  commercial  charter
flights  following  September  11. The  majority  of the  decline in  commercial
charter  revenues  in 2001,  as  compared to 2000,  was  principally  due to the
retirement  of certain  Lockheed  L-1011 and Boeing  727-200  aircraft  that the
Company has  traditionally  used in commercial  charter  flying.  Since aircraft
utilization  (number of  productive  hours of flying per aircraft each month) is
typically much lower for commercial  charter,  as compared to scheduled  service
flying,  the  Company's  replacement  fleets of new  Boeing  737-800  and Boeing
757-300  aircraft  are  economically  disadvantaged  when  used  in the  charter
business,  because  of their  higher  fixed-ownership  cost.  Consequently,  the
Company expects its commercial charter revenues to continue to decline in future
periods  as the fleet  supporting  this  business  continues  to shrink  through
aircraft retirements.

Although total commercial charter revenues have declined in 2001, as compared to
2000,  commercial  charter RASM has increased  over the same time  periods.  The
Company has  eliminated  lower-RASM  flying as this business has been reduced in
size,  thus  increasing  average  RASM on the flying that it has  retained.

                                       26
<PAGE>

The following table sets forth, for the periods indicated, certain key operating
and financial data for the commercial charter operations of the Company.

<TABLE>
<CAPTION>
                                                 Twelve Months Ended December 31,
                                          -------------------------------------------------------
                                            2001          2000        Inc (Dec)      % Inc (Dec)
                                            ----          ----        ---------      -----------
<S>                                       <C>           <C>           <C>                 <C>
Departures (b)                                7,293         9,722         (2,429)         (24.98)
Block Hours (c)                              24,495        34,356         (9,861)         (28.70)
RPMs (000s) (d)                           2,010,477     2,687,051       (676,574)         (25.18)
ASMs (000s) (e)                           2,588,780     3,610,413     (1,021,633)         (28.30)
Passengers Enplaned (g)                   1,128,660     1,472,340       (343,680)         (23.34)
Revenue $ (000s)                            192,246       246,705        (54,459)         (22.07)
RASM in cents (h)                              7.43          6.83           0.60            8.78
RASM less fuel escalation (l)                  7.13          6.47           0.66           10.20
</TABLE>

See footnotes (b) through (h) on pages 22 and 23.

(l) Commercial  charter contracts  generally provide that the tour operator will
reimburse the Company for certain fuel cost increases,  which, when earned,  are
accounted for as additional revenue. A separate RASM calculation,  excluding the
impact of fuel reimbursements, is provided as a separate measure of unit revenue
changes.

The Company  operates in two  principal  components  of the  commercial  charter
business,  known as "track  charter" and  "specialty  charter." The larger track
charter  business   component  is  generally   comprised  of  low-frequency  but
repetitive domestic and international  flights between city pairs, which support
high-passenger  load factors and are marketed through tour operators,  providing
value-priced  and convenient  nonstop service to vacation  destinations  for the
leisure traveler.  Since track charter  resembles  scheduled service in terms of
its repetitive  flying patterns between  fixed-city pairs, it allows the Company
to achieve  reasonable  levels of crew and aircraft  utilization  (although less
than for scheduled service), and provides the Company with meaningful protection
from some fuel price increases through the use of fuel escalation  reimbursement
clauses in tour operator  contracts.  Track charter  accounted for approximately
$149.7 million in revenues in 2001, as compared to $192.8 million in 2000.

Specialty charter is a product that is designed to meet the unique  requirements
of a customer and is a business  characterized  by lower  frequency of operation
and by greater  variation in city pairs served than the track charter  business.
Specialty charter includes such diverse contracts as flying university alumni to
football games,  transporting  political candidates on campaign trips and moving
NASA space shuttle ground crews to alternate landing sites. The Company also has
operated trips in an  all-first-class  configuration  for certain  corporate and
high-end leisure clients.  Although lower  utilization of crews and aircraft and
infrequent  service to specialty  destinations  often  result in higher  average
operating  costs,  the Company has determined that the revenue premium earned by
meeting special customer  requirements more than compensates for these increased
costs.  The diversity of the  Company's  fleet types also permits the Company to
meet a customer's  particular  needs by choosing the aircraft type that provides
the most economical solution for those requirements. Specialty charter accounted
for  approximately  $18.8  million in  revenues  in 2001,  as  compared to $31.5
million in 2000.

The remainder of commercial  charter revenues are attributable  primarily to the
air  revenues  of ATALC  and  Ambassadair,  which did not  change  significantly
between years.

                                       27
<PAGE>

Military/Government  Charter  Revenues.  The following table sets forth, for the
periods   indicated,   certain  key  operating   and  financial   data  for  the
military/government charter operations of the Company.

<TABLE>
<CAPTION>
                                                 Twelve Months Ended December 31,
                                          -------------------------------------------------------
                                            2001          2000        Inc (Dec)      % Inc (Dec)
                                            ----          ----        ---------      -----------
<S>                                       <C>           <C>             <C>               <C>
Departures (b)                                3,702         4,961         (1,259)         (25.38)
Block Hours (c)                              16,159        19,443         (3,284)         (16.89)
RPMs (000s) (d)                             965,740     1,339,545       (373,805)         (27.91)
ASMs (000s) (e)                           2,147,248     2,605,791       (458,543)         (17.60)
Passengers Enplaned (g)                     225,641       329,200       (103,559)         (31.46)
Revenue $ (000s)                            167,524       188,557        (21,033)         (11.15)
RASM in cents (h)                              7.80          7.24           0.56            7.73
RASM less fuel escalation (m)                  7.58          6.88           0.70           10.17
</TABLE>

See footnotes (b) through (h) on pages 22 and 23.

(m) Military/government  reimbursements to the Company are calculated based upon
a "cost plus" formula, including an assumed average fuel price for each contract
year. If actual fuel prices differ from the contract rate, revenues are adjusted
up or down to  neutralize  the impact of the change on the  Company.  A separate
RASM   calculation  is  provided,   excluding  the  impact  of  the  fuel  price
adjustments.

The  Company  estimates  that it lost  approximately  $1.0  million in  military
revenues, net of cancellation fees, due to the FAA-mandated shut down of the air
traffic system from September 11 until September 13. After having resumed flight
operations late in the day on September 13, 2001, the Company's  military flight
schedule quickly returned to normal. Although current military flight operations
of the Company have not been significantly  affected by the terrorist attacks of
September 11, future operations may be significantly  affected by changes in the
transportation needs of the U.S. military, possibly in association with military
operations  in the United  States and  abroad.  Heightened  military  activities
related to international  conflict usually bring reduced demand to the Company's
scheduled  service  business.  The  Company  cannot  predict the  magnitude  and
possible future impact on its results of operations and financial condition,  if
any, of these possible future events.

The decline in military revenues in 2001, as compared to 2000, was primarily due
to changes  in teaming  arrangements  used both by the  Company  and some of the
Company's competitors in the military/government  charter business. Such changes
reduced the  fixed-award  flying  allocated to the Company for the contract year
ending   September   30,   2001.   The   Company   earned   $159.3   million  in
military/government  charter  revenues in the contract year ended  September 30,
2001, a 6.0%  reduction as compared to $169.5  million  earned in the  preceding
contract year ended September 30, 2000.  Under its current teaming  arrangement,
the  Company  expects  its  military/government  charter  revenues  to  increase
slightly in the contract year ending September 2002.

The increase in RASM for military/charter revenues in 2001, as compared to 2000,
was due to rate increases awarded for the current contract year, based upon cost
data  submitted  to the U.S.  military  by the  Company  and other air  carriers
providing these services.

The Company  participates in two related  military/government  charter  programs
known  as  "fixed-award"  and  "short-term  expansion."  Pursuant  to  the  U.S.
military's  fixed-award  system,  each participating  airline is awarded certain
"mobilization  value  points"  based upon the number and type of  aircraft  made
available by that airline for military  flying.  In order to increase the number
of points  awarded,  the Company has  traditionally  participated  in contractor
teaming arrangements with other airlines. Under these arrangements, the team has


                                       28
<PAGE>

a greater likelihood of receiving  fixed-award  business and, to the extent that
the award  includes  passenger  transport,  the  opportunity  for the Company to
operate  this  flying is  enhanced  since the  Company  typically  represents  a
majority  of the  passenger  transport  capacity  of its  team.  As  part of its
participation in this teaming arrangement,  the Company pays a commission to the
team,  which  passes  that  revenue  on to all team  members  based  upon  their
mobilization  value  points.  All  airlines  participating  in  the  fixed-award
business  contract  annually  with  the  U.S.  military  from  October  1 to the
following  September  30.  For  each  contract  year,  reimbursement  rates  are
determined for aircraft types and mission  categories  based upon operating cost
data submitted by the participating airlines.  These contracts generally are not
subject to renegotiation once they become effective.

Short-term  expansion  business is awarded by the U.S.  military  first on a pro
rata basis to those  carriers who have been  provided  fixed-award  business and
then to any other  carrier  with  aircraft  availability.  Short-term  expansion
flying is generally offered to airlines on very short notice.

The overall amount of military flying that the Company  performs in any one year
is dependent upon several factors,  including (1) the percentage of mobilization
value points represented by the Company's team as compared to total mobilization
value  points of all  providers  of  military  service;  (2) the  percentage  of
passenger  capacity of the Company with respect to its own team;  (3) the amount
of  fixed-award  and  expansion  flying  required  by the U.S.  military in each
contract year; and (4) the availability of the Company's  aircraft to accept and
fly expansion awards.

Ground Package  Revenues.  The Company earns ground package revenues through the
sale of hotel, car rental,  cruise and other  accommodations in conjunction with
the  Company's  air  transportation  product.  The Company  markets these ground
packages  through  its  ATALC  subsidiary  and to its  Ambassadair  Travel  Club
members.

Ambassadair Travel Club offers  tour-guide-accompanied  vacation packages to its
approximately  34,000  individual  and family  members  annually.  ATALC  offers
numerous ground accommodations to the general public in many areas of the United
States,  Mexico and the Caribbean.  These  packages are marketed  through travel
agents, as well as directly by the Company.

In 2001, ground package revenues  decreased 12.7% to $52.2 million,  as compared
to $59.8  million in 2000.  The number of ground  packages  sold and the average
revenue  earned by the Company for a ground  package  sale are a function of the
seasonal mix of vacation  destinations  served,  the quality and types of ground
accommodations  offered  and general  competitive  conditions  in the  Company's
markets, all of which factors can change from period to period.

Other  Revenues.  Other revenues are comprised of the  consolidated  revenues of
certain affiliated companies,  together with miscellaneous categories of revenue
associated  with the  scheduled,  charter and ground  package  operations of the
Company,  such  as  cancellation  and  service  fees,  Ambassadair  Travel  Club
membership  dues and  cargo  revenue.  Other  revenues  decreased  0.5% to $42.9
million in 2001, as compared to $43.1 million in 2000.

Operating Expenses

Salaries,  Wages and Benefits.  Salaries, wages and benefits include the cost of
salaries and wages paid to the Company's employees,  together with the Company's
cost of employee benefits and  payroll-related  local,  state and federal taxes.
Salaries,  wages and benefits  expense in 2001  increased 9.5% to $325.2 million
from $297.0 million in 2000.

                                       29
<PAGE>

The Company  increased its average  equivalent  employees by approximately  4.7%
between 2001 and 2000.  This annual  growth rate combines  employment  growth in
conjunction  with a growing flight  schedule  prior to the terrorist  attacks on
September 11, offset by the employee furloughs under the Company's  cost-cutting
initiatives implemented shortly after the attacks. Through the first nine months
of the year, the average equivalent  headcount  increased  approximately  11.0%,
which primarily  reflected  growth in categories of employees that were required
for the  increased  flight  activity  the  Company  was  experiencing  prior  to
September  11.  In  the  fourth   quarter  of  2001,   employment   declined  by
approximately 12.5%, as compared to the fourth quarter of 2000. By the middle of
October 2001,  the Company had  furloughed  approximately  1,100  employees as a
result of a 20% flight  capacity  reduction  implemented  after the September 11
attacks. As of December 31, 2001, the Company had recalled approximately half of
those employees furloughed during the fourth quarter of 2001.

Additionally, in May 2000, the Company replaced its contracted ground handler at
its busiest airport, Chicago-Midway,  with its own ramp employees. Although this
contributed to a year-over-year  increase in salaries,  wages and benefits,  the
Company  experienced  a  corresponding   reduction  in  handling,   landing  and
navigation fees, where  third-party  handling  expenses are classified.  Chicago
Express  salaries,  wages and benefits  also  increased in 2001,  as compared to
2000,  due to the  replacement  of nine 19-seat  Jetstream  31 aircraft  with 11
34-seat Saab 340B aircraft, thus more than doubling total commuter seat capacity
between years.

Also  contributing  to the  increase  in  salaries,  wages and  benefits,  is an
increase of approximately  $7.8 million in benefits expenses to $34.3 million in
2001 as compared to $26.5  million in 2000.  This  increase is primarily  due to
increases in medical  insurance claims and workers'  compensation  costs between
years.

Fuel and Oil. Fuel and oil expense  decreased 8.6% to $251.3 million in 2001, as
compared to $274.8 million in 2000.  The Company  consumed 5.8% fewer gallons of
jet fuel for flying operations in 2001, as compared to 2000, which resulted in a
decrease in fuel expense of approximately  $13.7 million between  periods.  Fuel
consumption  varies with changes in jet block hours  flown,  and with changes in
the fleet mix. The Company flew 172,207 jet block hours in 2001,  as compared to
172,824  jet  block  hours in 2000,  a  decrease  of 0.4%  between  years.  Fuel
consumption in 2001 was more significantly affected by the delivery of 14 Boeing
737-800   aircraft  and  five  Boeing  757-300   aircraft,   replacing   certain
less-fuel-efficient  Boeing 727-200 and Lockheed  L-1011  aircraft  subsequently
retired from service.  The Company estimates that  approximately $9.4 million of
the  variance  attributable  to lower  fuel  consumption  resulted  from  flying
approximately 18,000 of these block hours using the 19 new aircraft, as compared
to flying those block hours with the  less-fuel-efficient  fleets.  During 2001,
the Company's average cost per gallon of jet fuel consumed  decreased by 6.0% as
compared  to  2000,  resulting  in  a  decrease  in  fuel  and  oil  expense  of
approximately $12.6 million between periods.

During  2001 and 2000,  the  Company  entered  into  several  fuel  price  hedge
contracts  under  which the  Company  sought to  reduce  the risk of fuel  price
fluctuations.  The  Company  recorded  losses  of $2.6  million  on these  hedge
contracts in 2001 as compared to gains of $0.1  million in 2000.  As of December
31, 2001,  the Company had entered into swap  agreements for  approximately  6.3
million gallons of heating oil for future delivery between January 2002 and June
2002, which represented approximately 2.6% of total expected fuel consumption in
2002. See  "Quantitative  and  Qualitative  Disclosures  about Market Risk," and
"Financial  Statements and Supplementary Data - Notes to Consolidated  Financial
Statements - Note 15 - Fuel Price Risk  Management" for more  information on the
Company's fuel price risk management program.

                                       30
<PAGE>

Depreciation and Amortization.  Depreciation  reflects the periodic expensing of
the recorded cost of owned  airframes and engines,  leasehold  improvements  and
rotable parts for all fleet types,  together  with other  property and equipment
owned by the  Company.  Amortization  is  primarily  the  periodic  expensing of
capitalized   airframe   and  engine   overhauls   for  all  fleet  types  on  a
units-of-production  basis using aircraft flight hours and cycles  (landings) as
the units of measure.  Depreciation and amortization  expense  decreased 3.0% to
$121.3 million in 2001, as compared to $125.0 million in 2000.

During the first nine months of 2001, the Company was depreciating the L-1011-50
and 100 fleet assuming a common retirement date of 2004.  However,  during 2001,
the  Company  decided  to retire  several  of these  aircraft  as of their  next
scheduled  heavy  maintenance  check.  During the first nine months of 2001, the
Company  retired three  L-1011-50  aircraft from revenue service in this manner,
recording  a loss on  disposal  of $6.6  million  for  these  aircraft  in other
operating  expense.  During the fourth quarter of 2001,  the Company  determined
that the remaining 10 L-1011-50 and 100 aircraft,  together with related rotable
parts and inventory,  were impaired in accordance  with FAS 121 (See  "Financial
Statements and Supplementary Data - Notes to Consolidated Financial Statements -
Note 16 - Asset  Impairment.")  Because the Company  continues to utilize  these
assets,  they are  classified as held for use under FAS 121, and are recorded on
the  balance  sheet  at  their  estimated  fair  market  value  at the  time  of
impairment,  which is the new asset  basis to be  depreciated  over the  assets'
estimated  remaining  useful  lives.  The useful  life of each  aircraft  is now
assumed to end immediately prior to its next scheduled heavy maintenance  check.
Due  primarily to the reduced cost basis of the  remaining 10 aircraft,  and the
retirement of three aircraft,  the Company recorded $5.0 million less engine and
airframe overhaul  amortization  expense for the L-1011-50 and 100 fleet in 2001
than in 2000.

In March 2001,  the Company  entered  into an  agreement  to transfer its entire
fleet of 24 Boeing  727-200  aircraft to BATA  Leasing LLC ("BATA") by May 2002.
(See  "Financial  Statements  and  Supplementary  Data - Notes  to  Consolidated
Financial  Statements - Note 12 - Commitments and  Contingencies.") As a result,
in the first  quarter of 2001,  the Company  implemented  a change in accounting
estimate  to  adjust  the  estimated  useful  lives and  salvage  value of these
aircraft to the terms of the BATA agreement.  This change in accounting estimate
resulted in an  increase of  depreciation  expense of $2.5  million in 2001,  as
compared to 2000.

Immediately  following the terrorist  attacks of September 11, 2001, the Company
decided to retire its Boeing 727-200 fleet from revenue  service,  although some
aircraft will be used for charter service through the first half of 2002.  These
aircraft were determined to be impaired under FAS 121.  Boeing 727-200  aircraft
not already transferred to BATA have been classified in the accompanying balance
sheet as assets held for sale. In accordance with FAS 121,  depreciation expense
was not recorded after the fleet was deemed impaired and will not be recorded in
future  accounting  periods.  As a  result,  the  Company  did  not  record  any
depreciation  expense on the  Boeing  727-200  fleet in the last four  months of
2001,  which  resulted in a $13.3 million  decrease in  depreciation  expense in
2001, as compared to 2000.

Amortization of capitalized  engine and airframe overhauls on the Boeing 757-200
and Lockheed  L-1011-500  fleets  increased $9.0 million in 2001, as compared to
2000,  after including  amortization  of related  manufacturers'  credits.  This
increase is primarily due to  amortization  of engine  overhauls on the Lockheed
L-1011-500  and Boeing 757-200  aircraft.  Both fleets are relatively new to the
Company and neither required overhauls until late 2000.

The remaining $3.1 million increase in depreciation and amortization  expense in
2001 as compared  to 2000  represents  primarily  fluctuations  associated  with
rotable parts, owned engines and the provision for inventory obsolescence, along
with  fluctuations  in expenses  related to  furniture  and  fixtures,  computer
hardware and software,  and debt issue costs between periods,  none of which are
individually significant.

                                       31
<PAGE>

Aircraft  Rentals.  Aircraft  rentals  expense for 2001 increased 37.3% to $99.0
million,  as compared to $72.1 million in 2000. The Company took delivery of two
Boeing 757-200 aircraft in June 2000 and two Boeing 757-200 aircraft in November
2000, all of which were financed  under  operating  leases.  These four aircraft
added $10.3  million to aircraft  rentals  expense in 2001, as compared to 2000.
Aircraft rent also  increased  $17.6 million for 2001, as compared to 2000, as a
result of the  delivery  of 14 leased  Boeing  737-800  and five  leased  Boeing
757-300 aircraft between May and December of 2001.

Also during 2001, the Company  terminated  leases on five Boeing  727-200s which
were  transferred  to BATA.  The Company  also  transferred  seven owned  Boeing
727-200  aircraft to BATA.  Subsequently,  the Company  leased  certain of those
aircraft  from  BATA  under  short-term  operating  leases.  These  transactions
resulted in a net  decrease in aircraft  rent of  approximately  $2.9 million in
2001.  Additional  Chicago Express aircraft and spare engine leases generated an
increase in aircraft  rent expense of  approximately  $1.9  million in 2001,  as
compared to 2000.

Handling,  Landing and  Navigation  Fees.  Handling and landing fees include the
costs  incurred by the Company at airports to land and service its  aircraft and
to handle  passenger  check-in,  security,  cargo and baggage  where the Company
elects to use third-party contract services in lieu of its own employees.  Where
the Company uses its own employees to perform  ground  handling  functions,  the
resulting cost appears within salaries,  wages and benefits. Air navigation fees
are incurred when the Company's aircraft fly over certain foreign airspace.

Handling, landing and navigation fees decreased by 8.9% to $88.7 million in 2001
as compared to $97.4 million in 2000,  although the total number of  system-wide
jet  departures  between 2001 and 2000  increased by 2.2% to 56,962 from 55,714.
The decrease in handling,  landing and  navigation  fees is primarily due to the
reduction in commercial  and  military/government  charter  flying between years
(much  of  which  is  operated  to  and  from  international  airports),   since
international  handling and landing fees are generally  more  expensive  than at
domestic U.S.  airports,  and air  navigation  fees apply only to  international
flying.  In 2001,  international  departures were 6,469, a reduction of 16.7% as
compared to international departures of 7,763 in 2000.

The Company also recorded  $2.9 million less in de-icing  expense in 2001 due to
relatively milder weather than as compared to 2000.

Aircraft  Maintenance,  Materials and Repairs. This expense includes the cost of
expendable  aircraft  spare parts,  repairs to repairable  and rotable  aircraft
components,  contract labor for maintenance activities and other non-capitalized
direct costs related to fleet maintenance,  including spare engine leases, parts
loan and exchange fees, and related  shipping  costs. It also includes the costs
incurred under hourly engine maintenance agreements the Company has entered into
on its Boeing 737-800 and Saab 340B power plants.  These agreements  provide for
the Company to pay  monthly  fees based on a  specified  rate per engine  flight
hour,  in  exchange  for  major  engine  overhauls  and  maintenance.   Aircraft
maintenance,  materials & repair  expense  decreased  12.8% to $61.4  million in
2001, as compared to $70.4 million in 2000.

The 2001 decline in  maintenance,  materials  and repairs  expense was primarily
attributable to a decrease in materials consumed and components repaired related
to  maintenance  on the  Company's  aging  fleets of Lockheed  L-1011 and Boeing
727-200  aircraft.  During 2001, the Company  placed 12 Boeing 727-200  aircraft
into BATA and retired three Lockheed L-1011 aircraft from service before related
heavy airframe maintenance checks were due to be performed.  The Company expects
maintenance,  materials  and  repairs  expense to  continue to decline in future
quarters as its older  fleets of  aircraft  continue to be replaced by newer and
more technologically advanced twin-engine aircraft with lower maintenance needs.


                                       32
<PAGE>

The Company also recorded a decrease of $3.0 million in  maintenance,  materials
and repairs in 2001,  as compared to 2000,  due to a negotiated  elimination  of
return  condition  requirements  on one leased  Lockheed L-1011 aircraft and the
recognition  of a return  condition  receivable  on one  leased  Boeing  757-200
aircraft.  The  Company  accrues  estimated  costs and credits  associated  with
maintenance  return  conditions  for  aircraft  on  leases  as  a  component  of
maintenance, materials and repairs expense.

The  Company  recognized  an increase in  aircraft  maintenance,  materials  and
repairs of $3.0  million in 2001,  as compared to 2000,  relating to the 11 Saab
340B aircraft operated by Chicago Express.

Crew  and  Other  Employee  Travel.  Crew and  other  employee  travel  consists
primarily of the cost of air transportation,  hotels and per diem reimbursements
to cockpit and cabin  crewmembers  incurred  to  position  crews away from their
bases to operate  Company  flights  throughout  the world.  The cost of crew and
other  employee  travel  decreased  9.9% to $59.3 million in 2001 as compared to
$65.8 million in 2000.

The  decrease in crew and  employee  travel in 2001,  as  compared in 2000,  was
mainly due to a significant  decrease in crew positioning  expense.  The average
cost of crew positioning per full-time-equivalent  crew member deceased 20.9% in
2001,  as compared to 2000.  The decrease was  primarily  due to the decrease in
military and charter flights, which often operate to and from points remote from
the Company's crew bases, thus requiring  significant  positioning  expenditures
for cockpit  and cabin crews on other  airlines.  For those  positioning  events
which did occur, the Company was also able to obtain lower prices from other air
carriers through specifically negotiated agreements,  as well as benefiting from
lower airfares which became generally available in the second half of 2001. Crew
and other  employee  travel also  declined due to a decrease in hotel  expenses,
also resulting primarily from the decline in international flying.

Passenger Service.  Passenger service expense includes the costs of onboard meal
and  non-alcoholic  beverage  catering,  the  cost of  alcoholic  beverages  and
in-flight movie headsets sold, and the cost of onboard  entertainment  programs,
together  with certain  costs  incurred for  mishandled  baggage and  passengers
inconvenienced  due to  flight  delays  or  cancellations.  For 2001  and  2000,
catering represented 74.4% and 78.8%,  respectively,  of total passenger service
expense.

The total cost of passenger  service decreased 3.7% to $43.9 million in 2001, as
compared  to $45.6  million in 2000.  The  Company  experienced  a  decrease  of
approximately  14.2% in the average unit cost of catering each passenger between
2001  and  2000,  primarily  because  in 2001  there  were  fewer  military  and
commercial  charter passengers in the Company's business mix, which are provided
a more  expensive  catering  product  due to the  longer  stage  length of these
flights. This resulted in a  price-and-business-mix  decrease of $5.4 million in
catering  expense in 2001,  as compared to 2000.  Total jet  passengers  boarded
increased 4.9% between years,  resulting in approximately $2.1 million in higher
volume-related catering expenses between the same sets of comparative periods.

In 2001, as compared to 2000, the Company incurred approximately $1.8 million in
higher expenses for mishandled baggage and passenger inconvenience due to flight
delays and cancellations.

Ground Package Cost. Ground package cost is incurred by the Company with hotels,
car rental  companies,  cruise lines and similar  vendors who provide ground and
cruise  accommodations  to Ambassadair and ATALC customers.  Ground package cost
decreased  17.1% to $42.2 million in 2001, as compared to $50.9 million in 2000.


                                       33
<PAGE>

Ground package costs vary based on the mix of vacation  destinations served, the
quality and types of ground  accommodations  offered,  and  general  competitive
conditions in the Company's markets, all of which factors can change from period
to period.  This decline was more significant than the decline in ground package
revenue in 2001 as compared to 2000,  because  the Company  received  discounted
hotel pricing in the last half of the year due to the weakening  economy and the
reduction in travel demand after the September 11 attacks.

Other Selling Expenses.  Other selling expenses are comprised  primarily of fees
paid to computer  reservation  systems ("CRS") for scheduled  service  bookings,
credit card  discount  expenses  incurred  when selling  single seats and ground
packages to customers  using credit cards for payment,  and toll-free  telephone
services  provided to single-seat and vacation package customers who contact the
Company directly to book reservations. Other selling expenses increased 13.4% to
$41.6 million in 2001, as compared to $36.7 million in 2000.

Approximately $3.7 million of this increase in 2001 resulted from an increase in
CRS fees. This increase resulted  partially from the growth in single-seat sales
volumes between  periods and partially  because of increases in rates charged by
CRS systems for improved  booking  functionality.  Credit card discount  expense
increased  $1.5 million as compared to 2000,  primarily due to higher volumes of
scheduled service tickets sold using credit cards as form of payment.

Commissions. The Company incurs commissions expense in association with the sale
by travel agents of vacation packages and single seats on scheduled service.  In
addition,   the  Company  incurs  commissions  to  secure  some  commercial  and
military/government  charter  business.  Commissions  expense decreased 11.0% to
$34.8 million in 2001, as compared to $39.1 million in 2000.

Approximately  $3.8 million of the decrease in  commissions in 2001, as compared
2000, was attributable to lower military  commissions,  which is consistent with
the decrease in military revenue between the same time periods. The Company also
experienced a decrease of $2.5 million between 2001 and 2000 in commissions paid
to travel  agents by ATALC,  which is  consistent  with the  decrease in related
revenues for that affiliate.  These decreases were partially offset by increases
in scheduled service commissions of $2.2 million between 2001 and 2000 due to an
increase in scheduled service sales made by travel agents.

Advertising.  Advertising  expense  increased 20.0% to $26.4 million in 2001, as
compared to $22.0  million in 2000.  The Company  routinely  incurs  advertising
costs primarily to support  single-seat  scheduled service sales and the sale of
air and  ground  packages.  In  2001,  the  Company  increased  its  advertising
(introducing a new marketing  campaign)  primarily in Chicago in connection with
the arrival of the new Boeing 737-800 and 757-300  aircraft,  the opening of new
ticketing  and  baggage  claim  facilities  at   Chicago-Midway   Airport,   the
announcement  of new scheduled  service  destinations,  and the promotion of low
fares as  compared  to the  competition.  The  Company  expects to  continue  to
increase  advertising  expenditures as it seeks to increase consumer  preference
for the Company's enhanced product,  especially in its important  Chicago-Midway
hub.

The Company also incurred $6.3 million of incremental  advertising costs in 2001
associated  with  rebuilding  customer  demand after the  September 11 terrorist
attacks,  but due to their  unusual  nature,  these  expenses  were  included as
special  charges  on  the  income  statement.   See  "Financial  Statements  and
Supplementary  Data - Notes  to  Consolidated  Financial  Statements  - Note 2 -
Impact of Terrorist Attacks on September 11, 2001."

Facilities and Other Rentals.  Facilities and other rentals  include the cost of
all  ground  facilities  that are  leased by the  Company  such as at  airports,
regional  sales offices and general  offices.  The cost of facilities  and other
rentals  increased  27.8% to $20.2 million in 2001, as compared to $15.8 million
in 2000.  Growth in facilities costs between periods was primarily  attributable


                                       34
<PAGE>

to the need to provide maintenance, flight crew and passenger service facilities
at airport  locations to support new scheduled  service  destinations and higher
frequencies  to existing  destinations.  The  Company  also began  occupancy  of
significantly  expanded  and  improved  passenger  check-in  and  baggage  claim
facilities at Chicago-Midway Airport beginning in March 2001.

Special Charges.  Special charges represent  expenses arising from September 11,
2001  terrorist  attacks  which have been  classified as unusual in nature under
Accounting  Principles Board Opinion No. 30, Reporting the Results of Operations
-  Reporting  the  Effects  of  Disposal  of  a  Segment  of  a  Business,   and
Extraordinary,  Unusual and Infrequently Occurring Events and Transactions ("APB
30"). Special charges incurred in 2001 amounted to $21.5 million. For additional
details with  respect to the special  charges,  see  "Financial  Statements  and
Supplementary Data - Notes to Consolidated Financial Statements - Note 2- Impact
of Terrorist Attacks on September 11, 2001."

Impairment Loss. Following the events of September 11, 2001, the Company decided
to retire its Boeing 727-200 fleet earlier than originally planned.  Most of the
aircraft  were  retired  from  revenue  service in the  fourth  quarter of 2001,
although some are being used for charter service through the first half of 2002.
In accordance  with FAS 121, the Company  determined  that the estimated  future
undiscounted cash flows expected to be generated by the Boeing 727-200s was less
than the net book value of these  aircraft  and the  related  rotable  parts and
inventory.  Therefore,  these assets were impaired  under FAS 121. In 2001,  the
Company recorded an asset impairment charge on these assets of $44.5 million.

Also, in the fourth quarter of 2001, the Company  determined that, in accordance
with FAS 121,  the  estimated  future  undiscounted  cash flows  expected  to be
generated by the Lockheed  L-1011-50 and 100 fleet was less than the current net
book  value of these  aircraft  and the  related  rotable  parts and  inventory.
Therefore, the assets were impaired under FAS 121. The Company recorded an asset
impairment charge on these assets of $67.8 million in 2001.

FAS 121 requires that whenever events or circumstances indicate that the Company
may not be able to recover the net book value of its  productive  assets through
future cash flows,  an  assessment  must be  performed  of expected  future cash
flows, and undiscounted  estimated future cash flows must be compared to the net
book value of these  productive  assets to determine if impairment is indicated.
The Company had been routinely performing FAS 121 impairment evaluations for its
Lockheed L-1011-50 and 100, and Boeing 727-200 fleets for several quarters,  due
to their expected  replacement by newer aircraft which were ordered in May 2000.
Prior to the events of September 11, 2001 no impairment was indicated  under FAS
121  for  either  fleet.   However,   the  terrorist  attacks  of  September  11
significantly  reduced demand for air travel in the United  States,  causing the
Company, and most major airlines, to reduce available seat capacity by 20%. This
reduction in future  flying caused the Company to reduce its estimates of future
cash flows for these  fleets over their  remaining  useful  lives,  causing both
fleets to meet the impairment criteria of FAS 121.

The  application  of FAS 121  requires the use of  significant  judgment and the
preparation of numerous significant estimates. The Company estimated future cash
flows from the  productive  use of these fleets by  estimating  the expected net
cash  contribution  from revenues  less  operating  expenses,  and adjusting for
estimated  cash outflows for heavy  maintenance  and estimated cash inflows from
final disposal of the assets. Such estimates were required for up to seven years
into the future.  Although the Company believes that its estimates of cash flows
in the application of FAS 121 were reasonable, and were based upon all available
information,  including extensive  historical cash flow data about the prior use
of these fleets, such estimates  nevertheless required substantial judgments and
were based upon material assumptions about future events.


                                       35
<PAGE>

Further  significant  assumptions  were required  concerning  the estimated fair
market value of both fleets,  since FAS 121 specifies  that  impaired  assets be
written down to their  estimated  fair market  value by recording an  impairment
charge to  earnings.  As  provided  under FAS 121,  the Company  primarily  used
discounted  cash flow analysis,  together with other available  information,  to
estimate fair market values.  Such estimates were significant in determining the
amount of the  impairment  charge to be recorded in 2001,  which could have been
materially  different under different sets of assumptions and estimates.  As FAS
121  requires  the  Company  to  continuously  evaluate  fair  market  values of
previously  impaired assets, it is possible that future estimates of fair market
value may result in additional material charges to earnings,  if those estimates
indicate a material  reduction in fair market value as compared to the estimates
made at the end of 2001.

For additional details with respect to these asset  impairments,  see "Financial
Statements and Supplementary Data - Notes to Consolidated Financial Statements -
Note 16 - Asset Impairment."

U.S.  Government Grant. On September 22, 2001 President Bush signed into law the
Air  Transportation  Safety and System  Stabilization  Act ("Act").  Among other
things,  this  legislation  was  enacted to provide  direct  payments of cash to
domestic  U.S.   airlines  to  compensate  them  for  certain   economic  losses
attributable  to  the  terrorist  attacks  of  September  11,  2001.  Under  the
provisions of the Act, U.S. domestic passenger and cargo airlines may receive up
to $5.0  billion in total cash  grants,  with $4.5  billion  being  specifically
reserved for passenger airlines such as the Company.  Each passenger airline may
receive no more cash than its pro rata share of the $4.5 billion, based upon the
ratio of that  airline's ASMs to total  passenger  airline ASMs for the month of
August 2001.  However,  cash compensation paid to any airline must be based upon
actual direct and incremental losses incurred by that airline, between September
11, 2001 and December 31, 2001,  as a direct  result of the  terrorist  attacks.
Therefore,  the  amount of cash  received  by any  airline  is limited by actual
direct and  incremental  losses  incurred,  which could result in payments to an
airline which are less that the maximum amount  permitted  under the upper limit
provided for by the August 2001 ASM calculations.

The DOT was directed by the Act to administer the distribution of grant money to
eligible air carriers.  The DOT subsequently  published  regulations under which
eligible air carriers were required to submit  applications for disbursements of
grant monies. Such applications required financial  information,  documenting to
the  satisfaction  of the DOT that  the air  carrier  had  incurred  direct  and
incremental losses attributable to the terrorist attacks.  Two such applications
were filed by many passenger airlines,  including the Company,  during the third
and fourth quarters of 2001. As a result of the approval of its  applications by
the DOT, the Company received payments of $32.6 million in the third quarter and
$11.9 million in the fourth quarter.  The Company accrued total U.S.  Government
grant  revenues  of $66.3  million in the second  half of 2001  relating  to its
estimates of direct and incremental  losses it incurred during that time period,
recording a current receivable of $21.8 million for the balance of cash expected
to be paid in 2002.

Based  upon  the  Company's  current  estimate  of its  ratio  of ASMs to  total
passenger  airline  ASMs in August  2001 (which  calculations  have not yet been
finalized or approved by the DOT), the Company estimates that the maximum amount
of cash  compensation  available to it under the Act for direct and  incremental
losses incurred is approximately  $74.0 million.  The DOT is expected to publish
soon final  rules  concerning  certain  agreed  upon  procedures  ("AUPs") to be
performed by certified public  accountants on financial and other information to
be included in air carriers' third and final  applications for grant assistance.
The DOT has not specified when final  applications,  including  reports on AUPs,
will be accepted for processing,  but the Company currently  estimates that this
is likely to occur in the second quarter of 2002.

                                       36
<PAGE>

Generally  accepted   accounting   principles  in  the  United  States  ("GAAP")
pertaining  to revenue  recognition  provide that revenue  should be  recognized
when: (1)  substantially all requirements or conditions to earn that revenue are
completed or satisfied; (2) the dollar amount of such revenues can be reasonably
estimated;  and (3)  such  revenues  have  been  realized  in  cash,  or  future
realization in cash is reasonably assured.

The  application  of  GAAP to the  specific  circumstances  of the Act  required
significant  judgments and estimates to be made by the Company. The term "direct
and incremental  losses  attributable to the terrorist  attacks of September 11,
2001"  was not  defined  in detail by  either  the Act or the  interpreting  DOT
regulations,   nor  were  specific  measurement   guidelines  provided  for  any
particular loss item. Such terms as "direct," "incremental," and "loss" can have
different meanings in common usage and in economic, accounting or other business
literature.  In its two grant applications to the DOT in 2001, the Company chose
to use GAAP in  selecting  and  measuring  direct and  incremental  losses to be
reimbursed under the Act.

The Company applied  significant  judgment in determining  which GAAP loss items
met the conditions for reimbursement  under the Act and associated  regulations,
and applied  further  significant  judgments in  estimating  the amounts of such
losses.  For example,  the Company estimated revenues lost as a direct result of
reduced air travel demand  immediately after the attacks and claimed the loss of
these revenues as reimbursable  under the Act. Estimates of such losses required
substantial  judgment,  as they needed to be made with reference to expectations
of what  revenues  would  likely have been if the attacks had never taken place.
The  Company  used  all  objective  evidence  available  to  it in  making  such
estimates.  In the case of estimating  lost revenues,  the Company  analyzed and
made comparisons of post-attack  revenues to actual revenues earned  immediately
prior to the attacks, as well as to actual revenues earned by the Company in the
same months of prior years,  and with  reference to revenue  forecasts  prepared
prior to the attacks. The amounts of U.S. Government grant compensation recorded
in 2001 could have been materially  different  using  different  assumptions and
judgments.

The  DOT,  upon  processing  the  Company's   second   application,   disallowed
reimbursement  to the Company  under the Act of certain  losses  included in the
Company's   results  of  operations   under  GAAP  in  2001.   These  disallowed
reimbursements  included  impairment  losses  on the  Company's  Boeing  727-200
aircraft and future rent payments due under Boeing  727-200  leases for aircraft
idled  immediately  after the  attacks.  Although  the DOT did not  provide  any
official  reasons for this  decision to the Company,  nor has it  published  any
related guidance in its regulations concerning the treatment of these loss items
under the Act,  the Company has not accrued any U.S.  Government  grant  revenue
pertaining to these  disallowed  items.  The Company is protesting  the specific
disallowances  made by the DOT on its  applications.  If the Company prevails in
this protest,  it could record additional U.S.  Government grant compensation of
up to $7.7 million.

Under the provisions of the Act, all airlines  receiving cash  compensation  are
subject to audit by agencies of the U.S.  Government for up to five years. It is
possible  that upon audit by such  agencies loss items for which the Company has
recorded U.S.  Government  grant  revenues in 2001 may be  disallowed  under new
regulations,  or according  to audit  interpretations  by those  agencies of the
Company's  accounting  estimates and  judgments.  It is therefore  possible that
material  adjustments to U.S.  Government grant revenues recorded in 2001 may be
required in future years.

Other  Operating  Expenses.  Other operating  expenses  increased 10.9% to $84.6
million in 2001, as compared to $76.3 million in 2000.  The purchase by ATALC of
charter air  services  from  airlines  other than the  Company was $4.0  million
higher in 2001 than in 2000.  Flight  simulator  rentals  increased $3.3 million
between years due to the crew  training  required to introduce the new aircraft.


                                       37
<PAGE>

The  Company  also  recorded  a loss on  disposal  of three  Lockheed  L-1011-50
aircraft  in 2001,  as  compared  to one  Lockheed  L-1011-50  aircraft in 2000,
resulting in an increase of loss on disposal of $4.4 million in 2001 as compared
to 2000.  These  increases  were  partially  offset  by net  decreases  in other
expenses included in this category, none of which were individually significant.

Interest  Income and Expense.  Interest  expense in 2001 decreased 4.4% to $30.1
million,  as  compared  to  $31.5  million  in  2000.  The  Company  capitalized
additional  interest  totaling  $10.8  million in 2001,  as compared to 2000, on
aircraft pre-delivery deposits. Additional interest expense of $7.4 million, all
of which was  capitalized,  was  incurred  in 2001,  as  compared  to 2000,  for
incremental borrowings made to fund a portion of aircraft pre-delivery deposits.

The Company also  incurred  approximately  $2.0  million in interest  expense in
2001, relating to three Boeing 757-300 aircraft which were temporarily  financed
with bridge debt  immediately  after the September 11, 2001  terrorist  attacks.
These aircraft were refinanced with operating leases at the end of 2001.

The Company  invested  excess cash balances  primarily in  commercial  paper and
money market funds and thereby  earned $5.3 million in interest  income in 2001,
as compared to $8.4  million in 2000.  The decrease in interest  income  between
periods is mainly due to a decline in the average  interest rate earned  between
periods on these investments.

Income Tax Expense.  In 2001,  the Company  recorded $39.8 million in income tax
credits  applicable to $116.1 million of pre-tax loss for that period,  while in
2000 the Company recorded $4.6 million in income tax credits applicable to $19.9
million of pre-tax loss.  The  effective tax rate  applicable to credits in 2001
was 34.2%, as compared to an effective tax rate of 23.1% in 2000.

Income  tax  credits  in  both   periods   were   affected   by  the   permanent
non-deductibility for federal income tax purposes of 40% of certain amounts paid
for  crew  per  diem.  The  value  of  these   permanent   differences  was  not
significantly  different  in 2001 as compared  to 2000,  so they  impacted  2000
taxable loss more significantly.


                                       38
<PAGE>

Year Ended December 31, 2000, Versus Year Ended December 31, 1999

Consolidated Flight Operations and Financial Data

The following table sets forth, for the periods indicated, certain key operating
and financial data for the consolidated  flight operations of the Company.  Data
shown for "Jet"  operations  include  the  consolidated  operations  of Lockheed
L-1011,  Boeing  727-200 and Boeing  757-200  aircraft  in all of the  Company's
business units. Data shown for "J31/Saab"  operations  include the operations of
Jetstream  31 and Saab 340B  propeller  aircraft  by Chicago  Express as the ATA
Connection.

<TABLE>
<CAPTION>
                                                       Twelve Months Ended December 31,
                                             -----------------------------------------------------------
                                                 2000           1999         Inc (Dec)      % Inc (Dec)
                                                 ----           ----         ---------      -----------
<S>                                          <C>            <C>              <C>                  <C>
Departures Jet                                   55,714         50,207           5,507            10.97
Departures J31/Saab (a)                          18,985         17,716           1,269             7.16
                                             -----------------------------------------------------------
     Total Departures (b)                        74,699         67,923           6,776             9.98
                                             -----------------------------------------------------------

Block Hours Jet                                 172,824        157,481          15,343             9.74
Block Hours J31/Saab                             18,708         17,979             729             4.05
                                             -----------------------------------------------------------
     Total Block Hours (c)                      191,532        175,460          16,072             9.16
                                             -----------------------------------------------------------

RPMs Jet (000s)                              11,760,135     10,913,081         847,054             7.76
RPMs J31/Saab (000s)                             56,669         35,922          20,747            57.76
                                             -----------------------------------------------------------
     Total RPMs (000s) (d)                   11,816,804     10,949,003         867,801             7.93
                                             -----------------------------------------------------------

ASMs Jet (000s)                              16,295,730     15,025,000       1,270,730             8.46
ASMs J31/Saab (000s)                             94,371         57,630          36,741            63.75
                                             -----------------------------------------------------------
     Total ASMs (000s) (e)                   16,390,101     15,082,630       1,307,471             8.67
                                             -----------------------------------------------------------

Load Factor Jet                                   72.17          72.63           (0.46)           (0.63)
Load Factor J31/Saab                              60.05          62.33           (2.28)           (3.66)
                                             -----------------------------------------------------------
     Total Load Factor (f)                        72.10          72.59           (0.49)           (0.68)
                                             -----------------------------------------------------------

Passengers Enplaned Jet                       7,686,077      6,838,339         847,738            12.40
Passengers Enplaned J31/Saab                    320,062        206,304         113,758            55.14
                                             -----------------------------------------------------------
     Total Passengers Enplaned (g)            8,006,139      7,044,643         961,496            13.65
                                             -----------------------------------------------------------

Revenue $ (000s)                              1,291,553      1,122,366         169,187            15.07
RASM in cents (h)                                  7.88           7.44            0.44             5.91
CASM in cents (i)                                  7.86           6.84            1.02            14.91
Yield in cents (j)                                10.93          10.25            0.68             6.63
</TABLE>

 See footnotes (a) through (j) on pages 22 and 23.

Operating Revenues

Total  operating  revenues in 2000 increased 15.2% to $1.292 billion from $1.122
billion in 1999. This increase was due to a $128.7 million increase in scheduled
service  revenues,  a $62.3  million  increase  in  military/government  charter
revenues and a $1.7 million  increase in ground  package  revenues,  offset by a
$6.4  million  decrease  in  other  revenues  and a $17.1  million  decrease  in
commercial charter revenues.

                                       39
<PAGE>

Scheduled  Service  Revenues.  The following  table sets forth,  for the periods
indicated,  certain key operating and financial  data for the scheduled  service
operations of the Company.  Data shown for "Jet" operations include the combined
operations of Lockheed  L-1011,  Boeing 727-200 and Boeing  757-200  aircraft in
scheduled service. Data shown for "J31/Saab" include the operations of Jetstream
31 and Saab 340B propeller aircraft by Chicago Express as the ATA Connection.

<TABLE>
<CAPTION>
                                                       Twelve Months Ended December 31,
                                             -----------------------------------------------------------
                                                 2000           1999         Inc (Dec)      % Inc (Dec)
                                                 ----           ----         ---------      -----------
<S>                                          <C>             <C>             <C>                  <C>
Departures Jet                                   40,892         35,402           5,490            15.51
Departures J31/Saab (a)                          18,985         17,716           1,269             7.16
                                             -----------------------------------------------------------
     Total Departures (b)                        59,877         53,118           6,759            12.72
                                             -----------------------------------------------------------

Block Hours Jet                                 118,473        104,555          13,918            13.31
Block Hours J31/Saab                             18,708         17,979             729             4.05
                                             -----------------------------------------------------------
     Total Block Hours (c)                      137,181        122,534          14,647            11.95
                                             -----------------------------------------------------------

RPMs Jet (000s)                               7,700,639      6,828,181         872,458            12.78
RPMs J31/Saab (000s)                             56,669         35,922          20,747            57.76
                                             -----------------------------------------------------------
     Total RPMs (000s) (d)                    7,757,308      6,864,103         893,205            13.01
                                             -----------------------------------------------------------

ASMs Jet (000s)                              10,025,603      8,809,564       1,216,039            13.80
ASMs J31/Saab (000s)                             94,371         57,630          36,741            63.75
                                             -----------------------------------------------------------
     Total ASMs (000s) (e)                   10,119,974      8,867,194       1,252,780            14.13
                                             -----------------------------------------------------------

Load Factor Jet                                   76.81          77.51           (0.70)           (0.90)
Load Factor J31/Saab                              60.05          62.33           (2.28)           (3.66)
                                             -----------------------------------------------------------
     Total Load Factor (f)                        76.65          77.41           (0.76)           (0.98)
                                             -----------------------------------------------------------

Passengers Enplaned Jet                       5,873,598      4,878,643         994,955            20.39
Passengers Enplaned J31/Saab                    320,062        206,304         113,758            55.14
                                             -----------------------------------------------------------
     Total Passengers Enplaned (g)            6,193,660      5,084,947       1,108,713            21.80
                                             -----------------------------------------------------------

Revenue $ (000s)                                753,301        624,647         128,654            20.60
RASM in cents (h)                                  7.44           7.04            0.40             5.68
Yield in cents (j)                                 9.71           9.10            0.61             6.70
Revenue per segment $ (k)                        121.62         122.84           (1.22)           (0.99)
</TABLE>

See footnotes (a) through (j) on pages 22 and 23.
See footnote (k) on page 24.

Scheduled service revenues in 2000 increased 20.6% to $753.3 million from $624.6
million in 1999. Scheduled service revenues were 58.3% of consolidated  revenues
in 2000, as compared to 55.7% of consolidated revenues in 1999.

The Company's  scheduled service at  Chicago-Midway  accounted for approximately
63.5% of scheduled  service ASMs and 83.5% of scheduled  service  departures  in
2000,  as compared to 56.7% and 77.2%,  respectively,  during  1999.  During the
second and third quarters of 2000, the Company began  operating  nonstop flights
to  Ronald   Reagan   Washington   National   Airport,   Boston,   Seattle   and
Minneapolis-St.  Paul,  none of which were served in the  comparable  periods of
1999. In addition to this new service, the Company served the following existing
jet markets in both years: Dallas-Ft.  Worth, Denver, Ft. Lauderdale, Ft. Myers,
Las Vegas,  Los Angeles,  New York's John F.  Kennedy  Airport  (seasonal),  New


                                       40
<PAGE>

York's LaGuardia Airport, Orlando,  Phoenix, St. Petersburg,  San Francisco, San
Juan and Sarasota.  The Company,  in cooperation  with a tour operator  partner,
began nonstop service to Hawaii from  Chicago-O'Hare  International  Airport and
New York's  John F.  Kennedy  International  Airport in  December  of 2000,  but
discontinued this service during 2001.

The  Company   operated  94  peak  daily  jet  and  commuter   departures   from
Chicago-Midway in 2000, as compared to 67 in 1999, and served 25 destinations on
a nonstop basis in 2000, as compared to 22 nonstop destinations served in 1999.

The Company's Hawaii service  accounted for 17.0% of scheduled  service ASMs and
4.3% of scheduled  service  departures  in 2000,  as compared to 18.5% and 4.7%,
respectively,  in 1999. The Company  provided nonstop service in both years from
Los  Angeles,  Phoenix  and  San  Francisco  to both  Honolulu  and  Maui,  with
connecting service between Honolulu and Maui.

The Company's Indianapolis service accounted for 12.2% of scheduled service ASMs
and 8.8% of  scheduled  service  departures  in 2000,  as  compared to 14.0% and
10.8%,  respectively,  in 1999. In both years,  the Company  operated nonstop to
Cancun,  Ft.  Lauderdale,  Ft.  Myers,  Las  Vegas,  Los  Angeles  (service  was
discontinued as of August 2000), Orlando, St. Petersburg and Sarasota.

Commercial Charter Revenues.  Commercial charter revenues accounted for 19.1% of
consolidated  revenues in 2000 as compared to 23.5% in 1999. The following table
sets forth, for the periods indicated,  certain key operating and financial data
for the commercial charter operations of the Company.

<TABLE>
<CAPTION>
                                                 Twelve Months Ended December 31,
                                          -------------------------------------------------------
                                            2000          1999        Inc (Dec)      % Inc (Dec)
                                            ----          ----        ---------      -----------
<S>                                       <C>           <C>             <C>               <C>
Departures (b)                                9,722        10,212           (490)          (4.80)
Block Hours (c)                              34,356        37,119         (2,763)          (7.44)
RPMs (000s) (d)                           2,687,051     3,253,165       (566,114)         (17.40)
ASMs (000s) (e)                           3,610,413     4,129,966       (519,553)         (12.58)
Passengers Enplaned (g)                   1,472,340     1,753,237       (280,897)         (16.02)
Revenue $ (000s)                            246,705       263,766        (17,061)          (6.47)
RASM in cents (h)                              6.83          6.39           0.44            6.89
RASM less fuel escalation (l)                  6.47          6.35           0.12            1.89
</TABLE>

See footnotes (b) through (h) on pages 22 and 23.
See footnote (l) on page 27.

Track charter accounted for approximately $192.8 million in revenues in 2000, as
compared  to  $193.8   million  in  1999.   Specialty   charter   accounted  for
approximately $31.5 million in revenues in 2000, as compared to $40.0 million in
1999.

                                       41
<PAGE>

Military/Government  Charter  Revenues.   Military/government  charter  revenues
accounted  for 14.6% of  consolidated  revenues in 2000, as compared to 11.2% in
1999. The following  table sets forth,  for the periods  indicated,  certain key
operating and financial data for the  military/government  charter operations of
the Company.

<TABLE>
<CAPTION>
                                                 Twelve Months Ended December 31,
                                          -------------------------------------------------------
                                            2000          1999        Inc (Dec)      % Inc (Dec)
                                            ----          ----        ---------      -----------
<S>                                       <C>           <C>              <C>                <C>
Departures (b)                                4,961         4,444            517            11.63
Block Hours (c)                              19,443        15,354          4,089            26.63
RPMs (000s) (d)                           1,339,545       818,627        520,918            63.63
ASMs (000s) (e)                           2,605,791     2,027,471        578,320            28.52
Passengers Enplaned (g)                     329,200       199,013        130,187            65.42
Revenue $ (000s)                            188,556       126,213         62,343            49.40
RASM in cents (h)                              7.24          6.23           1.01            16.21
RASM less fuel escalation (m)                  6.88          6.21           0.67            10.79
</TABLE>

See footnotes (b) through (h) on page 22 and 23.
See footnote (m) on page 28.

Ground Package  Revenues.  In 2000,  ground package  revenues  increased 2.7% to
$59.8  million,  as  compared  to $58.2  million  in 1999.  The number of ground
packages sold and the average revenue earned by the Company for a ground package
sale are a function of the seasonal  mix of vacation  destinations  served,  the
quality  and types of ground  accommodations  offered  and  general  competitive
conditions in the Company's markets, all of which factors can change from period
to period.

Other  Revenues.  Other  revenues  decreased  13.1% to $43.1 million in 2000, as
compared to $49.6 million in 1999.

Operating Expenses

Salaries,  Wages and  Benefits.  Salaries,  wages and  benefits  expense in 2000
increased  17.6% to $297.0  million  from  $252.6  million in 1999.  The Company
increased its average equivalent  employees by approximately  20.4% between 2000
and 1999.  This growth was most  significant in categories of employees that are
influenced  directly by flight  activity,  such as flight crews and  maintenance
staff. Beginning in May 2000, the Company replaced its contracted ground handler
at its busiest airport,  Chicago-Midway,  with its own ramp employees.  Although
this  contributed to the increase in salaries,  wages and benefits,  the Company
experienced a corresponding reduction in handling,  landing and navigation fees.
Some further  employment  growth in 2000 was also  provided to improve  customer
service in targeted  areas by  increasing  customer  service  staff,  such as at
airport ticket  counters,  in reservations  facilities and in other staff groups
primarily  involved in  delivering  services to the Company's  customers.  Staff
increases also occurred for Chicago Express as a result of increased  passengers
boarded due to the conversion from 19-seat to 34-seat aircraft in the first nine
months of 2000. The Company also experienced a significant  increase in employee
benefit costs in 2000, as compared to 1999.

These increases in salaries,  wages and benefits costs were partially  offset by
the  elimination  of employee  incentive  awards in 2000.  In 1999,  the Company
recognized  $6.4  million in incentive  awards  while no  incentive  awards were
earned in 2000.

                                       42
<PAGE>

Fuel and Oil. Fuel and oil expense increased 60.8% to $274.8 million in 2000, as
compared to $170.9  million in 1999.  The Company  consumed 8.1% more gallons of
jet fuel for flying  operations  between  2000 and 1999,  which  resulted  in an
increase in fuel expense of  approximately  $14.1 million between  periods.  Jet
fuel consumption  increased primarily due to the increased number of block hours
of jet flying  operations  between  periods.  The Company flew 172,824 jet block
hours in 2000,  as compared  to 157,481 jet block hours in 1999,  an increase of
9.7% between years.

During  2000,  the  Company's  average  cost per  gallon  of jet  fuel  consumed
increased by 49.7% as compared to 1999, resulting in an increase in fuel and oil
expense of approximately  $91.6 million between periods.  The Company  contracts
with most commercial  charter  customers,  the U.S.  military,  and with certain
bulk-seat  purchasers to provide for fuel  escalation  revenue,  which partially
offset the impact of higher fuel prices.  In 2000, the Company  recognized $26.4
million in fuel escalation  revenue,  as compared to $1.8 million  recognized in
1999.

The Company  implemented a fuel hedge program  beginning in the third quarter of
2000,  consisting of swap  agreements  for heating oil. As of December 31, 2000,
the Company had entered  into swap  agreements  for  approximately  13.6 million
gallons of heating oil for future  delivery  between  January 2001 and September
2001, which  represented  approximately  6.3% of total expected fuel consumption
for that period.

Depreciation and Amortization.  Depreciation and amortization  expense increased
30.2% to $125.0 million in 2000, as compared to $96.0 million in 1999.

Depreciation  expense  attributable  to owned  airframes,  engines and leasehold
improvements  increased  $9.3 million in 2000, as compared to 1999.  The Company
added four owned  Lockheed  L-1011-500s,  to the Company's  fleet from late 1999
through  2000.  The Company also  purchased  seven  hushkits  for  Boeing727-200
aircraft and two spare engines for the Lockheed L-1011-500s late in 1999 through
2000. The Company also increased its investment in rotable parts,  furniture and
fixtures,  and computer  hardware and software,  and increased its provision for
inventory obsolescence and amortization of debt issue costs between years. These
changes resulted in an increase in depreciation and amortization expense of $8.4
million in 2000, as compared to 1999.

Amortization of capitalized engine and airframe overhauls increased $8.5 million
in  2000,  as  compared  to  1999,  after  including   amortization  of  related
manufacturers' credits. Changes to the cost of overhaul amortization were partly
due to the  increase in total block hours and cycles  flown  between  comparable
periods for the  Lockheed  L-1011  fleet,  since such  expense  varies with that
activity, and partly due to the completion of more engine and airframe overhauls
in 2000 for the Boeing 727-200 and Lockheed  L-1011 fleets.  Rolls-Royce-powered
Boeing 757-200  aircraft,  13 of which were delivered new from the  manufacturer
since late 1995, are starting to generate engine and airframe  overhaul expense.
This resulted in a $1.2 million increase in amortization costs between periods.

The cost of engine  overhauls that become worthless due to early engine failures
and which  cannot be  economically  repaired  is  charged  to  depreciation  and
amortization   expense  in  the  period  the  engine  fails.   Depreciation  and
amortization  expense attributable to these early engine failures increased $2.5
million in 2000,  as compared to 1999.  When these early engine  failures can be
economically  repaired, the related repairs are charged to aircraft maintenance,
materials and repairs expense.

Aircraft  Rentals.  Aircraft  rentals  expense for 2000 increased 22.8% to $72.1
million from $58.7 million in 1999. The Company accepted  delivery of six Boeing
757-200 aircraft from the  manufacturer  (two in the fourth quarter of 1999, two
in June 2000 and two in November 2000), adding $10.8 million to aircraft rentals


                                       43
<PAGE>

expense in 2000, as compared to 1999. Chicago Express aircraft rentals increased
by $2.4 million in 2000 as compared to 1999,  due to the  replacement of 19-seat
Jetstream  aircraft with 34-seat Saab 340B  aircraft.  The Company also incurred
$2.8 million in higher rentals in 2000, as compared to 1999, due to the lease of
spare engines to support the Boeing 757-200 and Lockheed  L-1011-500 fleets. The
Company  purchased 12 Boeing 727-200  aircraft between the first quarter of 1999
and fourth quarter of 2000, which had previously been financed through operating
leases,  resulting  in a decrease in aircraft  rentals of $1.5  million  between
periods.

Handling,  Landing and Navigation  Fees.  Handling,  landing and navigation fees
increased by 9.1% to $97.4 million in 2000 as compared to $89.3 million in 1999.
The total number of system-wide  jet departures  between 2000 and 1999 increased
by 11.0% to 55,714 from  50,207.  The lower rate of growth in handling  costs in
2000,  as  compared  to  the  growth  in  departures,  was  partly  due  to  the
implementation of self-handling on the ramp at Chicago-Midway  Airport beginning
in May 2000, which was done with third-party  contractors  during all of 1999. A
corresponding   increase  in  salaries,   wages  and  benefits  attributable  to
self-handling was experienced during the remainder of 2000.

Aircraft Maintenance, Materials and Repairs. Aircraft maintenance, materials and
repair  expense  increased  26.6% to $70.4 million in 2000, as compared to $55.6
million in 1999. The Company  performed a total of 62 maintenance  checks on its
fleet  during 2000 as compared to 53 such checks in 1999.  The cost of materials
consumed  and  components  repaired  in  association  with such checks and other
maintenance activity increased by $9.0 million between 2000 and 1999.

The  Company  recognized  an increase in  aircraft  maintenance,  materials  and
repairs of $2.5 million in 2000, as compared to 1999,  due to the  consolidation
of the results of its wholly owned subsidiary,  Chicago Express.  The results of
operation for Chicago Express were  consolidated  with the Company  beginning in
May 1999.

Crew and  Other  Employee  Travel.  The cost of crew and other  employee  travel
increased  32.4% to $65.8  million in 2000 as compared to $49.7 million in 1999.
Positioning and hotel costs increased significantly in 2000 due primarily to the
substantial  increase  in  military  departures  in 2000,  as  compared to 1999.
Military flights often operate to and from points remote from the Company's crew
bases, thus requiring significant positioning expenditures for cockpit and cabin
crews on other  airlines.  Also,  due to heavy airline  industry load factors in
2000,  the Company paid higher  average fares to position  crews.  Average hotel
costs are also higher for military operations since hotel rates at international
locations generally exceed domestic U.S. hotel rates.

Passenger  Service.  For 2000 and 1999,  catering  represented  78.8% and 82.0%,
respectively,  of total passenger  service expense.  The total cost of passenger
service  increased  16.3% to $45.6 million in 2000, as compared to $39.2 million
in 1999.  The  Company  experienced  an increase  of  approximately  2.1% in the
average unit cost of catering each  passenger  between 2000 and 1999,  primarily
because in 2000 there were relatively more military  passengers in the Company's
business mix, who are provided a more expensive catering product due to military
catering  specifications and the longer average duration of these flights.  This
resulted  in a  price-and-business-mix  increase  of $0.8  million  in  catering
expense in 2000, as compared to 1999.

Total jet passengers boarded, however,  increased 12.4% between years, resulting
in approximately $3.7 million in higher volume-related catering expenses between
the same sets of comparative periods.

                                       44
<PAGE>

In 2000, as compared to 1999, the Company experienced increased departure delays
over 15 minutes of 34.3%. These irregular operations resulted in higher costs to
handle inconvenienced  passengers and misconnected baggage. In 2000, as compared
to 1999, such costs were $2.6 million higher.

Ground  Package Cost.  Ground  package cost  increased  3.9% to $50.9 million in
2000, as compared to $49.0 million in 1999.  Ground  package costs  increased in
proportion to the increase in ground package revenues.

Other Selling Expenses.  Other selling expenses increased 30.6% to $36.7 million
in 2000,  as compared to $28.1  million in 1999.  Approximately  $6.3 million of
this  increase in 2000  resulted  from an increase  in CRS fees.  This  increase
resulted  partially from the growth in single-seat sales volumes between periods
and  partially  from  increases  in rates  charged by CRS  systems.  Credit card
discount expense increased $3.0 million in 2000, as compared to 1999,  primarily
due to higher  volumes of scheduled  service  tickets sold using credit cards as
form of payment. Toll-free telephone services decreased by $0.8 million in 2000,
as  compared  to 1999,  due to billing  rate  reductions  secured  from  related
vendors.

Commissions.  Commissions  expense  remained  unchanged at $39.1 million between
2000 and 1999. The Company incurred higher military  commissions expense of $4.4
million  in 2000,  as  compared  to 1999,  which is  consistent  with  growth in
military  revenues  between  years.  These  increases  were  largely  offset  by
decreases in scheduled  service  commissions  of $4.9 million due to an industry
reduction in travel agency  commission from 8.0% to 5.0% effective in the fourth
quarter of 1999.

Advertising.  Advertising  expense  increased 18.3% to $22.0 million in 2000, as
compared to $18.6  million in 1999.  Such expenses were higher in the spring and
summer months of 2000, as advertising  support was provided for the introduction
of scheduled  service to the new  destinations of Boston,  Seattle,  Washington,
D.C. and  Minneapolis-St.  Paul.  Advertising  also  increased  due to increased
marketing emphasis on commuter and Florida markets in 2000.

Facilities and Other Rentals. The cost of facilities and other rentals increased
18.8% to $15.8 million in 2000, as compared to $13.3 million in 1999.  Growth in
facilities  costs  between  periods was  primarily  attributable  to the need to
provide  facilities  at airport  locations  to  support  new  scheduled  service
destinations and expanded services at existing destinations.

Other  Operating  Expenses.  Other  operating  expenses  increased 5.7% to $76.3
million in 2000, as compared to $72.2 million in 1999.  The purchase by ATALC of
charter air services from airlines  other than the Company was $7.5 million less
in 2000 than in 1999,  due to the  increased  utilization  of the  Company's own
aircraft for ATALC charter programs.  In 1999, the Company incurred $3.1 million
in Chicago  Express  code-share  expenses,  which were not  incurred  during any
period in 2000.  Other expenses  included in this category  increased in 2000 as
the Company's  flight  activity  increased.  Expenses  increasing year over year
included flight simulator rentals,  professional  fees,  insurance and supplies.
The  Company  also  incurred  higher  costs  associated  with  irregular  flight
operations in 2000, as compared to 1999.

Interest Income and Expense.  Interest  expense in 2000 increased 50.0% to $31.5
million,  as compared to $21.0 million in 1999. The increase in interest expense
between periods was primarily due to changes in the Company's  capital structure
resulting from the sale in December 1999 of $75.0 million in principal amount of
10.5% unsecured  senior notes.  Additional  interest expense of $7.7 million was
recorded in 2000 applicable to these notes, as compared to 1999.


                                       45
<PAGE>

The Company  invested excess cash balances in short-term  government  securities
and commercial paper and thereby earned $8.4 million in interest income in 2000,
as  compared  to $5.4  million in 1999,  when less cash was  available  for such
investment.

Other Non-operating  Income.  Other non-operating income decreased 82.4% to $0.6
million in 2000,  as  compared  to $3.4  million in 1999.  The  Company  holds a
membership  interest  in the SITA  Foundation  ("SITA"),  an  organization  that
provides data  communication  services to the airline  industry.  SITA's primary
asset is its ownership in Equant N.V. ("Equant"). In February and December 1999,
SITA sold a portion of its interest in Equant in a secondary public offering and
distributed  the pro rata  proceeds  to certain of its  members  (including  the
Company) that elected to  participate  in the offering.  The Company  recorded a
gain of $1.7  million in the first  quarter  of 1999 and a similar  gain of $1.3
million in the fourth quarter of 1999.

Income Tax Expense.  In 2000,  the Company  recorded  $4.6 million in income tax
credits  applicable to $19.9  million of pre-tax loss for that period,  while in
1999 income tax expense was $30.5  million on pre-tax  income of $77.8  million.
The effective tax rate  applicable to credits in 2000 was 23.1%,  as compared to
an effective tax rate of 39.1% in 1999.

Income tax  expense in both sets of  comparative  periods  was  affected  by the
permanent  non-deductibility  for federal income tax purposes of a percentage of
certain amounts paid for crew per diem (40% in 2000 and 45% in 1999). The effect
of this and other  permanent  differences  on the effective  income tax rate for
financial  accounting  purposes is to increase the effective  rate as amounts of
pre-tax  income  decrease and to decrease tax credits  otherwise  applicable  to
pre-tax losses.

Liquidity and Capital Resources

Cash Flows.  In 2001,  2000 and 1999, net cash provided by operating  activities
was $144.4  million,  $111.7  million  and  $152.7  million,  respectively.  The
increase  in cash  provided  by  operating  activities  between  2000  and  2001
primarily  resulted  from  changes  in  operating  assets and  liabilities,  the
non-cash  impact of  impairment  losses  recognized  on the Boeing  727-200  and
Lockheed  L-1011-50  and  100  fleets,   partially  offset  by  lower  earnings.
Significant changes in operating assets and liabilities in 2001 included: (1) an
increase in receivables,  primarily  comprised of a receivable for $21.8 million
for U.S.  Government grant compensation due under the Air Transportation  Safety
and  System  Stabilization  Act;  (2) an  increase  in trade  payables  of $16.9
million,  representing  extended  payment  terms  negotiated  with trade vendors
subsequent  to the  events of  September  11;  and (3) an  increase  in  accrued
expenses  of $32.8  million,  approximately  $16.0  million of which  represents
deferred payment of certain federal and state taxes authorized by several taxing
jurisdictions  until the first quarter of 2002.  The decrease in operating  cash
flows  between  1999 and  2000 was  primarily  attributable  to lower  earnings,
partially offset by higher depreciation and amortization charges.

Net cash used in investing  activities  was $129.8  million,  $290.8 million and
$305.7  million,  respectively,  in the years ended December 31, 2001,  2000 and
1999. In 2001, $30.8 million of expenditures were made for pre-delivery deposits
on future  deliveries  of new  aircraft,  net of returned  deposits on delivered
aircraft, as compared to $117.0 million and $7.4 million made for these deposits
in 2000 and 1999,  respectively.  Capital expenditures  totaling $119.8 million,
$146.5 million and $266.9  million,  respectively,  were made in 2001,  2000 and
1999 primarily for aircraft purchases,  engine and airframe overhauls,  airframe
improvements, hushkit installations, and the purchase of rotable parts. In 1999,
the Company's capital expenditures also included $115.7 million for the purchase
and  modification  of five  L-1011-500  aircraft and the purchase of nine Boeing
727-200  aircraft  that  were  previously  leased.  In 2001,  net  cash  used in
investing  activities  was reduced by $27.3  million in cash  provided from BATA


                                       46
<PAGE>

upon transfer of 12 Boeing 727-200 aircraft to this joint venture. In 2001, 2000
and 1999,  noncurrent  prepaid  aircraft rent  increased  $17.2  million,  $16.8
million and $15.2  million,  respectively,  reflecting  primarily  the cash rent
pre-payments  due at inception of many new Boeing  737-800,  Boeing  757-200 and
Boeing 757-300 operating  leases.  The increase in other assets in 1999 included
$24.4 million in goodwill  associated  with the  acquisitions of units of ATALC,
Chicago Express and 50% of ATA Cargo.

Net cash provided by financing activities for the years ended December 31, 2001,
2000  and  1999  was  $40.7  million,   $188.1   million  and  $100.3   million,
respectively.  In all years, cash provided by financing activities was primarily
attributable  to proceeds from short-term and long-term debt, net of repayments,
which in 2001  primarily  consisted of $28.4 million in proceeds  related to the
financing of pre-delivery  deposits on aircraft,  the borrowing of $35.0 million
under the Company's bank credit facility,  and the repayment of $17.0 million in
special  facility  revenue bonds.  Also in 2001, the Company borrowed and repaid
$153.4 million in temporary  bridge debt related to the purchase of three Boeing
757-300 aircraft, which were subsequently financed with operating leases in late
2001.  In 2000,  net proceeds  from  short-term  and  long-term  debt  primarily
consisted  of $89.9  million  from the  financing  of  pre-delivery  deposits on
aircraft and proceeds of $23.0 million in notes collateralized by two L-1011-500
aircraft. In 1999, the Company received $75.0 million in proceeds from unsecured
senior notes. Net cash provided from financing  activities in 2000 also included
$80.0 million in proceeds from the issuance of preferred stock.

The Company presently  expects that cash generated by operations,  together with
available  borrowings  under  collateralized  credit  facilities,  the return of
pre-delivery deposits held by the manufacturer on future aircraft deliveries and
the receipt of additional U.S. Government grant compensation, will be sufficient
to fund operations  during the next twelve months.  For additional  details with
respect to the grant from the U.S.  Government,  see  "Financial  Statements and
Supplementary  Data - Notes  to  Consolidated  Financial  Statements  - Note 2 -
Impact of Terrorist Attacks on September 11, 2001."

The impact of the terrorist attacks of September 11, 2001 and their aftermath on
the Company and the sufficiency of its financial resources to absorb that impact
will depend on a number of factors, including: (1) the magnitude and duration of
the adverse impact of the terrorist  attacks on the economy in general,  and the
airline  industry  in  particular;  (2) the  Company's  ability  to  reduce  its
operating  costs and conserve its financial  resources,  taking into account the
increased  costs it will incur as a consequence of the attacks,  including those
referred to below;  (3) the higher costs  associated  with new airline  security
directives  and  any  other  increased  regulation  of  air  carriers;  (4)  the
significantly  higher costs of aircraft  insurance  coverage  for future  claims
caused by acts of war, terrorism,  sabotage, hijacking and other similar perils,
and the extent to which such  insurance  will continue to be available;  (5) the
Company's ability to raise additional financing;  (6) the price and availability
of jet fuel and the  availability  to the  Company  of fuel  hedges  in light of
current  industry  conditions;  (7) the number of crew members who may be called
for duty in the reserve forces of the armed services and the resulting impact on
the Company's ability to operate as planned;  (8) any resulting  declines in the
values of the  aircraft in the  Company's  fleet and any aircraft or other asset
impairment  charge; (9) the extent of the benefits received by the Company under
the Act, taking into account any challenges to and interpretations or amendments
of the Act or  regulations  issued  pursuant  thereto;  and (10)  the  Company's
ability  to retain  its  management  and  other  employees  in light of  current
industry conditions.

Debt and Operating  Lease Cash Payment  Obligations.  The Company is required to
make cash  payments  in the future on debt  obligations  and  operating  leases.
Although  the Company is obligated  on a number of  long-term  operating  leases
which are not  recorded  on the balance  sheet  under  GAAP,  the Company has no
off-balance  sheet debt and,  with the  exception of  insignificant  amounts not
requiring disclosure under GAAP, does not guarantee the debt of any other party.


                                       47
<PAGE>

The following  table  summarizes  the Company's  contractual  debt and operating
lease  obligations  at December 31, 2001,  and the effect such  obligations  are
expected to have on its liquidity and cash flows in future periods.

<TABLE>
<CAPTION>
                                                             Cash Payments Currently Scheduled

                                           Total                              2003           2005            After
                                       As of 12/31/01          2002           -2004          -2006            2006
                                       --------------        ---------      ---------      ---------      -----------
                                                                         (in thousands)

<S>                                     <C>                  <C>            <C>            <C>            <C>
Current and long-term debt   (1)        $   497,592          $ 124,059      $ 219,627      $ 135,640      $    18,266

Lease obligations (2)                     2,456,543            162,646        316,694        309,311        1,667,892
                                        -----------          ---------      ---------      ---------      -----------

Total contractual cash obligations      $ 2,954,135          $ 286,705      $ 536,321      $ 444,951      $ 1,686,158
                                        ===========          =========      =========      =========      ===========
</TABLE>

(1)  See   discussion  of  debt   obligations   in  "Financial   Statements  and
Supplementary  Data - Notes  to  Consolidated  Financial  Statements  - Note 5 -
Long-Term Debt."

(2)  See   discussion  of  operating   leases  in  "Financial   Statements   and
Supplementary Data - Notes to Consolidated Financial Statements - Note 6 - Lease
Commitments."

In  addition,  the  Company is  committed  to taking  delivery  of 32 new Boeing
757-300 and Boeing  737-800  aircraft in 2002 and beyond,  as well as five spare
engines.  The amounts relating to these aircraft and engines are not included in
the table.  The Company  intends to finance  these  aircraft  and  engines  with
operating leases.

Aircraft and Fleet  Transactions.  In 2000, the Company entered into a series of
agreements  to  purchase  or lease 39 new Boeing  737-800  aircraft  and ten new
Boeing  757-300  aircraft,  as well as the  engines to power the  aircraft.  The
Boeing 737-800 aircraft are powered by General Electric CFM56-7B27 engines,  and
the Boeing 757-300  aircraft are powered by  Rolls-Royce  RB211-535 E4C engines.
The Company also received purchase rights for an additional 50 aircraft.

The  Company  has a  purchase  agreement  with the Boeing  Company  to  purchase
directly  from  Boeing  the ten new  Boeing  757-300s  and 20 of the new  Boeing
737-800s.  The  manufacturer's  list price is $73.6 million for each 757-300 and
$52.4 million for each 737-800,  subject to escalation.  The Company's  purchase
price for each aircraft is subject to various discounts. To fulfill its purchase
obligations,  the Company has arranged for each of these aircraft, including the
engines,  to be  purchased  by third  parties  that  will,  in turn,  enter into
long-term  operating  leases with the  Company.  As of December  31,  2001,  the
Company  had taken  delivery of five Boeing  737-800s  and five Boeing  757-300s
purchased  directly  from Boeing.  As a result of the  decreased  demand for air
travel due to the events of September 11, 2001 (see  "Financial  Statements  and
Supplementary  Data - Notes  to  Consolidated  Financial  Statements  - Note 2 -
Impact of Terrorist Attacks on September 11, 2001"), the Company delayed planned
delivery  dates of certain  Boeing  737-800  and Boeing  757-300  aircraft.  The
delivery  dates of seven  aircraft  were  delayed  by more than 12  months.  All
remaining  aircraft to be purchased  directly  from Boeing are now scheduled for
delivery  between  January  2002  and  August  2004,  rather  than  May  2004 as
previously  agreed.  Aircraft  pre-delivery  deposits  are  required  for  these
purchases,  and the Company has funded these deposits  using  operating cash and
deposit finance  facilities (see "Financial  Statements and Supplementary Data -
Notes to Consolidated  Financial  Statements - Note 5 - Long-Term  Debt"). As of
December  31,  2001,  the Company had $170.7  million in  pre-delivery  deposits
outstanding  for these  aircraft,  of which $118.2 million was funded by deposit
finance  facilities  with  several  lenders.  Upon  delivery  of  the  aircraft,


                                       48
<PAGE>

pre-delivery  deposits  funded  with  operating  cash  will be  returned  to the
Company,  and those funded with deposit  facilities  will be used to repay those
facilities.

The Company has entered into operating  lease  agreements  with respect to 14 of
the new Boeing 737-800s from International Lease Finance  Corporation  ("ILFC").
In  conjunction  with these lease  agreements,  the Company  also  committed  to
purchase two spare General  Electric  aircraft engines from ILFC. As of December
31, 2001, the Company has taken  delivery of six Boeing  737-800s that are being
leased from ILFC. The remaining  aircraft under these operating lease agreements
are scheduled for delivery between January 2002 and May 2004. Both spare engines
were received in 2001 and were financed with an operating lease.

The Company has an  agreement to lease five of the new Boeing  737-800s  from GE
Capital Aviation  Services  ("GECAS").  As of December 31, 2001, the Company has
taken  delivery of three  Boeing  737-800  aircraft  that are being  leased from
GECAS.  The two remaining  aircraft,  to be financed  through GECAS leases,  are
scheduled for delivery in 2002.

The Company has available a bridge financing facility which provides for maximum
borrowings  of $400.0  million to finance new Boeing  737-800  aircraft  and new
Boeing 757-300  aircraft.  Borrowings  under the facility bear interest,  at the
option of ATA, at LIBOR plus three optional margins, depending on the percentage
of the purchase price borrowed and whether the borrowing matures 18 or 24 months
after the aircraft  delivery  date. As of December 31, 2001,  the Company had no
borrowings under this facility.

The Company has committed to purchase an additional four spare General  Electric
aircraft  engines from the engine  manufacturer.  The spare  engines  under this
agreement are scheduled for delivery between 2003 and 2006.

The  Company has  committed  to purchase  an  additional  two spare  Rolls-Royce
engines from the engine manufacturer. The first spare engine was received in the
third  quarter of 2001 and was  financed  with an  operating  lease.  The second
engine is scheduled for delivery in 2002.

On December 27,  2001,  the Company  entered  into an  agreement  with Boeing to
exercise purchase rights on two 757-300 aircraft to be delivered in May and June
2003. The Company has purchase rights for eight additional  757-300 aircraft and
40 737-800 aircraft.

In 2000,  the Company  signed an  agreement  with GE Engine  Services,  Inc. for
warranty and ongoing  maintenance  services  applicable to the General  Electric
engines, which will power all 39 Boeing 737-800 aircraft.  Under this agreement,
overhauls  and other engine  maintenance  will be provided in exchange for fixed
payments  by the  Company  for  each  engine  flight  hour  over the life of the
agreement.  These  payments are  accounted  for as a component  of  maintenance,
materials and repairs expense as the engine flight hours occur.

In March  2001,  the  Company  formed a limited  liability  company  with Boeing
Capital Corporation,  Inc. ("BCC") to form BATA, a 50/50 joint venture.  Because
the Company does not control BATA, the Company's  investment is being  accounted
for under the equity  method.  BATA will  re-market  the  Company's  fleet of 24
Boeing 727-200 aircraft in either passenger or cargo configurations. In exchange
for supplying the aircraft and certain  operating  services to BATA, the Company
has and will  continue to receive  both cash and equity in the income or loss of
BATA. The Company  transferred  12 Boeing 727-200  aircraft to BATA in 2001. The
Company  subsequently entered into short-term operating leases on nine of the 12
transferred  aircraft.  As of December  31,  2001,  eight of the nine leases had


                                       49
<PAGE>

terminated,  while the Company  continued  to operate  one of these  aircraft in
early 2002.  The Company  expects to transfer  most of the  remaining  12 Boeing
727-200 aircraft to BATA in the first half of 2002. As of December 31, 2001, six
of the 12 Boeing 727-200  aircraft not yet transferred to BATA were leased.  The
Company intends to exercise the available  purchase  options at the end of these
six leases before  transferring  them to BATA.  Therefore,  the Company does not
expect to incur, and has not accrued,  any return condition expenses under these
leases.

In June 2001, the Company  committed to the purchase of two additional Saab 340B
aircraft. These aircraft went into service on August 17 and August 24, 2001, and
were paid for in cash.

Significant  Financings.  The Company has a revolving bank credit facility which
provides for maximum borrowings of $100.0 million, including up to $50.0 million
for  stand-by  letters of credit.  The  facility  matures  January 2, 2003,  and
borrowings  under the facility  bear  interest,  at the option of ATA, at either
LIBOR plus a margin or the agent bank's prime rate.  This facility is subject to
certain  restrictive  covenants  and is  collateralized  by all six owned Boeing
727-200 aircraft,  nine Lockheed  L-1011-50 and L-1011-100  aircraft and engines
and three  Lockheed  L-1011-500  aircraft  and engines.  The facility  agreement
provides  that in the event of a material  adverse  occurrence,  the lenders can
elect not to fund any additional  borrowings,  and can require  repayment of any
outstanding balance immediately.  No such determination was made relative to the
terrorist  attacks on September 11, 2001.  As of December 31, 2001,  the Company
had borrowings of $35.0 million against the facility and had outstanding letters
of credit of $39.3 million secured by the facility.

As of December 31, 2001 the various  aircraft  securing the bank credit facility
had a collateralized  value of $76.7 million.  All aircraft currently pledged as
collateral  for the facility are being  reappraised  to determine  their current
collateral  value.  Since the  terrorist  attacks of  September 11 resulted in a
significant increase in surplus used aircraft,  the Company anticipates that the
appraised  values of its pledged  aircraft may be lower than before the attacks.
In that event, the Company expects to either reduce the maximum borrowings under
the  facility  or to pledge  additional  assets  as  collateral  for an  amended
facility.  Negotiations  are currently  underway to amend the agreement,  and to
implement changes to certain existing financial  covenants.  The Company expects
to have the revised  facility in place by the end of the first  quarter of 2002,
but can provide no assurance as to the outcome of the negotiations.

In February 2000, the Company borrowed $11.5 million, and in September 2000, the
Company   borrowed  an  additional   $11.5  million.   Each  five-year  note  is
collateralized by one Lockheed L-1011-500 aircraft.

In September 2000, the Company obtained a $10.0 million,  14-year loan,  secured
by a mortgage  on its  maintenance  facility at the  Indianapolis  International
Airport.  The proceeds of the loan were used to repay an advance  received  from
the  City  of   Indianapolis  in  December  1995  that  had  resulted  from  the
sale/leaseback of the facility.

In  September  2000,  the Company  issued 300 shares of Series B  Preferred.  In
December 2000, the Company issued and sold 500 shares of Series A Preferred. The
proceeds  from the issuance and sale of the Series B Preferred  and the Series A
Preferred  were used for aircraft  pre-delivery  deposits and general  corporate
purposes.  For  additional  details with respect to the issuance and sale of the
Series B  Preferred  and  Series A  Preferred,  see  "Financial  Statements  and
Supplementary  Data - Notes to  Consolidated  Financial  Statements  - Note 10 -
Redeemable Preferred Stock."

In December 2000, the Company  entered into three finance  facilities with Banca
Commerciale Italiana, GE Capital Aviation Services,  Inc., and Rolls-Royce plc.,
to fund pre-delivery deposits on new Boeing 757-300 and Boeing 737-800 aircraft.
These  facilities  provide  for up to $173.2  million  in  pre-delivery  deposit
funding,  and as of December 31, 2001,  the Company had borrowed  $118.2 million


                                       50
<PAGE>

against these three facilities.  All of this debt has been classified as current
in the accompanying  balance sheets because it will be repaid through the return
of related  pre-delivery  deposits through lease financing of aircraft scheduled
for delivery within the next 12 months.  Interest on these facilities is payable
monthly.  On June 28, 2001,  the Company signed a $4.2 million  promissory  note
with ILFC for the purchase of a spare engine.  The principal amount of this note
was paid on December 11, 2001, when the engine was financed through an operating
lease.

In September and October 2001,  the Company signed three  promissory  notes with
Boeing Capital Loan Corporation, for a total of $153.4 million, for the purchase
of three Boeing 757-300  aircraft.  The principal amount of these notes was paid
in late December 2001, when the aircraft were financed with operating leases.

On September 28, 2001,  the Company signed a $4.7 million  promissory  note with
Rolls-Royce  for the purchase of a spare engine.  The  principal  amount of this
note was paid on December  18,  2001,  when the engine was  financed  through an
operating lease.

Card Agreement. The Company accepts charges to most major credit and debit cards
("cards") as payment from its customers.  Approximately 90% of scheduled service
and vacation package sales are purchased using these cards.

More than half of these card sales are made using  MasterCard or Visa cards. The
Company  maintains an agreement with a bank for the processing and collection of
charges to these cards. Under this agreement,  a sale is normally charged to the
purchaser's card account and is paid to the Company in cash within a few days of
the date of purchase,  although the Company may provide the  purchased  services
days, weeks or months later. In 2001, the Company processed  approximately  $535
million in MasterCard and Visa charges under its merchant processing agreement.

On September 21, 2001, the bank notified the Company that it had determined that
the terrorist attacks of September 11, 2001, the ensuing grounding of commercial
flights by the FAA, and the  significant  uncertainty  about the level of future
air travel  entitled the bank to retain cash  collected by it on processed  card
charges as a deposit, up to 100% of the full dollar amount of purchased services
to be  provided  at a future  date.  If the  Company  fails to perform  pre-paid
services  which  are  purchased  by a charge  to a card,  the  purchaser  may be
entitled to obtain a refund which, if not paid by the Company, is the obligation
of the bank. The deposit  secures this potential  obligation of the bank to make
such refunds.

The bank exercised its right to withhold  distributions  beginning shortly after
its notice to the Company.  As of September  30, 2001 the bank had withheld $3.6
million,  and as of  December  31,  2001 it had  increased  the deposit to $23.1
million,  $20.0  million of which was  funded,  not with cash but by a letter of
credit  provided on behalf of the Company by the Company's  senior lenders under
its revolving  bank  facility.  The Company has  classified  the remaining  $3.1
million in cash withheld as a current receivable.

As of December 31, 2001 the $23.1 million deposit constituted  approximately 60%
of the  Company's  total future  obligations  to provide  services  purchased by
charges to card accounts as of that date. The bank,  subject to the execution of
a  definitive  amendment  to its  agreement  with the  Company,  which is now in
negotiation,  has agreed to a 60% deposit, with that percentage being subject to
increase up to 100% upon the  occurrence of various  specified  adverse  events,
including  noncompliance  by the Company  with the  financial  covenants  in its
senior credit  facility.  Pending  execution of this amendment,  the bank in the
first quarter of 2002 has continued to require a deposit equal to 60%. A deposit
of 100% of this  obligation  would have resulted in the additional  retention of
$15.4  million by the bank at December 31, 2001.  The bank's right to maintain a
deposit does not terminate  unless,  in its reasonable  judgment and at its sole
discretion, it determines that a deposit is no longer required.

                                       51
<PAGE>

The  Company  has the  right to  terminate  its  agreement  with  the bank  upon
providing  appropriate  notice. In the event of such  termination,  the bank may
retain a deposit  equal to the amount of purchased  services not yet  performed,
for up to 16 months from the date of termination.

Surety Bonds.  The Company has  historically  provided  surety bonds to selected
vendors, such as airport authorities,  to secure the Company's trade payables to
those  vendors.  The DOT also  requires the Company to provide a surety bond, in
unlimited  amount,  to secure potential  refund claims of charter  customers who
have made  prepayments  to the  Company  for future  transportation.  One issuer
currently  provides all surety bonds issued on behalf of the Company.  Since the
charter bond is unlimited in amount, the Company periodically reports historical
monthly  charter  liabilities  to the issuer,  on the basis of which the current
liability is estimated.

Prior to the terrorist  attacks of September 11, 2001 the Company had provided a
letter  of  credit of $1.5  million  as  security  to the  issuer  for its total
estimated surety bond obligations,  which were $20.9 million at August 31, 2001.
Effective October 5, 2001 the issuer required the Company to increase its letter
of credit to 50% of its estimated surety bond liability,  or $10.2 million.  The
letter of credit was adjusted to $8.3  million on November 19, 2001,  based upon
50% of the estimated liability as of that date.

Effective  January  16,  2002,  the issuer  implemented  a  requirement  for the
Company's letter of credit to secure 100% of estimated surety bond  obligations,
which  totaled  $19.8  million.  The  Company's  letter of credit  was  adjusted
accordingly,  and the Company is subject to future  adjustments of its letter of
credit based upon further revisions to the estimated  liability for total surety
bonds outstanding. The Company's letter of credit to the issuer is secured under
its  revolving  bank  facility.  The Company has the right to replace the issuer
with one or more alternative  issuers of surety bonds,  although the Company can
provide no assurance  that it will be able to secure more  favorable  terms from
other issuers.

Future Accounting Changes

In June 2001, the FASB issued Statements of Financial  Accounting  Standards No.
141,  Business  Combinations,  and No. 142, Goodwill and Other Intangible Assets
("FAS 142") effective for fiscal years beginning after December 15, 2001.  Under
the new pronouncements, goodwill and intangible assets deemed to have indefinite
lives will no longer be  amortized,  but will be  subject  to annual  impairment
reviews.

The  Company  will  apply the new rules on  accounting  for  goodwill  and other
intangible  assets  under  FAS 142  beginning  in the  first  quarter  of  2002.
Application  of the  nonamortization  provisions  of  FAS  142,  related  to the
Company's existing  goodwill,  is expected to result in a reduction in operating
expenses of  approximately  $1.3 million in 2002.  During 2002, the Company will
also  perform  the  impairment   tests  of  goodwill  which  are  required  upon
implementation of the new standards. The Company has not yet determined what the
effect of these  impairment  tests will be, if any, on the results of operations
and  financial   position  of  the  Company.   See  "Financial   Statements  and
Supplementary  Data - Notes to  Consolidated  Financial  Statements  - Note 17 -
Goodwill and Other Intangible Assets."

In October 2001, the FASB issued  Statements of Financial  Accounting  Standards
No. 144 ("FAS 144"),  Accounting  for the  Impairment  or Disposal of Long-Lived
Assets,  effective for fiscal years  beginning  after December 15, 2001. FAS 144
addresses  accounting and reporting for the impairment or disposal of long-lived
assets and  supersedes  FAS 121 and  portions of APB 30. The Company  will begin
applying  the  new  rules  on  accounting  for the  impairment  or  disposal  of
long-lived  assets in the first quarter of 2002.  The Company does not currently


                                       52
<PAGE>

expect  adoption of the new standard to have a material impact on the results of
operations or financial position of the Company.

Forward-Looking Information and Risk Factors

Information  contained  within  "Business"  and  "Management's   Discussion  and
Analysis  of   Financial   Condition   and  Results  of   Operations"   includes
forward-looking   information   which  can  be  identified  by   forward-looking
terminology   such  as   "believes,"   "expects,"   "may,"   "will,"   "should,"
"anticipates,"  or the  negative  thereof,  or other  variations  in  comparable
terminology. Such forward-looking information is based upon management's current
knowledge of factors affecting the Company's  business.  The differences between
expected  outcomes  and  actual  results  may be  material,  depending  upon the
circumstances. Where the Company expresses an expectation or belief as to future
results  in any  forward-looking  information,  such  expectation  or  belief is
expressed in good faith and is believed to have a reasonable  basis. The Company
can provide no assurance that the statement of expectation or belief will result
or will be achieved or accomplished.

Such forward-looking  statements involve known and unknown risks,  uncertainties
and other factors that may cause actual results to be materially  different from
those expected. Such factors include, but are not limited to, the following:

o    economic conditions;
o    labor costs;
o    aviation fuel costs;
o    competitive pressures on pricing;
o    weather conditions;
o    governmental legislation and regulation;
o    consumer perceptions of the Company's products;
o    demand for air transportation in markets in which the Company operates; and
o    other risks and uncertainties listed from time to time in reports the
     Company periodically files with the Securities and Exchange Commission.

In addition,  there are risk factors that relate  specifically  to the September
11,  2001  terrorist  attacks  that may cause  actual  results to be  materially
different from those expected.  These factors  include,  but are not limited to,
the following:

o   the adverse impact of the terrorist attacks on the economy in general;
o   the  likelihood  of a further  decline in air travel because of the attacks
    and as a result of a  reduction in the airline industry's operations;
o   higher costs associated with new security directives and potential new
    regulatory initiatives;
o   higher costs for insurance and the continued availability of such insurance;
o   the Company's ability to raise additionalfinancing, and to refinance
    existing borrowings upon maturity;
o   declines in the value of the Company's  aircraft,  as these may result in
    lower  collateral  value and  additional  impairment charges;
o   the extent of benefits paid to the Company under the Act,  including
    challenges to and  interpretations  or amendments of the Act or associated
    regulations; and
o   the impact on the Company's ability to operate as planned, including its
    ability to retain key employees.

                                       53
<PAGE>

The Company does not undertake to update its forward-looking statements to
reflect future events or circumstances.

Item 7a.  Quantitative and Qualitative Disclosures About Market Risk

The Company is subject to certain market risks,  including  commodity price risk
resulting  from aircraft  fuel price  fluctuations  and interest rate risk.  The
adverse effects of potential  changes in these market risks are discussed below.
The sensitivity analyses presented do not consider the effects that such adverse
changes may have on overall economic activity,  nor do they consider  additional
actions  management might take to mitigate the adverse impact of such changes on
the  Company.  See  the  notes  to  consolidated   financial  statements  for  a
description of the Company's  accounting  policies and other information related
to these financial instruments.

Aircraft Fuel Prices.  The Company's  results of  operations  are  significantly
impacted by changes in the price of aircraft  fuel.  During 2001,  aircraft fuel
accounted for approximately 18.4% of the Company's operating expenses,  compared
to 21.3% in 2000. In addition to purchasing fuel-hedging contracts,  the Company
obtains fuel price  fluctuation  protection from  escalation  clauses in certain
commercial charter, military charter, bulk scheduled service and mail contracts.

During 2001 and 2000,  the Company  entered into fuel hedge  contracts to reduce
the volatility of fuel prices, using heating oil swaps. As of December 31, 2001,
the Company had outstanding fuel hedge  agreements  totaling 6.3 million gallons
of heating oil,  corresponding to 2.6% of the Company's  projected aircraft fuel
requirements for 2002, as compared to 4.8% of the Company's  projected  aircraft
fuel requirements for 2001 hedged at December 31, 2000.

The following  table  depicts the  estimated  fair values the Company would have
paid or received on December 31, 2001, had the contracts been terminated on that
date,  based on a  comparison  of the  average  contract  rate to the  estimated
forward prices of heating oil as of December 31, 2001.

<TABLE>
<CAPTION>
                                                                                            Estimated Fair
                                           Notional Amount           Average Contract           Values
                                            (in Gallons)             Rate per Gallon         (Pay)/Receive
                                           ----------------------------------------------------------------

<S>                                           <C>                          <C>                 <C>
Swap Contracts - Heating Oil                  6,300,000                    $0.7150             ($1,057,035)
</TABLE>

Market risk is estimated as a hypothetical 10% increase in the December 31, 2001
cost per  gallon  of  fuel.  Based  on  projected  2002  fuel  usage,  excluding
anticipated protection from escalation clauses, such a change would result in an
increase in aircraft fuel expense of  approximately  $16.5  million,  net of the
benefit of fuel hedge instruments outstanding at December 31, 2001.

Interest Rates. The Company's results of operations are affected by fluctuations
in market  interest rates. As of December 31, 2001 and 2000, the majority of the
Company's  variable-rate  debt was comprised of approximately  $35.0 million and
$0.0 of variable-rate debt through a revolving credit facility and approximately
$118.2  million  and  $89.9  million  of  variable-rate  debt  funding  aircraft
pre-delivery deposits,  respectively. If interest rates average 100 basis points
more on  variable-rate  debt in 2002,  as compared to 2001  average  rates,  the
Company's   interest  expense  on  these  debt  instruments  would  increase  by
approximately  $1.5 million.

As of December 31, 2001 and 2000, the majority of the Company's  fixed-rate debt
was comprised of unsecured debt with a carrying value of $300.0  million.  Based
upon discounted future cash flows using current  incremental  borrowing rates as
of the end of the year for similar  types of  instruments,  the fair value as of
December  31, 2001 of this  fixed-rate  debt is  estimated  to be  approximately
$308.2 million.  Market risk,  estimated as the potential increase in fair value
resulting from a hypothetical 100 basis point decrease in market interest rates,


                                       54
<PAGE>

was  approximately  $17.2  million as of December 31,  2001.  As of December 31,
2000, that risk was approximately $14.5 million.

If 2002  average  short-term  interest  rates  decreased  by 100 basis points as
compared to 2001 average rates,  the Company's  projected  interest  income from
short-term   investments  would  decrease  by  approximately  $1.8  million.  In
comparison, the Company estimated that if 2001 average short-term interest rates
decreased by 100 basis points as compared to 2000 average  rates,  the Company's
interest   income  from   short-term   investments   would  have   decreased  by
approximately $1.5 million as of December 31, 2000.

All  estimated  changes  in  interest  income  and  expense  are  determined  by
considering  the  impact  of  hypothetical  changes  in  interest  rates  on the
Company's debt and cash balances at December 31, 2001 and 2000.


                                       55
<PAGE>

Item 8.        Financial Statements and Supplementary Data


               REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS





Board of Directors
Amtran, Inc.



We have audited the accompanying consolidated balance sheets of Amtran, Inc. and
subsidiaries  as of  December  31, 2001 and 2000,  and the related  consolidated
statements of operations,  changes in redeemable  preferred stock,  common stock
and other shareholders' equity and cash flows for each of the three years in the
period ended December 31, 2001. Our audits also included the financial statement
schedule  listed in the index at Item  14(a).  These  financial  statements  and
schedule are the responsibility of the Company's management.  Our responsibility
is to express an opinion on these financial statements and schedule based on our
audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable  assurance about whether the financial  statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting  the amounts and  disclosures in the financial  statements.  An audit
also includes assessing the accounting principles used and significant estimates
made by  management,  as well as  evaluating  the  overall  financial  statement
presentation.  We believe  that our audits  provide a  reasonable  basis for our
opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all material respects,  the consolidated  financial position of Amtran, Inc. and
subsidiaries  at December  31, 2001 and 2000,  and the  consolidated  results of
their  operations and their cash flows for each of the three years in the period
ended  December 31, 2001, in conformity  with  accounting  principles  generally
accepted in the United  States.  Also,  in our  opinion,  the related  financial
statement  schedule,   when  considered  in  relation  to  the  basic  financial
statements  taken as a whole,  presents  fairly  in all  material  respects  the
information set forth herein.





/S/ERNST & YOUNG LLP
Indianapolis, Indiana
January 22, 2002

                                       56
<PAGE>

<TABLE>
<CAPTION>
                                      AMTRAN, INC. AND SUBSIDIARIES
                                       CONSOLIDATED BALANCE SHEETS
                                         (Dollars in thousands)

                                                                       December 31,       December 31,
                                                                           2001               2000
                                                                       --------------------------------
<S>                                                                    <C>                 <C>
                              ASSETS
Current assets:
     Cash and cash equivalents .....................................   $    184,439        $    129,137
     Aircraft pre-delivery deposits ................................        166,574             126,307
     Receivables, net of allowance for doubtful accounts
     (2001 - $1,526; 2000 - $1,191) ................................         75,046              56,605
     Inventories, net ..............................................         47,648              49,055
     Assets held for sale ..........................................         18,600                   -
     Prepaid expenses and other current assets .....................         19,471              25,411
                                                                       ------------        ------------
Total current assets ...............................................        511,778             386,515

Property and equipment:
     Flight equipment ..............................................        327,541             822,979
     Facilities and ground equipment ...............................        119,975             111,825
                                                                       ------------        ------------
                                                                            447,516             934,804
     Accumulated depreciation ......................................       (132,573)           (412,685)
                                                                       ------------        ------------
                                                                            314,943             522,119

Goodwill ...........................................................         21,780              22,858
Assets held for sale ...............................................         33,159                   -
Prepaid aircraft rent ..............................................         49,159              31,979
Investment in BATA .................................................         30,284                   -
Deposits and other assets ..........................................         41,859              68,959
                                                                       ------------        ------------

Total assets .......................................................   $  1,002,962        $  1,032,430
                                                                       ============        ============

               LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
    Current maturities of long-term debt ...........................   $      5,820        $      6,865
    Short-term debt ................................................        118,239              89,875
    Accounts payable ...............................................         26,948              10,066
    Air traffic liabilities ........................................        100,958             107,050
    Accrued expenses ...............................................        177,102             147,095
                                                                       ------------        ------------
Total current liabilities ..........................................        429,067             360,951

Long-term debt, less current maturities ............................        373,533             361,209
Deferred income taxes ..............................................         13,655              54,503
Other deferred items ...............................................         62,575              51,113
                                                                       ------------        ------------

Total liabilities ..................................................        878,830             827,776

Redeemable preferred stock; authorized and issued 800 shares                 80,000              80,000

Shareholders' equity:
    Preferred stock; authorized 9,999,200 shares; none issued ......              -                   -
    Common stock, without par value; authorized 30,000,000 shares;
       issued 13,266,642 - 2001; 13,082,118 - 2000 .................         61,964              59,012
    Treasury stock; 1,710,658 shares - 2001; 1,696,355 shares - 2000        (24,768)            (24,564)
    Additional paid-in-capital .....................................         11,534              12,232
    Other comprehensive loss .......................................           (687)                  -
    Retained earnings (deficit) ....................................         (3,911)             77,974
                                                                       ------------        ------------
Total shareholders' equity .........................................         44,132             124,654
                                                                       ------------        ------------

Total liabilities and shareholders' equity .........................   $  1,002,962        $  1,032,430
                                                                       ============        ============

See accompanying notes.
</TABLE>

                                       57
<PAGE>

<TABLE>
<CAPTION>
                                               AMTRAN, INC. AND SUBSIDIARIES
                                           CONSOLIDATED STATEMENTS OF OPERATIONS
                                       (Dollars in thousands, except per share data)

                                                                                 Year Ended December 31,
                                                                           2001               2000               1999
                                                                       ---------------------------------------------------

<S>                                                                    <C>                 <C>               <C>
Operating revenues:
   Scheduled service ...............................................   $    820,666        $    753,301      $    624,647
   Charter .........................................................        359,770             435,262           389,979
   Ground package ..................................................         52,182              59,848            58,173
   Other ...........................................................         42,866              43,142            49,567
                                                                       -------------       -------------     -------------
Total operating revenues ...........................................      1,275,484           1,291,553         1,122,366
                                                                       -------------       -------------     -------------

Operating expenses:
Salaries, wages and benefits .......................................        325,153             297,012           252,595
Fuel and oil .......................................................        251,333             274,820           170,916
Depreciation and amortization ......................................        121,327             125,041            96,038
Aircraft rentals ...................................................         98,988              72,145            58,653
Handling, landing and navigation fees ..............................         88,653              97,414            89,302
Aircraft maintenance, materials and repairs ........................         61,394              70,432            55,645
Crew and other employee travel .....................................         59,278              65,758            49,707
Passenger service ..................................................         43,856              45,571            39,231
Ground package cost ................................................         42,160              50,903            49,032
Other selling expenses .............................................         41,601              36,650            28,099
Commissions ........................................................         34,789              39,065            39,050
Advertising ........................................................         26,421              22,016            18,597
Facilities and other rentals .......................................         20,241              15,817            13,318
Special charges ....................................................         21,525                   -                 -
Impairment loss ....................................................        112,304                   -                 -
U.S. Government grant ..............................................        (66,318)                  -                 -
Other ..............................................................         84,649              76,339            72,156
                                                                       -------------       -------------     -------------
Total operating expenses ...........................................      1,367,354           1,288,983         1,032,339
                                                                       -------------       -------------     -------------

Operating income (loss) ............................................        (91,870)              2,570            90,027

Other income (expense):
Interest income ....................................................          5,331               8,389             5,375
Interest expense ...................................................        (30,082)            (31,452)          (20,966)
Other ..............................................................            554                 562             3,361
                                                                       -------------       -------------     -------------
Other expenses .....................................................        (24,197)            (22,501)          (12,230)
                                                                       -------------       -------------     -------------

Income (loss) before income taxes ..................................       (116,067)            (19,931)           77,797
Income taxes (credit) ..............................................        (39,750)             (4,607)           30,455
                                                                       -------------       -------------     -------------
Net income (loss) ..................................................        (76,317)            (15,324)           47,342

Preferred stock dividends ..........................................         (5,568)               (375)                -
                                                                       -------------       -------------     -------------
Income (loss) available to common shareholders .....................   $    (81,885)       $    (15,699)     $     47,342
                                                                       =============       =============     =============

Basic earnings per common share:
Average shares outstanding .........................................     11,464,125          11,956,532        12,269,474
Net income (loss) per common share .................................   $      (7.14)       $      (1.31)     $       3.86
                                                                       =============       =============     =============

Diluted earnings per common share:
Average shares outstanding .........................................     11,464,125          11,956,532        13,469,537
Net income (loss) per common share .................................   $      (7.14)       $      (1.31)     $       3.51
                                                                       =============       =============     =============

See accompanying notes.
</TABLE>

                                       58
<PAGE>

<TABLE>
<CAPTION>
                                                    AMTRAN, INC. AND SUBSIDIARIES
            CONSOLIDATED STATEMENTS OF CHANGES IN REDEEMABLE PREFERRED STOCK, COMMON STOCK AND OTHER SHAREHOLDERS' EQUITY
                                                       (Dollars in thousands)

                                        Redeemable                         Additional    Deferred     Other   Retained
                                        Preferred    Common    Treasury      Paid-in       Comp       Compr   Earnings
                                          Stock       Stock      Stock       Capital       ESOP       Loss    (Deficit)      Total
                                         -------     -------   ---------    ---------    --------   --------  ---------    ---------

<S>                                      <C>         <C>       <C>           <C>         <C>          <C>      <C>         <C>
Balance, December 31, 1998 .............     $ -     $47,632    $(1,881)     $11,735     $(1,066)       $ -    $46,331     $102,751
                                         -------     -------   ---------    ---------    --------   --------  ---------    ---------

Net income .............................       -           -          -            -           -          -     47,342       47,342

Issuance of common stock for ESOP ......       -           -          -           37         533          -          -          570

Restricted stock grants ................       -          32          -          (10)          -          -          -           22

Stock options exercised ................       -       6,897          -       (3,207)          -          -          -        3,690

Purchase of treasury stock .............       -           -     (8,619)           -           -          -          -       (8,619)

Disqualifying disposition of stock .....       -           -          -        3,887           -          -          -        3,887

Acquisition of businesses ..............       -       1,265          -          468           -          -          -        1,733
                                         -------     -------   ---------    ---------    --------   --------  ---------    ---------

Balance, December 31, 1999 .............       -      55,826    (10,500)      12,910        (533)         -     93,673      151,376
                                         -------     -------   ---------    ---------    --------   --------  ---------    ---------

Net loss ...............................       -           -          -            -           -          -    (15,324)     (15,324)

Issuance of redeemable preferred stock..  80,000           -          -            -           -          -          -       80,000

Issuance of common stock for ESOP ......       -           -          -          276         533          -          -          809

Preferred dividends ....................       -           -          -            -           -          -       (375)        (375)

Restricted stock grants ................       -          67        (14)          17           -          -          -           70

Stock options exercised ................       -       2,937          -       (1,356)          -          -          -        1,581

Purchase of treasury stock .............       -           -    (14,050)           -           -          -          -      (14,050)

Disqualifying disposition of stock .....       -           -          -          411           -          -          -          411

Acquisition of businesses ..............       -         182          -          (26)          -          -          -          156
                                         -------     -------   ---------    ---------    --------   --------  ---------    ---------

Balance, December 31, 2000 .............  80,000      59,012    (24,564)      12,232           -          -     77,974      204,654
                                         =======     =======   =========    =========    ========   ========  =========    =========

Net loss ...............................       -           -          -            -           -          -    (76,317)     (76,317)

Net loss on derivative instruments .....       -           -          -            -           -       (687)         -         (687)
                                                                                                    --------  ---------    ---------

Total comprehensive loss ...............                                                               (687)   (76,317)     (77,004)
                                                                                                    --------  ---------    ---------

Preferred dividends ....................       -           -          -            -           -          -     (5,568)      (5,568)

Restricted stock grants ................       -          40         (8)          10           -          -          -           42

Stock options exercised ................       -       2,912          -       (1,242)          -          -          -        1,670

Purchase of treasury stock .............       -           -       (196)           -           -          -          -         (196)

Disqualifying disposition of stock .....       -           -          -          534           -          -          -          534
                                         -------     -------   ---------    ---------    --------   --------  ---------    ---------

Balance, December 31, 2001 ............. $80,000     $61,964   $(24,768)     $11,534         $ -      $(687)   $(3,911)    $124,132
                                         =======     =======   =========    =========    ========   ========  =========    =========

See accompanying notes.
</TABLE>

                                       59
<PAGE>

<TABLE>
<CAPTION>
                                         AMTRAN, INC. AND SUBSIDIARIES
                                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                             (Dollars in thousands)

                                                                           Year Ended December 31,
                                                                     2001             2000             1999
                                                                 ----------------------------------------------

<S>                                                               <C>              <C>              <C>
Operating activities:

Net income (loss) ...................................             $  (76,317)      $  (15,324)      $   47,342
Adjustments to reconcile net income (loss)
  to net cash provided by operating activities:
     Depreciation and amortization ..................                121,327          125,041           96,038
     Impairment loss ................................                112,304                -                -
     Deferred income taxes (credit) .................                (40,848)          (3,990)           5,873
     Other non-cash items ...........................                  8,407            4,324            7,573
Changes in operating assets and liabilities:
     Receivables ....................................                (18,441)          (4,506)         (21,197)
     Inventories ....................................                (11,586)         (15,191)         (18,746)
     Prepaid expenses ...............................                  5,940           (2,466)           7,484
     Accounts payable ...............................                 16,882          (10,168)          10,684
     Air traffic liabilities ........................                 (6,092)          13,543           (2,465)
     Accrued expenses ...............................                 32,848           20,429           20,087
                                                                  -----------       ----------      -----------
    Net cash provided by operating activities                        144,424          111,692          152,673
                                                                  -----------       ----------      -----------

Investing activities:

Aircraft pre-delivery deposits ......................                (30,781)        (116,978)          (7,363)
Capital expenditures ................................               (119,798)        (146,523)        (266,937)
Acquisition of businesses, net of cash acquired .....                      -                -           16,673
Investment in BATA ..................................                 27,343                -                -
Noncurrent prepaid aircraft rent ....................                (17,180)         (16,811)         (15,212)
Additions to other assets ...........................                 10,474          (10,593)         (33,143)
Proceeds from sales of property and equipment .......                    151               68              264
                                                                  -----------       ----------      -----------
   Net cash used in investing activities                            (129,791)        (290,837)        (305,718)
                                                                  -----------       ----------      -----------

Financing activities:

Preferred stock dividends ...........................                 (5,568)            (375)               -
Proceeds from sale/leaseback transactions ...........                  5,229           10,791            6,890
Proceeds from short-term debt .......................                 71,537           90,825                -
Payments on short-term debt .........................                (44,123)               -                -
Proceeds from long-term debt ........................                219,422           33,117           99,902
Payments on long-term debt ..........................               (207,294)         (13,998)          (1,590)
Proceeds from stock option exercises ................                  1,670            1,822            3,690
Proceeds from redeemable preferred stock ............                      -           80,000                -
Purchase of treasury stock ..........................                   (204)         (14,064)          (8,619)
                                                                  -----------       ----------      -----------
   Net cash provided by financing activities                          40,669          188,118          100,273
                                                                  -----------       ----------      -----------

Increase (decrease) in cash and cash equivalents ....                 55,302            8,973          (52,772)
Cash and cash equivalents, beginning of period ......                129,137          120,164          172,936
                                                                  -----------       ----------      -----------
Cash and cash equivalents, end of period ............             $  184,439        $ 129,137       $  120,164
                                                                  ===========       ==========      ===========

Supplemental disclosures:

Cash payments for:
    Interest ........................................             $   44,839       $   31,628       $   24,411
    Income taxes (refunds) ..........................             $   (9,721)      $      579       $   11,910

Financing and investing activities not affecting cash:
    Capital lease ...................................             $        -       $      117       $    2,729
    Accrued capital interest ........................             $    7,465       $    7,890       $        -

See accompanying notes.
</TABLE>

                                       60
<PAGE>

Notes to Consolidated Financial Statements

1.   Significant Accounting Policies

     Basis of Presentation and Business Description

     The consolidated  financial statements include the accounts of Amtran, Inc.
     (the  "Company")  and  its  wholly  owned  subsidiaries.   All  significant
     intercompany accounts and transactions have been eliminated.

     The Company  operates  principally in one business segment through American
     Trans Air, Inc.  ("ATA"),  its  principal  subsidiary,  which  accounts for
     approximately  90%  of  the  Company's   operating   revenues.   ATA  is  a
     U.S.-certificated  air carrier providing domestic and international charter
     and scheduled passenger air services.

     Use of Estimates

     The  preparation  of financial  statements  in conformity  with  accounting
     principles  generally accepted in the United States requires  management to
     make  estimates  and  assumptions  that affect the amounts  reported in the
     financial  statements and accompanying  notes.  Actual results could differ
     from those estimates.

     Cash Equivalents

     Cash equivalents are carried at cost, which  approximates  market,  and are
     primarily comprised of money market funds, commercial paper and investments
     in U.S.  Treasury  bills,  which are purchased with original  maturities of
     three months or less (See "Note 3 - Cash and Cash Equivalents.")

     Inventories

     Inventories  consist primarily of expendable aircraft spare parts, fuel and
     other  supplies.  Aircraft  parts  inventories  are  stated at cost and are
     reduced by an allowance for  obsolescence.  The  obsolescence  allowance is
     provided by amortizing the cost of the aircraft parts inventory,  net of an
     estimated residual value, over the related fleet's estimated useful service
     life.  The  obsolescence  allowance at December 31, 2001 and 2000 was $10.9
     million and $13.1 million, respectively. Inventories are charged to expense
     when consumed.

     Revenue Recognition

     Revenues  are  recognized  when air  transportation  or other  services are
     provided.  Customer flight deposits and unused  passenger  tickets sold are
     included in air traffic liability. As is customary within the industry, the
     Company performs periodic evaluations of this estimated liability,  and any
     resulting  adjustments,  which  can be  significant,  are  included  in the
     results  of  operations  for the  periods  in  which  the  evaluations  are
     completed.

     In 2001,  the Company  recognized  reimbursement  for estimated  direct and
     incremental  losses  incurred  as a result of the  September  11  terrorist
     attacks  according  to  guidelines  established  in the Air  Transportation
     Safety and System Stabilization Act. The Company used accounting principles
     generally accepted in the United States to identify and measure such direct
     and  incremental  losses.  Certain of those direct and  incremental  losses
     identified  by the  Company  have  been  disallowed  by the  DOT,  and  are
     therefore excluded from the reimbursement recognized by the Company.

                                       61
<PAGE>

     Passenger Traffic Commissions

     Passenger   traffic   commissions   are  recognized  as  expense  when  the
     transportation  is provided  and the  related  revenue is  recognized.  The
     amount of passenger  traffic  commissions  paid but not yet  recognized  as
     expense is included in prepaid  expenses  and other  current  assets in the
     accompanying consolidated balance sheets.

     Reclassifications

     Certain 2000 balance sheet amounts have been reclassified to conform to the
     2001 presentation.

     Property and Equipment

     Property and equipment is recorded at cost and is  depreciated  to residual
     value  over its  estimated  useful  service  life  using the  straight-line
     method.  The estimated  useful service lives for the principal  depreciable
     asset classifications are as follows:

<TABLE>
<CAPTION>
Asset                                                   Estimated Useful Service Life
-----------------------------------------------------------------------------------------------------------
<S>                                                     <C>
Aircraft and related equipment

     Lockheed L-1011 (Series 50 and 100)                Depreciating to individual aircraft retirement date
                                                        (2002-2004) (See "Note 16 - Asset Impairment.")

     Lockheed L-1011 (Series 500)                       Depreciating to common retirement date of
                                                        December 2010

     Boeing 737-800                                     All aircraft are subject to operating leases

     Boeing 757-200                                     All aircraft are subject to operating leases

     Boeing 757-300                                     All aircraft are subject to operating leases

     Saab 340B                                          15 years

Major rotable parts, avionics and assemblies            Life of equipment to which applicable (generally
                                                        ranging from 5-18 years)

Improvements to leased flight equipment                 Period of benefit or term of lease

Other property and equipment                            3-7 years
</TABLE>

     Aircraft Lease Return Conditions

     The Company  finances a significant  number of aircraft  through  operating
     leases. Many of these leases require that the airframes and engines be in a
     specified  maintenance condition upon their return to the lessor at the end
     of the lease.  If these return  conditions are not met by the Company,  the
     leases  generally  require  financial  compensation to the lessor.  When an
     operating lease is within five years of its initial  termination  date, the
     Company accrues ratably over that five years the estimated return condition
     obligations at the end of the leases.

                                       62
<PAGE>

     Airframe and Engine Overhauls

     The Company has entered into engine  manufacturers'  agreements for engines
     which power the Boeing 737-800 and Saab 340B fleets,  which provide for the
     Company to pay a monthly fee per engine  flight hour in exchange  for major
     overhaul and  maintenance of those engines.  The Company  expenses the cost
     per flight  hour under these  agreements  as  incurred.  The cost of engine
     overhauls for remaining  fleets types,  and the cost of airframe  overhauls
     for all  fleet  types  other  than  the Saab  340B,  are  capitalized  when
     performed and amortized over estimated useful lives based upon usage, or to
     earlier  fleet or  aircraft  retirement  dates,  for both  owned and leased
     aircraft.  Airframe  overhauls  for Saab  340B  aircraft  are  expensed  as
     incurred.

     Aircraft Pre-delivery Deposits

     Advanced payments for future aircraft deliveries  scheduled within the next
     12 months are classified as current aircraft  pre-delivery  deposits in the
     accompanying  consolidated balance sheets, as the aircraft will be acquired
     and paid for by third parties who will lease them to the Company.  Advanced
     payments for future  aircraft  deliveries not scheduled  within the next 12
     months are classified as deposits and other assets. As of December 31, 2001
     and 2000,  deposits and other assets included  advanced payments for future
     aircraft and engine  deliveries  totaling  $4.1 million and $13.6  million,
     respectively.

     Intangible Assets

     Goodwill, which represents the excess of cost over fair value of net assets
     acquired,  is amortized on a straight-line basis over 20 years. The Company
     periodically  reviews the amortization  periods and the carrying amounts of
     goodwill  to  assess  its  continued   recoverability  in  accordance  with
     Accounting  Principles Board Opinion No. 17,  Intangible Assets ("APB 17").
     The Company's  policy is to record an impairment loss in the period when it
     is determined that the carrying amount of the asset may not be recoverable.

     Financial Instruments

     The carrying amounts of cash equivalents,  receivables and debt approximate
     fair value.  (See "Note 5 - Long-Term  Debt.") The fair value of fixed-rate
     debt, including current maturities, is estimated using discounted cash flow
     analysis based on the Company's current incremental rates for similar types
     of borrowing arrangements.

2.   Impact of Terrorist Attacks on September 11, 2001

     On September 11, 2001, four commercial  aircraft operated by two other U.S.
     airlines  were  hijacked and  destroyed in terrorist  attacks on the United
     States.  These attacks  resulted in  significant  loss of life and property
     damage in New York City,  Washington,  D.C.  and western  Pennsylvania.  In
     response to these attacks,  on September 11 the FAA  temporarily  suspended
     all  commercial  flights  to,  from and  within  the  United  States  until
     September 13. The Company  resumed  limited flight  operations on September
     13, with the exception of flights to and from Chicago-Midway Airport, which
     commenced  partial  operations  on  September  14.  From  September  11  to
     September  14,  the  Company  canceled  over 800  scheduled  flights.  Upon
     resuming its  pre-attack  flight  schedule  the week of  September  17, the
     Company experienced significantly lower passenger traffic and unit revenues
     than prior to the  attacks.  In response to this,  the Company  reduced its
     flight schedule by approximately  20%, as compared to the schedule operated
     immediately  prior to  September  11, and  furloughed  approximately  1,100
     employees by the middle of October.  By December 31, 2001,  the Company had
     recalled  approximately half of the furloughed employees and had added some
     capacity back to its flight schedule.

                                       63
<PAGE>

     In order to adjust its fleet to its reduced  flight  schedule,  the Company
     accelerated  the  planned  retirement  of its  fleet of 24  Boeing  727-200
     aircraft.  Most of these aircraft were retired from revenue  service in the
     fourth  quarter of 2001,  although the Company will continue to use as many
     as five to ten aircraft in charter service through the middle of 2002. (See
     "Note 16 - Asset Impairment.") The Company also negotiated delayed delivery
     dates for certain Boeing 737-800 and Boeing 757-300  aircraft under its new
     aircraft order from Boeing. Delivery dates of seven Boeing 737-800 aircraft
     were delayed more than 12 months.  The final Boeing 737-800 delivery is now
     planned  for  August  2004  rather  than May 2004,  and the  final  757-300
     delivery is planned for August 2002 rather than June 2002.  (See "Note 12 -
     Commitments and Contingencies.")

     On   September   22,  2001,   President   Bush  signed  into  law  the  Air
     Transportation  Safety  and  System  Stabilization  Act  ("Act").  The  Act
     provides for,  among other  things:  (1) $5.0 billion in  compensation  for
     direct  losses  incurred  by all  U.S.  airlines  and  air  cargo  carriers
     (collectively,  "air  carriers")  as a result of the  closure by the FAA of
     U.S.  airspace  following the September 11, 2001 terrorist  attacks and for
     incremental  losses incurred by air carriers through December 31, 2001 as a
     direct  result of such  attacks;  (2)  subject to certain  conditions,  the
     availability  of up to  $10.0  billion  in U.S.  Government  guarantees  of
     certain  loans  made to air  carriers  for which  credit is not  reasonably
     available  as  determined  by  a  newly   established  Air   Transportation
     Stabilization  Board; (3) the authority of the Secretary of  Transportation
     to  reimburse  air  carriers  (which  authority  expires 180 days after the
     enactment  of the Act) for the  increase  in the  cost of  insurance,  with
     respect to a premium for coverage  ending before  October 1, 2002,  against
     loss or damage  arising out of any risk from the  operation  of an aircraft
     over the  premium in effect for a  comparable  operation  during the period
     September  4, 2001 to  September  10, 2001;  (4) at the  discretion  of the
     Secretary of  Transportation,  a $100 million limit on the liability of any
     air carrier to third parties with respect to acts of terrorism committed on
     or to such air carrier during the 180-day period following the enactment of
     the Act; (5) the  extension of the due date for the payment by eligible air
     carriers of certain excise taxes; (6) compensation to individual  claimants
     who were physically  injured or killed as a result of the terrorist attacks
     of September 11, 2001;  and (7) the Secretary of  Transportation  to ensure
     that all  communities  that had scheduled air service before  September 11,
     2001  continue  to receive  adequate  air  service.  In  addition,  the Act
     provides that,  notwithstanding  any other provision of law,  liability for
     all claims, whether for compensatory or punitive damages,  arising from the
     terrorist-related  events of  September  11,  2001  against any air carrier
     shall not be in an amount greater than the limits of the liability coverage
     maintained  by the air  carrier.  With  respect to the cash grants of up to
     $5.0 billion,  each qualified air carrier is entitled to receive the lesser
     of: (1) its actual direct and incremental losses incurred between September
     11, 2001 and December 31, 2001;  or (2) its  proportion of the $5.0 billion
     of total compensation available to all qualified air carriers under the Act
     allocated by August 2001 available seat miles or ton miles.

     The  Company  believes  it is  eligible  to receive up to $74.0  million in
     connection with the Act in compensation  for direct and incremental  losses
     arising  from the  terrorist  attacks of  September  11 and the  subsequent
     decline in demand for air travel.  However,  the Company has recorded $66.3
     million  in 2001  in U.S.  Government  grant  compensation,  as the DOT has
     disallowed  certain losses  recorded under  generally  accepted  accounting
     principles ("GAAP").  Included in these potentially  nonreimbursable losses
     are the Company's non-cash  write-down of the Boeing 727-200 aircraft fleet
     ($35.2  million)  and exit costs  related  to rent  payments  scheduled  to
     continue on certain  Boeing  727-200  aircraft  after they are removed from
     service  ($3.8  million.)  The  Company,   along  with  the  Air  Transport
     Association,  has  requested  that  the DOT use  GAAP as the  standard  for
     determining  reimbursable  losses under the Act. If the DOT reverses  their
     position to disallow these losses,  the Company may record  additional U.S.
     Government  grant  revenue of up to $7.7  million  in 2002,  based upon the
     Company's   estimated  maximum  allocation   calculated  from  August  2001
     available  seat miles.  As of December 31,  2001,  the Company had received
     $44.5  million in cash  compensation  under the Act and  expects to receive
     $21.8  million  in  additional  cash in the  second  quarter  of 2002.  The


                                       64
<PAGE>

     Company's  calculation of direct and incremental losses is subject to audit
     by the United States Government at a future date, yet to be determined.

     Components of direct and incremental  losses  incurred by the Company,  for
     which U.S. Government compensation of $66.3 million was recorded,  include:
     (1) $57.1 million in lost profit  contribution  (direct revenues lost, less
     variable  operating  expenses  avoided)  from planned  flights not operated
     between September 11 and December 31, and from flights operated during this
     time period with lower load factors and unit revenues;  (2) certain special
     charges of $17.8 million,  that were deemed  directly  attributable  to the
     attacks, as described in the following paragraphs; less (3) $8.6 million in
     expense  reductions  realized as a direct result of lower costs incurred by
     the Company after the September 11 attacks.

     Special  charges  are those  direct  expenses  which,  due to the events of
     September 11, are unusual under the provisions of APB Opinion 30, Reporting
     the Results of  Operations - Reporting the Effects of Disposal of a Segment
     of a Business, and Extraordinary, Unusual and Infrequently Occurring Events
     and  Transactions  ("APB  30").  These  costs  include  travel  expenses to
     reposition  crew members and aircraft once flights  resumed;  expenses paid
     for  passengers  whose  travel was  interrupted  by flight  diversions  and
     cancellations;  and employee  salaries  for crew members and airport  staff
     affected by the temporary  FAA-mandated  grounding of the Company's  fleet.
     Also  classified  as  special  charges  are  increased  hull and  liability
     insurance costs; additional advertising expense incurred as a direct result
     of  September  11;  interest  expense  related to debt  incurred  under the
     Company's  credit  facility to provide  operating cash after  September 11;
     incremental  security costs;  toll-free  telephone service costs related to
     the  implementation of a reduced flight schedule on and after September 23;
     losses on abandoned capital projects;  and additional letter of credit fees
     incurred. The Company also recorded special charges of $3.8 million related
     to exit costs for rent  payments  scheduled  to continue on certain  Boeing
     727-200 aircraft after they are removed from service;  however,  Government
     grant  revenue was not recorded in relation to these  charges  based on the
     Department   of   Transportation's   current   position   that   they   are
     nonreimbursable.

     Special charges also include $3.3 million of expenses related to a proposed
     transaction in which Amtran would have been taken  private,  which had been
     substantially  completed  just prior to September 11. On June 18, 2001, the
     Company  entered into a merger  agreement  with INDUS  Acquisition  Company
     ("INDUS"), a newly formed company wholly owned by J. George Mikelsons,  the
     Company's  Chairman,  founder  and  majority  shareholder,   providing  for
     approximately  28% of the outstanding  shares of the Company's common stock
     not  presently  owned by Mr.  Mikelsons to be  converted  into the right to
     receive $23 in cash per share.  Also on June 18, 2001, the Company received
     from Citicorp USA, Inc. and Salomon Smith Barney,  Inc. a commitment letter
     with  respect to a $175.0  million  secured  credit  facility to be used to
     finance that  transaction.  On September 21, 2001,  following the events of
     September 11, Citicorp USA, Inc. and Salomon Smith Barney,  Inc. terminated
     their  obligations under the commitment letter on the basis that a material
     adverse  change  had  occurred  in the  business  condition  (financial  or
     otherwise),  operations  or  properties  of the Company,  taken as a whole,
     since  December  31,  2000.  Completion  of the  proposed  transaction  was
     conditioned on, among other things, receipt of a financing commitment to be
     used to fund  the  proposed  transaction.  The  Company  attempted  to find
     alternate  financing to replace the lost  commitment,  but was unable to do
     so. On October 4, 2001,  as a result of the  termination  of the  financing
     commitment  and the inability to find  alternative  financing,  the Company
     entered into a mutual termination  agreement with INDUS that terminated the
     merger agreement.

     The  Company  has not yet  submitted  an  application  for loan  guarantees
     provided under the Act. The Company believes it meets the qualifications to
     receive such loan guarantees;  however,  the Company is not able to provide
     any estimate at this time as to the amount of loan guarantees, if any, that
     it may  request or  receive,  or for what  period of time those  guarantees
     might remain in effect.

                                       65
<PAGE>

     As a result of the  September  11, 2001  attacks,  the  Company's  aviation
     insurers,  and other air carriers'  aviation  insurers,  have significantly
     reduced the maximum amount of insurance  coverage they will  underwrite for
     liability to persons other than employees or passengers resulting from acts
     of terrorism,  war, hijacking or other similar perils (war-risk  coverage).
     In  addition,  the  Company  and other  air  carriers,  are  being  charged
     significantly  higher premiums for this reduced coverage,  as well as other
     aviation  insurance.  The Act provided for reimbursement to air carriers of
     incremental  costs  of the  war-risk  coverage  for a 30-day  period  ended
     October 31,  2001.  The Company  received  $0.9 million as a result of this
     provision.  In addition, and pursuant to the Act, the Government has issued
     supplemental war-risk coverage to U.S. air carriers, including the Company,
     through May 20, 2002. It is  anticipated  that after this date a commercial
     product for war risk  coverage will become  available,  but the Company may
     incur significant additional costs for this coverage.

     On November  19,  2001,  President  Bush signed into law the  Aviation  and
     Transportation  Security Act ("Aviation  Security Act").  This law provides
     for placing  substantially all aspects of civil aviation passenger security
     and screening under federal control,  to be phased in during 2002 and 2003,
     and creates a new Transportation Security Administration under the DOT. The
     cost of the  provisions  set  forth in the  Aviation  Security  Act will be
     funded by a new security fee of $2.50 per passenger enplanement, limited to
     $5 per one-way trip and $10 per round trip.  Air  carriers,  including  the
     Company,  began  collecting  the new fee on February 1, 2002.  The Aviation
     Security  Act will  also be  funded by  financial  assessments  to each air
     carrier  beginning  in the second  quarter  of 2002.  The amount of the air
     carrier  assessment  is  limited to the amount  each air  carrier  spent on
     aviation security in 2000.

3.   Cash and Cash Equivalents

     Cash and cash equivalents consist of the following:

<TABLE>
<CAPTION>
                                                                                    December 31,
                                                                              2001               2000
                                                                           ------------------------------
                                                                                  (in thousands)
<S>                                                                         <C>                <C>
Cash and money market funds                                                 $ 180,388          $  19,264
Commercial paper                                                                    -            108,938
U.S. Treasury repurchase agreements                                             4,051                935
                                                                           -----------        -----------
                                                                            $ 184,439          $ 129,137
                                                                           -----------        -----------
</TABLE>

4.   Property and Equipment

     The Company's property and equipment consist of the following:

<TABLE>
<CAPTION>
                                                                                              December 31,
                                                                                         2001             2000
                                                                                       ---------------------------
                                                                                            (in thousands)
<S>                                                                                    <C>              <C>
Flight equipment, including airframes, engines and other                               $ 327,541        $ 822,979
Less accumulated depreciation                                                             58,396          351,329
                                                                                       ----------       ----------
                                                                                         269,145          471,650
                                                                                       ----------       ----------
Facilities and ground equipment                                                          119,975          111,825
Less accumulated depreciation                                                             74,177           61,356
                                                                                       ----------       ----------
                                                                                          45,798           50,469
                                                                                       ----------       ----------
                                                                                       $ 314,943        $ 522,119
                                                                                       ----------       ----------
</TABLE>

                                       66
<PAGE>

5.   Long-Term Debt

     Long-term debt consists of the following:

<TABLE>
<CAPTION>
                                                                                                  December 31,
                                                                                          2001                    2000
                                                                                         ---------------------------------
                                                                                                 (in thousands)
<S>                                                                                      <C>                    <C>
Unsecured Senior Notes, fixed rate of 10.50%, payable in August 2004                     $ 175,000              $ 175,000

Unsecured Senior Notes, fixed rate of 9.625%, payable in December 2005                     125,000                125,000

Aircraft pre-delivery deposit finance facilities, variable rates,                          118,239                 89,875
payable upon delivery of aircraft

Borrowings against secured revolving bank credit facility, variable                         35,000                      -
rate, payable in January 2003

Secured note payable to institutional lender, variable rate,                                 9,375                 11,075
payable in varying installments through October 2005

Secured note payable to institutional lender, variable rate, payable                         8,383                 10,083
in varying installments through March 2005

Mortgage note payable to institutional lender, fixed rate of 8.75%,                          9,538                  9,937
payable in varying installments through June 2014

Mortgage note payable to institutional lender, fixed rate of 8.30%,                          7,280                  7,595
payable in varying installments through June 2014

City of Chicago variable-rate special facility revenue bonds,                                6,000                  6,000
payable in December 2020

City of Chicago variable-rate special facility revenue bonds, repaid                             -                 16,960
in November 2001

Other                                                                                        3,777                  6,424
                                                                                         ----------             ----------
                                                                                           497,592                457,949

Less current maturities and short-term debt                                                124,059                 96,740
                                                                                         ----------             ----------
                                                                                         $ 373,533              $ 361,209
                                                                                         ==========             ==========
</TABLE>

                                       67
<PAGE>

     In July 1997,  the Company sold $100.0 million  principal  amount of 10.50%
     unsecured  senior  notes.  The Company  sold an  additional  $75.0  million
     principal  amount of these notes in December 1999.  Interest on these notes
     is payable on February 1 and August 1 of each year.  The Company may redeem
     the  notes,  in whole or in part,  at any time on or after  August 1, 2002,
     initially  at 105.25% of their  principal  amount  plus  accrued  interest,
     declining ratably to 100.0% of their principal amount plus accrued interest
     at maturity.  The net proceeds of the $100.0 million unsecured notes issued
     in 1997 were approximately $96.9 million, after deducting costs and fees of
     issuance.  The Company  used a portion of the net proceeds to repay in full
     the Company's  prior bank facility and used the balance of the proceeds for
     general corporate purposes. The net proceeds of the $75.0 million unsecured
     notes issued in 1999 were approximately $73.0 million after deducting costs
     and fees of issuance, and were used for general corporate purposes.

     In December  1998,  the Company  sold $125.0  million  principal  amount of
     9.625% unsecured  senior notes.  Interest on these notes is payable on June
     15 and December 15 of each year. The Company may redeem the notes, in whole
     or in part, at any time on or after June 15, 2003,  initially at 104.81% of
     their principal amount plus accrued interest, declining to 102.41% of their
     principal  amount plus accrued interest on June 15, 2004, then to 100.0% of
     their principal amount plus accrued interest at maturity.  The net proceeds
     of the $125.0 million  unsecured  notes were  approximately  $121.0 million
     after  deducting  costs  and fees of  issuance.  The  Company  used the net
     proceeds  for the  purchase of Lockheed  L-1011-500  aircraft,  engines and
     spare  parts,   and,   together  with  operating  cash  and  bank  facility
     borrowings,  for the purchase of Boeing 727-200 aircraft,  engines,  engine
     hushkits and spare parts.

     In June 1999, the Company obtained an $8.0 million loan at 8.30% secured by
     a 15-year  mortgage on the new  Maintenance  and  Operations  Center.  This
     building had a carrying amount of $8.0 million as of December 31, 2001.

     In December 1999, the Company issued $17.0 million in variable-rate special
     facility  revenue  bonds  through  the  City  of  Chicago  to  finance  the
     construction of a Federal  Inspection  Service  facility at  Chicago-Midway
     Airport.  In  November  2001,  these bonds were paid in full by the City of
     Chicago, in exchange for ownership of the facility.

     In March and October 2000,  the Company  issued two $11.5 million  variable
     rate  five-year  notes,  each  collateralized  by one  Lockheed  L-1011-500
     aircraft.  The related  aircraft have a combined  carrying  amount of $25.4
     million as of December 31, 2001.

     In September  2000, the Company  obtained a $10.0 million,  14-year loan at
     8.75%,   secured  by  a  mortgage  on  its  maintenance   facility  at  the
     Indianapolis  International  Airport. The proceeds of the loan were used to
     repay an advance  received from the City of  Indianapolis  in December 1995
     that resulted from the sale/leaseback of the facility.

     In December 2000, the Company entered into three finance facilities to fund
     pre-delivery  deposits  on  the  new  Boeing  757-300  and  Boeing  737-800
     aircraft.  The Company  obtained the first facility from Banca  Commerciale
     Italiana. It provides up to $75.0 million in deposit funding, against which
     the  Company had  borrowed  $75.0  million at  December  31, 2001 and $55.7
     million at December 31, 2000. The Company  obtained a second  facility from
     GE  Capital  Aviation  Services,  Inc.  This  facility  provides  for up to
     approximately $58.2 million in pre-delivery deposit funding,  against which
     the  Company had  borrowed  $23.2  million at  December  31, 2001 and $14.3
     million at December 31, 2000. The third facility, obtained from Rolls-Royce
     plc., will fund up to $40.0 million in deposits,  against which the Company
     had  borrowed  $20.0  million at  December  31,  2001 and $19.9  million at
     December 31, 2000.  All of this debt has been  classified as current in the
     accompanying  balance sheets,  because it will be repaid through the return
     of related pre-delivery  deposits on aircraft scheduled for delivery within
     12 months of each balance  sheet date, as the aircraft will be acquired and


                                       68
<PAGE>

     paid for by third  parties who will lease them to the Company.  Interest on
     these facilities is payable monthly.

     The Company has a secured revolving bank credit facility which provides for
     maximum  borrowings  of $100.0  million,  including up to $50.0 million for
     stand-by  letters of credit.  The  facility  matures  January 2, 2003,  and
     borrowings  under the  facility  bear  interest,  at the option of ATA,  at
     either LIBOR plus a margin or the agent bank's prime rate.  The facility is
     subject to certain  restrictive  covenants and is collateralized by all six
     owned Boeing 727-200 aircraft, nine Lockheed L-1011-50 and 100 aircraft and
     engines and three Lockheed  L-1011-500  aircraft and engines,  which have a
     combined carrying amount of approximately $133.5 million as of December 31,
     2001. As of December 31, 2001,  the Company had borrowings of $35.0 million
     against  the  facility,  and had  outstanding  letters  of  credit of $39.3
     million secured by the facility.

     The unsecured senior notes, bank credit facility and other loans secured by
     certain collateral are subject to restrictive covenants,  including,  among
     other things, limitations on the incurrence of additional indebtedness; the
     payment  of  dividends;   certain   transactions   with   shareholders  and
     affiliates;  and the creation of liens on or other  transactions  involving
     certain assets. In addition,  certain covenants require specified financial
     ratios to be maintained.

     Future maturities of long-term debt are as follows:

<TABLE>
<CAPTION>
                         December 31, 2001
                         -----------------
                           (in thousands)

<C>                             <C>
2002                            $ 124,059

2003                               39,878

2004                              179,749

2005                              134,038

2006                                1,602

Thereafter                         18,266
                         -----------------
                                $ 497,592
                         =================
</TABLE>

     Interest capitalized in connection with long-term asset purchase agreements
     and construction projects was $29.0 million, $15.3 million and $6.1 million
     in 2001, 2000, and 1999,  respectively.  The capitalized  interest includes
     $14.7  million,  $7.9  million  and $0.0  million  in 2001,  2000 and 1999,
     respectively,  of interest  to be paid to Boeing  upon  delivery of certain
     Boeing  737-800 and Boeing  757-300  aircraft in lieu of the Company making
     additional pre-delivery deposits, as allowed by the purchase agreement.

                                       69
<PAGE>

 6.  Lease Commitments

     At December  31, 2001,  the Company had the  following  operating  aircraft
     leases:

<TABLE>
<CAPTION>
                                           Total Leased     Initial Lease Expirations     Initial Lease Terms
                                           ------------     -------------------------     -------------------
<S>                                             <C>           <C>                           <C>
Lockheed L-1011-100                             1                     2003                     60 months
Boeing 727-200 (1)                              7             Between 2001 and 2003         6 to 84 months
Boeing 757-200                                  16            Between 2002 and 2022          1 to 22 years
Boeing 757-300                                  5                     2021                     20 years
Boeing 737-800                                  14            Between 2016 and 2021         15 to 20 years
Saab 340B                                       9                 2009 and 2010                9.5 years
Engines - Lockheed L-1011-500                   6                 2006 and 2007                 7 years
Engines - Boeing 757-200                        5             Between 2008 and 2011          9 to 15 years
Engines - Boeing 757-300                        1                     2024                    22.5 years
Engines - Boeing 737-800                        2                     2021                     20 years
</TABLE>

(1)  As of December  31,  2001,  three of the aircraft had been retired from
     revenue service, but the Company remained obligated on the leases.

     The Company is responsible for all maintenance  costs on these aircraft and
     engines,  and it must meet specified  airframe and engine return conditions
     upon lease expiration.

     As of December 31, 2001, the Company had other long-term  leases related to
     certain  ground  facilities,   including  terminal  space  and  maintenance
     facilities,  with lease  terms that vary from two to 45 years and expire at
     various  dates through 2040.  The lease  agreements  relating to the ground
     facilities, which are primarily owned by governmental units or authorities,
     generally  do not provide for  transfer of  ownership,  nor do they contain
     options to purchase.  The Company also had two long-term  leases related to
     certain ground equipment, which both expire in 2008.

     The Company leases its headquarters  facility from the Indianapolis Airport
     Authority  under an operating  lease  agreement,  which expires in December
     2002. The agreement has an option to extend for five years.  The Company is
     responsible for maintenance, taxes, insurance and other expenses incidental
     to the operation of the facilities.

                                       70
<PAGE>

     Future  minimum  lease  payments at December  31, 2001,  for  noncancelable
     operating leases with initial terms of more than one year are as follows:

<TABLE>
<CAPTION>
                                             Facilities
                           Flight            and Ground
                         Equipment            Equipment              Total
                       ------------------------------------------------------
                                            (in thousands)

<C>                    <C>                  <C>                 <C>
2002                   $   150,825          $    11,821         $    162,646

2003                       147,110               11,889              158,999

2004                       146,357               11,338              157,695

2005                       145,191                9,946              155,137

2006                       145,191                8,983              154,174

Thereafter               1,631,398               36,494            1,667,892
                       ------------         ------------      ---------------
                       $ 2,366,072          $    90,471       $    2,456,543
</TABLE>

     Rental expense for all operating  leases in 2001,  2000 and 1999 was $119.2
     million, $88.0 million and $72.0 million, respectively.

                                       71
<PAGE>

7.   Income Taxes

     The provision for income tax expense (credit) consisted of the following:

<TABLE>
<CAPTION>
                                                                            December 31,
                                                            2001               2000               1999
                                                          -----------------------------------------------
                                                                           (In thousands)
<S>                                                       <C>             <C>                 <C>
Federal:
     Current                                              $    4,070      $         -         $   15,339
     Deferred                                                (40,546)          (4,278)            10,889
                                                          -----------     ------------        -----------
                                                             (36,476)          (4,278)            26,228
State:
     Current                                                     510              328              1,284
     Deferred                                                 (3,784)            (657)             2,943
                                                          -----------     ------------        -----------
                                                              (3,274)            (329)             4,227
                                                          -----------     ------------        -----------
Income tax expense (credit)                               $  (39,750)      $   (4,607)        $   30,455
                                                          -----------     ------------        -----------
</TABLE>

     The  provision  for income tax expense  (credit)  differed  from the amount
     obtained by applying the statutory federal income tax rate to income (loss)
     before income taxes as follows:

<TABLE>
<CAPTION>
                                                                            December 31,
                                                            2001               2000               1999
                                                          -----------------------------------------------
                                                                           (In thousands)
<S>                                                         <C>                 <C>              <C>
Federal income tax (credit) at statutory rate               $ (40,626)          $ (6,841)        $ 27,175

State income tax (credit) net of federal benefit               (2,328)              (143)           1,997

Non-deductible expenses                                         2,041              1,872            1,578

Other, net                                                      1,163                505             (295)
                                                          ------------       ------------       ----------

Income tax expense (credit)                                 $ (39,750)          $ (4,607)        $ 30,455
                                                          ------------       ------------       ----------
</TABLE>

                                       72
<PAGE>

     Deferred  income  taxes arise from  temporary  differences  between the tax
     basis of assets and liabilities and their reported amounts in the financial
     statements.  The  principal  temporary  differences  relate  to the  use of
     accelerated  methods of  depreciation  and  amortization  for tax purposes.
     Deferred tax liability and asset components are as follows:

<TABLE>
<CAPTION>
                                                                                             December 31,
                                                                                        2001                2000
                                                                                      -------------------------------
                                                                                            (In thousands)
<S>                                                                                    <C>                  <C>
Deferred tax liabilities:

    Property and equipment                                                             $ 35,031             $ 85,398

    Other taxable temporary differences                                                     342                  714

                                                                                       ---------            ---------
      Deferred tax liabilities                                                           35,373               86,112
                                                                                       ---------            ---------

Deferred tax assets:

    Tax benefit of net operating loss carryforwards                                         383               12,739

    Alternative minimum tax and other tax credit carryforwards                           19,528               15,813

    Vacation pay accrual                                                                  4,723                4,552

    Other deductible temporary differences                                                2,042                2,978
                                                                                       ---------            ---------

       Deferred tax assets                                                               26,676               36,082
                                                                                       ---------            ---------

       Net deferred tax liability                                                      $  8,697             $ 50,030
                                                                                       =========            =========

Deferred taxes classified as:

    Current asset                                                                      $  4,958             $  4,473

    Non-current liability                                                              $ 13,655             $ 54,503
</TABLE>

     At December 31, 2001, for federal tax reporting  purposes,  the Company had
     approximately $0.4 million of net operating loss carryforward  available to
     offset  future  federal  taxable  income and $19.5  million of  alternative
     minimum tax and other tax credit  carryforwards  available to offset future
     federal tax  liabilities.  The net operating loss  carryforward  expires in
     2015. The alternative  minimum tax and other tax credit  carryforwards have
     no expiration dates.

8.   Retirement Plan

     The Company has a defined  contribution  401(k) savings plan which provides
     for  participation  by substantially  all the Company's  employees who have
     completed  one year of service.  The Company has elected to  contribute  an
     amount  equal to 55.0% in  2001,  50.0% in 2000 and  45.0% in 1999,  of the
     amount  contributed  by each  participant  up to the first six  percent  of
     eligible  compensation.  Company matching  contributions  expensed in 2001,
     2000  and  1999  were  $4.7   million,   $3.9  million  and  $3.1  million,
     respectively.

     In 1993,  the  Company  added an Employee  Stock  Ownership  Plan  ("ESOP")
     feature to its existing  401(k) savings plan. The ESOP used the proceeds of
     a $3.2  million  loan from the  Company to purchase  200,000  shares of the
     Company's common stock. The selling shareholder was the Company's principal
     shareholder.  Shares of common  stock  held by the ESOP were  allocated  to
     participating  employees annually for seven years,  ending in 1999, as part


                                       73
<PAGE>

     of the Company's  401(k) savings plan  contribution.  The fair value of the
     shares allocated during the year was recognized as compensation expense. As
     the program ended in 1999, the Company  recognized no related  compensation
     expense in 2001 and 2000, but recognized $0.7 million in 1999.

 9.  Shareholders' Equity

     Since 1994, the Company's Board of Directors has approved the repurchase of
     up to 1,900,000  shares of the Company's  common stock.  As of December 31,
     2001,  the Company had  repurchased  1,710,658  common  shares at a cost of
     $24.8 million.

     The  Company's  1993  Incentive  Stock Plan for Key  Employees  (1993 Plan)
     authorizes  the grant of options for up to 900,000  shares of the Company's
     common stock.  The Company's  1996  Incentive  Stock Plan for Key Employees
     (1996 Plan)  authorizes the grant of options for up to 3,000,000  shares of
     the Company's common stock. The Company's 2000 Incentive Stock Plan for Key
     Employees  (2000 Plan)  authorizes the grant of options for up to 3,000,000
     shares of the Company's common stock.  Options granted have five to 10-year
     terms and  generally  vest and  become  fully  exercisable  over  specified
     periods of up to three years of continued employment.

     A summary of common stock option changes follows:

<TABLE>
<CAPTION>
                                                                Number               Weighted-Average
                                                               of Shares              Exercise Price
                                                              -----------           -------------------
<S>                                                            <C>                             <C>
Outstanding at December 31, 1998                               2,370,253                       $  9.38
                                                              -----------           -------------------
     Granted                                                     582,510                         26.33
     Exercised                                                  (431,075)                         8.56
     Canceled                                                    (28,528)                        15.02
                                                              -----------           -------------------
Outstanding at December 31, 1999                               2,493,160                         13.41
                                                              -----------           -------------------
     Granted                                                     638,550                         15.69
     Exercised                                                  (183,906)                         8.61
     Canceled                                                    (37,331)                        17.88
                                                              -----------           -------------------
Outstanding at December 31, 2000                               2,910,473                         14.19
                                                              -----------           -------------------
     Granted                                                     106,600                         12.21
     Exercised                                                  (181,949)                         9.18
     Canceled                                                   (121,075)                        21.60
                                                              -----------           -------------------

Outstanding at December 31, 2001                               2,714,049                       $ 14.14
                                                              ===========           ===================
Options exercisable at December 31, 1999                       1,077,554                       $ 10.04
                                                              ===========           ===================
Options exercisable at December 31, 2000                       1,741,092                       $ 11.51
                                                              ===========           ===================
Options exercisable at December 31, 2001                       2,528,633                       $ 13.80
                                                              ===========           ===================
</TABLE>

     During  1996,  the  Company  adopted  the  disclosure  provisions  of  FASB
     Statement  of  Financial  Accounting  Standards  No.  123,  Accounting  for
     Stock-Based  Compensation ("FAS 123") with respect to its stock options. As
     permitted  by FAS 123,  the  Company has elected to continue to account for
     employee stock options  following  Accounting  Principles Board Opinion No.
     25,  Accounting  for  Stock  Issued to  Employees  ("APB  25") and  related
     interpretations.  Under APB 25, because the exercise price of the Company's


                                       74
<PAGE>

     employee stock options  equals the market price of the underlying  stock on
     the date of grant, no compensation expense is recognized.

     The  weighted-average  fair value of options  granted during 2001, 2000 and
     1999 is estimated at $5.44, $6.02 and $9.67 per share, respectively, on the
     grant  date.  These  estimates  were made  using the  Black-Scholes  option
     pricing model with the  following  weighted-average  assumptions  for 2001,
     2000 and 1999: risk-free interest rate of 3.59%, 5.06% and 6.29%;  expected
     market price volatility of 0.62, 0.51 and 0.46;  weighted-average  expected
     option life of 1.04 years, 0.94 years and 0.92 years; estimated forfeitures
     of 10.8%, 6.0% and 5.6%; and no dividends.

     The  Black-Scholes   option  valuation  model  was  developed  for  use  in
     estimating  the  fair  value  of  traded  options  which  have  no  vesting
     restrictions  and are fully  transferable.  In addition,  option  valuation
     models use highly  subjective  assumptions,  including  the expected  stock
     price  volatility.  Because  the  Company's  employee  stock  options  have
     characteristics  significantly  different from those of traded options, and
     because changes in the subjective input  assumptions can materially  affect
     the fair value estimate,  in management's  opinion,  the existing models do
     not necessarily  provide a reliable single measure of the fair value of its
     employees' stock options.

     For  purposes  of pro forma  disclosure,  the  estimated  fair value of the
     options is amortized to expense  over the options'  vesting  period (1 to 3
     years). The Company's pro forma information follows:

<TABLE>
<CAPTION>
                                                         2001               2000               1999
                                                       ------------------------------------------------
                                                            (In thousands, except per share data)
<S>                                                    <C>                <C>                 <C>
Net income (loss) available to common
shareholders as reported                               $ (81,885)         $ (15,699)          $ 47,342

Net income (loss) available to common shareholders
pro forma                                                (83,696)           (19,837)            42,340

Diluted income (loss) per share as reported                (7.14)             (1.31)              3.51

Diluted income (loss) per share pro forma                  (7.30)             (1.66)              3.14
</TABLE>

     Options outstanding at December 31, 2001, expire from July
     2003 to November 2011. A total of 2,840,658  shares are reserved for future
     grants as of December 31, 2001,  under the 1993,  1996 and 2000 Plans.  The
     following  table   summarizes   information   concerning   outstanding  and
     exercisable options at December 31, 2001:

<TABLE>
<CAPTION>
Range of Exercise Prices                                            $6 - 8          $9 - 14            $15 - 19           $20 - 27
------------------------                                            ------          -------            --------           --------
<S>                                                                <C>             <C>                 <C>                <C>

Options outstanding:
     Weighted-Average Remaining Contractual Life                   5.6 years       5.7 years           6.8 years          7.0 years
     Weighted-Average Exercise Price                                $  8.17         $ 10.70             $ 15.87            $ 26.20
     Number                                                         840,327         681,872             679,750            512,100
Options exercisable:
     Weighted-Average Exercise Price                                $  8.18         $ 10.61             $ 15.87            $ 26.20
     Number                                                         836,827         645,872             600,534            445,400
</TABLE>

                                       75
<PAGE>

10.  Redeemable Preferred Stock

     In the last half of 2000,  the Company issued and sold 300 shares of Series
     B convertible  redeemable  preferred  stock,  without par value  ("Series B
     Preferred"),  at a price of $100,000 per share. The purchaser of the Series
     B Preferred is entitled to cumulative quarterly dividends at an annual rate
     of 5.0% on the  liquidation  amount  ($100,000  per  share) of the Series B
     Preferred.  The  Series B  Preferred  is  convertible  into  shares  of the
     Company's  common stock at a conversion  rate of 6,381.62  shares of common
     stock per share of Series B Preferred,  at a conversion price of $15.67 per
     share of common stock,  subject to antidilution  adjustments.  The Series B
     Preferred is optionally redeemable by the Company under certain conditions,
     but the Company must redeem the Series B Preferred no later than  September
     20,  2015.  Optional  redemption  by the Company may occur at 103.6% of the
     liquidation  amount  beginning  September 20, 2003,  decreasing 0.3% of the
     liquidation  amount  per year to  100.0% of the  liquidation  amount at the
     mandatory  redemption  date of  September  20,  2015.  Shares  of  Series B
     Preferred  have the  right  to vote on or  consent  to only  the  following
     matters (in addition to any voting rights  otherwise  required by law): (1)
     amendments to the Company's Articles of Incorporation  which are adverse to
     the  holders  of Series B  Preferred;  (2) if six  quarterly  dividends  go
     unpaid, the owner of Series B Preferred,  together with the owner of Series
     A Preferred (as defined below) and the owners of any other  preferred stock
     ranking equal to Series B Preferred,  will be entitled to elect at the next
     annual shareholders meeting 25% of the Company's Board of Directors, but no
     less than two  directors;  and (3)  increases  in the number of  authorized
     shares of Series B Preferred and  authorizations of preferred stock ranking
     senior to Series B  Preferred.  Votes will be  allocated  among  holders of
     preferred  stock based on the percentage  owned by each holder of the total
     liquidation amount of all series of preferred stock.

     Also, in the last half of 2000,  the Company  issued and sold 500 shares of
     Series  A  redeemable   preferred  stock,  without  par  value  ("Series  A
     Preferred"),  at a price of $100,000 per share. The purchaser of the Series
     A Preferred  is entitled to  cumulative  semiannual  dividends at an annual
     rate of 8.44% on the liquidation  amount ($100,000 per share) of the Series
     A Preferred. The Series A Preferred is optionally redeemable by the Company
     under  certain  conditions,  but the  Company  must  redeem  the  Series  A
     Preferred in equal  semiannual  payments  beginning  December 28, 2010, and
     ending December 28, 2015. Optional redemption by the Company may occur at a
     redemption  premium of 50.0% of the dividend  rate  beginning  December 28,
     2003,  decreasing  10.0% per year to 20.0% of the dividend rate  commencing
     December 28, 2006, and to 0.0% after the seventh year after issuance. Prior
     to the third  anniversary of issuance,  the Company may redeem the Series A
     Preferred  with net proceeds of a public  offering of the Company's  common
     stock. Shares of Series A Preferred have the right to vote on or consent to
     only the  following  matters (in  addition to any voting  rights  otherwise
     required by law): (1) amendments to the Company's Articles of Incorporation
     which  are  adverse  to the  holders  of Series A  Preferred;  (2) if three
     semiannual  dividends go unpaid, the owner of Series A Preferred,  together
     with the owner of Series B Preferred and the owners of any other  preferred
     stock ranking equal to Series A Preferred, will be entitled to elect at the
     next annual shareholders' meeting, 25% of the Company's Board of Directors,
     but no less than three directors; (3) approval of (a) an acquisition by the
     Company or one of its  subsidiaries of assets and liabilities  from a third
     party  the net  asset  value  of  which  equals  10% of the  Company's  net
     consolidated assets in its most recent publicly available balance sheet, or
     (b) a merger by the Company or one of its  subsidiaries  with a third party
     involving an  acquisition  or disposition of more than 10% of the Company's
     consolidated net assets in its most recent publicly available balance sheet
     (other  than a  disposition  of all the  Company's  L-1011  or  Boeing  727
     aircraft)  that,  in either case,  results in a downgrade of the  Company's
     credit  rating by Moody's to "C1" or by  Standard & Poor's to "C+,"  unless
     the  Company  offers  to  redeem  the  Series  A  Preferred  prior  to that
     transaction  at a price equal to the  liquidation  amount plus  accrued and
     unpaid dividends to the redemption date; and (4) increases in the number of
     authorized  shares of Series A Preferred  and  authorizations  of preferred
     stock ranking senior to Series A Preferred.  Votes will be allocated  among
     holders of preferred stock based on the percentage  owned by each holder of
     the total liquidation  amount of all series of preferred stock. The Company


                                       76
<PAGE>

     has the right on any date on which  dividends  are  payable to  exchange in
     whole but not in part subordinated  notes for shares of Series A Preferred;
     the  principal  amount of any exchanged  subordinated  notes will equal the
     liquidation  amount of the shares of Series A  Preferred,  plus any accrued
     and unpaid dividends.

11.  Earnings per Share

     The  following  table  sets  forth the  computation  of basic  and  diluted
     earnings per share:

<TABLE>
<CAPTION>
                                                                    2001                   2000                  1999
                                                               ----------------------------------------------------------
<S>                                                            <C>                    <C>                   <C>
Numerator:
     Net income (loss)                                         $ (76,317,000)         $ (15,324,000)        $ 47,342,000
     Preferred stock dividends                                    (5,568,000)              (375,000)                   -
                                                               --------------         --------------        -------------

     Income (loss) available to common shareholders            $ (81,885,000)         $ (15,699,000)        $ 47,342,000
                                                               ==============         ==============        =============

Denominator:
     Denominator for basic earnings per share -
     weighted average shares                                      11,464,125             11,956,532           12,269,474

     Effect of dilutive securities:
         Employee stock options                                            -                      -            1,200,063
                                                               --------------         --------------        -------------

     Dilutive potential securities                                         -                      -            1,200,063
                                                               --------------         --------------        -------------

     Denominator for diluted earnings per share
     - adjusted weighted average shares                           11,464,125             11,956,532           13,469,537
                                                               ==============         ==============        =============

Basic earnings (loss) per share                                      $ (7.14)               $ (1.31)              $ 3.86
                                                               ==============         ==============        =============
Diluted earnings (loss) per share                                    $ (7.14)               $ (1.31)              $ 3.51
                                                               ==============         ==============        =============
</TABLE>

     Potentially  dilutive  securities  of 2,467,511  and  1,160,066 in 2001 and
     2000,  respectively,  were  not  included  in the  computation  of  diluted
     earnings  per  share  because  these  years  resulted  in a net  loss,  and
     therefore, their effect would be antidilutive.

12.  Commitments and Contingencies

     In 2000,  the Company  entered into a series of  agreements  to purchase or
     lease 39 new Boeing 737-800  aircraft and ten new Boeing 757-300  aircraft,
     as well as the  engines to power  these new  aircraft.  The Boeing  737-800
     aircraft are powered by General Electric CFM56-7B27 engines, and the Boeing
     757-300  aircraft are powered by  Rolls-Royce  RB211-535  E4C engines.  The
     Company also  received  purchase  rights for an  additional  50 aircraft.

     On December  27,  2001,  the Company  entered into an agreement to exercise
     purchase  rights on two Boeing 757-300  aircraft to be delivered in May and
     June 2003.  The Company has  purchase  rights  remaining  for eight  Boeing
     757-300 aircraft and 40 Boeing 737-800 aircraft.

     The Company has a purchase  agreement  with the Boeing  Company to purchase
     directly  from Boeing the 10 new Boeing  757-300s  and 20 of the new Boeing
     737-800s.  The manufacturer's  list price is $73.6 million for each 757-300


                                       77
<PAGE>

     and $52.4 million for each 737-800,  subject to  escalation.  The Company's
     purchase  price for each  aircraft  is  subject to  various  discounts.  To
     fulfill its  purchase  obligations,  the Company has  arranged  for each of
     these  aircraft,  including  the engines,  to be purchased by third parties
     that will, in turn, enter into long-term operating leases with the Company.
     As of December  31,  2001,  the  Company had taken  delivery of five Boeing
     737-800s and five Boeing  757-300s  obtained  directly  from  Boeing.  As a
     result  of the  decreased  demand  for  air  travel  due to the  events  of
     September 11, 2001 (See "Note 2 - Impact of Terrorist  Attacks on September
     11, 2001"),  the Company delayed  planned  delivery dates of certain Boeing
     737-800 and Boeing 757-300  aircraft.  The delivery dates of seven aircraft
     were delayed by more than 12 months. All remaining aircraft to be purchased
     directly from Boeing are now scheduled  for delivery  between  January 2002
     and  August  2004,  rather  than May 2004 as  previously  agreed.  Aircraft
     pre-delivery deposits are required for these purchases, and the Company has
     funded these deposits using operating cash and deposit  finance  facilities
     (See "Note 5 - Long-Term Debt.").  As of December 31, 2001, the Company had
     $170.7 million in pre-delivery  deposits outstanding for these aircraft, of
     which  $118.2  million was  provided  by deposit  finance  facilities  with
     various  lenders.  Upon  delivery of the  aircraft,  pre-delivery  deposits
     funded  with  operating  cash will be returned  to the  Company,  and those
     funded with deposit facilities will be used to repay those facilities.

     The Company has entered into operating lease  agreements with respect to 14
     of the new Boeing  737-800s from  International  Lease Finance  Corporation
     ("ILFC").  In  conjunction  with these lease  agreements,  the Company also
     committed  to purchase two spare  General  Electric  aircraft  engines from
     ILFC. As of December 31, 2001, the Company has taken delivery of six Boeing
     737-800s  that are being leased from ILFC.  The  remaining  aircraft  under
     these operating lease agreements are scheduled for delivery between January
     2002 and May  2004.  Both  spare  engines  were  received  in 2001 and were
     financed with an operating lease.

     The Company has an agreement to lease five of the new Boeing  737-800s from
     GE Capital  Aviation  Services  ("GECAS").  As of December  31,  2001,  the
     Company has taken delivery of three Boeing 737-800  aircraft that are being
     leased from GECAS. The two remaining aircraft, to be financed through GECAS
     operating leases, are scheduled for delivery in 2002.

     The Company has  committed  to purchase an  additional  four spare  General
     Electric aircraft engines from the engine  manufacturer.  The spare engines
     under this agreement are scheduled for delivery  between 2003 and 2006. The
     Company  has  committed  to purchase  an  additional  two spare Rolls Royce
     engines from the engine  manufacturer.  The first spare engine was received
     in the third quarter of 2001 and was financed with an operating  lease. The
     second engine is scheduled for delivery in 2002.

     In March  2001,  the  Company  entered  into a  limited  liability  company
     agreement with Boeing Capital  Corporation ("BCC") to form BATA Leasing LLC
     ("BATA") a 50/50 joint venture.  Because the Company does not control BATA,
     the Company's  investment is being  accounted for under the equity  method.
     BATA will remarket the  Company's  fleet of 24 Boeing  727-200  aircraft in
     either  passenger or cargo  configurations.  In exchange for  supplying the
     aircraft and certain  operating  services to BATA, the Company has and will
     continue to receive both cash and equity in the income or loss of BATA. The
     Company transferred 12 Boeing 727-200 aircraft to BATA in 2001. The Company
     expects to transfer  most of the  remaining 12 Boeing  727-200  aircraft to
     BATA in the first half of 2002.  Also in 2001,  the  Company  entered  into
     short-term  operating  leases  with  BATA  on  nine  of the 12  transferred
     aircraft. As of December 31, 2001, eight of the nine leases had terminated,
     and the Company continued to operate one of these aircraft.  The Company is
     subject to lease  return  conditions  on these nine  operating  leases upon
     delivery of any related  aircraft to a third party by BATA.  As of December
     31, 2001, a third-party  lessee or buyer has not been identified for any of
     these aircraft. Management believes it is reasonably possible that a lessee
     or buyer will be  identified.  The  Company  estimates  that it could incur
     approximately $7.0 million of expense to meet the return conditions, if all


                                       78
<PAGE>

     nine of the aircraft were leased by BATA to third parties. No liability has
     been recorded for these return conditions.

     Various claims, contractual disputes and lawsuits against the Company arise
     periodically   involving   complaints   which  are  normal  and  reasonably
     foreseeable in light of the nature of the Company's business.  The majority
     of these suits are covered by insurance. In the opinion of management,  the
     resolution of these claims will not have a material  adverse  effect on the
     business, operating results or financial condition of the Company.

13.  Acquisition of Businesses

     On January 26, 1999, the Company acquired all of the issued and outstanding
     stock of T. G. Shown  Associates,  Inc.,  which then owned 50% of the Amber
     Air Freight  partnership.  The Company  already  owned the other 50% of the
     partnership.

     On January 31, 1999,  the Company  purchased  the  membership  interests of
     Travel Charter International, LLC ("TCI"), a Detroit-based independent tour
     operator. ATA had been providing passenger airline services to TCI for over
     14 years.  TCI's  results of  operations,  beginning  February  1999,  were
     consolidated into the Company.

     On April 30, 1999, the Company  acquired all of the issued and  outstanding
     stock of Agency Access  Training  Center,  Inc.  ("AATC") and Key Tours Las
     Vegas,  Inc.  ("KTLV"),  and  additionally  purchased  the  majority of the
     current  assets and  current  liabilities  of  Keytours,  Inc.  ("KTI"),  a
     Canadian  corporation.  All  three  companies  (AATC,  KTLV and  KTI)  were
     previously  under common control and jointly  operated an independent  tour
     business  in the  Detroit  metropolitan  area  using the brand  name of Key
     Tours. ATA had been providing  passenger  airline services to Key Tours for
     over 15 years.  Beginning May 1999, the results of operations of Key Tours'
     brand were consolidated into the Company.

     On April 30, 1999, the Company  acquired all of the issued and  outstanding
     stock of Chicago Express Airlines,  Inc. ("Chicago  Express").  The Company
     had  maintained a code-share  agreement  with Chicago  Express  since April
     1997.  Chicago  Express'  results of operations,  beginning May 1999,  were
     consolidated into the Company.

     The  Company  paid  approximately  $16.1  million in cash and  issued  $1.9
     million in stock for the  purchase  of all  acquisitions  discussed  above,
     which were accounted for using the purchase method of accounting.

14.  Segment Disclosures

     During  1999,  the  Company  acquired  several  independent  tour  operator
     businesses  and  combined  their  operations  with the  Company's  existing
     vacation  package  brand,  ATA  Vacations.  (See "Note 13 - Acquisition  of
     Businesses.") These companies comprise the ATA Leisure Corp. ("ATALC").

     The Company  identifies  its segments on the basis of similar  products and
     services.  The airline segment derives its revenues primarily from the sale
     of  scheduled  service or charter  air  transportation.  ATALC  derives its
     revenues  from the sale of  vacation  packages,  which,  in addition to air
     transportation,   include  hotels  and  other  ground  arrangements.  ATALC
     purchases air  transportation  for its vacation packages from ATA and other
     airlines.

     The Company's revenues are derived  principally from customers domiciled in
     the United States.

                                       79
<PAGE>

     The most significant  component of the Company's  property and equipment is
     aircraft and related improvements and parts. All aircraft are registered in
     the United  States.  The  Company  therefore  considers  all  property  and
     equipment to be domestic.

     The United States  Government is the only customer that  accounted for more
     than 10.0% of consolidated revenues. U.S. Government revenues accounted for
     13.1%,  14.6% and 11.2% of  consolidated  revenues for 2001, 2000 and 1999,
     respectively.

     Segment  financial  data as of and for the years ended  December  31, 2001,
     2000 and 1999 follows:

<TABLE>
<CAPTION>
                                                             For the Year Ended December 31, 2001
                                                                                   Other/
                                               Airline            ATALC          Eliminations         Consolidated
                                             ------------      ------------      -------------        -------------
                                                                        (in thousands)
<S>                                          <C>               <C>                <C>                  <C>
Operating revenue (external)                 $ 1,127,400       $    71,893        $    76,191          $ 1,275,484

Inter-segment revenue                             34,626             2,031            (36,657)                   -

Operating expenses (external)                  1,245,802            56,941             64,611            1,367,354

Inter-segment expenses                             7,514            19,071            (26,585)                   -

Operating income (loss)                          (91,290)           (2,088)             1,508              (91,870)

Segment assets (at year-end)                   1,156,428           162,349           (315,815)           1,002,962
</TABLE>

<TABLE>
<CAPTION>
                                                             For the Year Ended December 31, 2000
                                                                                   Other/
                                               Airline            ATALC          Eliminations         Consolidated
                                             ------------      ------------      -------------        -------------
                                                                        (in thousands)
<S>                                          <C>               <C>               <C>                   <C>
Operating revenue (external)                 $ 1,132,031       $    95,357       $     64,165          $ 1,291,553

Inter-segment revenue                             58,140             3,212            (61,352)                   -

Operating expenses (external)                  1,162,084            66,995             59,904            1,288,983

Inter-segment expenses                             7,260            43,251            (50,511)                   -

Operating income (loss)                           20,827           (11,677)            (6,580)               2,570

Segment assets (at year-end)                   1,109,042           120,496           (197,108)           1,032,430
</TABLE>


                                       80
<PAGE>

<TABLE>
<CAPTION>
                                                             For the Year Ended December 31, 1999
                                                                                   Other/
                                               Airline            ATALC          Eliminations         Consolidated
                                             ------------      ------------      -------------        -------------
                                                                        (in thousands)
<S>                                          <C>               <C>               <C>                   <C>
Operating revenue (external)                 $   972,081       $    94,840       $     55,445          $ 1,122,366

Inter-segment revenue                             42,970             4,985            (47,955)                   -

Operating expenses (external)                    919,833            69,925             42,581            1,032,339

Inter-segment expenses                             7,045            32,516            (39,561)                   -

Operating income (loss)                           88,173            (2,616)             4,470               90,027

Segment assets (at year-end)                     821,373            47,945            (54,037)             815,281
</TABLE>

15.  Fuel Price Risk Management

     During 2001,  2000 and 1999, the Company  entered into fuel hedge contracts
     to minimize  the risk of fuel price  fluctuation.  The extent to which fuel
     has been hedged and the type of hedge instruments used has varied. In early
     1999,  the  Company  hedged  fuel using swap  agreements,  which  establish
     specific swap prices for designated periods, and fuel cap agreements, which
     guarantee a maximum price per gallon for designated  periods.  Beginning in
     the fourth  quarter of 2000,  the  Company  again  entered  into fuel hedge
     contracts,  this time  exclusively  hedging  fuel price  using  heating oil
     swaps.

     During 2000 and 1999,  the Company  accounted  for fuel hedge  contracts in
     accordance  with FASB Statement of Financial  Accounting  Standards No. 80,
     Accounting for Futures  Contracts ("FAS 80").  According to FAS 80, changes
     in the market value of the hedge  contracts  are  recognized in income when
     the  effects  of  related  changes  in the  price  of the  hedged  item are
     recognized.  Therefore,  the Company recorded gains or losses on fuel hedge
     contracts as a component of fuel expense in the month of settlement.

     Effective  January 1, 2001, the Company adopted FASB Statement of Financial
     Accounting  Standards No. 133,  Accounting for Derivative  Instruments  and
     Hedging Activities, as amended ("FAS 133"). FAS 133 requires the Company to
     recognize all  derivatives on the balance sheet at fair value.  Derivatives
     that are not hedges must be adjusted to fair value through  income.  If the
     derivative is a hedge, depending on the nature of the hedge, changes in the
     fair value of derivatives  will either be offset against the change in fair
     value  of the  hedged  assets,  liabilities  or  firm  commitments  through
     earnings or recognized in other comprehensive  income until the hedged item
     is recognized in earnings. The ineffective portion of a derivative's change
     in fair value must be immediately recognized in earnings.

     The Company's heating oil swap agreements have initial  maturities of up to
     12 months. As of December 31, 2001, the Company's existing  instruments had
     remaining  maturities of up to six months.  In accordance with FAS 133, the
     Company  accounts for its heating oil swap  agreements as cash flow hedges.
     Upon the adoption of FAS 133, the fair value of the Company's  fuel hedging
     contracts  representing  the amount the Company would pay if the agreements
     were terminated was $0.6 million.  The Company recorded this amount, net of
     income  taxes  of  $0.2   million,   in  other  assets  and  other  current
     liabilities,   with  a  corresponding  entry  of  the  net  fair  value  in
     accumulated other comprehensive  income on the consolidated  balance sheet.
     All changes in fair value of the heating  oil swap  agreements  during 2001
     were  effective  for purposes of FAS 133, so these  valuation  changes were
     recognized  throughout  the  year in  other  comprehensive  loss  and  were
     included in earnings as a component of fuel expense only upon settlement of
     each agreement.

                                       81
<PAGE>

     During 2001, the Company  recognized hedging losses on settled contracts in
     fuel expense of approximately $2.6 million. The fair value of the Company's
     fuel hedging  agreements at December 31, 2001,  representing the amount the
     Company would pay if the agreements were terminated,  totaled $1.1 million,
     which,  net of income taxes of approximately  $0.4 million,  represents the
     balance of other  comprehensive  loss of $0.7  million in the  consolidated
     balance sheet at December 31, 2001.

16.  Asset Impairment

     Following the events of September 11, 2001,  the Company  decided to retire
     the Boeing  727-200  fleet  earlier than  originally  planned,  in order to
     adjust its fleet size to a reduced flight schedule.  Most of these aircraft
     were retired from revenue  service in the fourth quarter of 2001,  although
     some are being used for charter  service through the first half of 2002. In
     accordance with FASB Statement of Financial  Accounting  Standards No. 121,
     Accounting  for the  Impairment  of  Long-Lived  Assets and for  Long-Lived
     Assets to Be  Disposed of ("FAS  121"),  the  Company  determined  that the
     estimated  future  undiscounted  cash flows expected to be generated by the
     Boeing 727-200s were less than the current net book value of these aircraft
     and the related rotable parts and inventory.  Therefore,  these assets were
     impaired  under FAS 121.  During  the third  quarter of 2001,  the  Company
     recorded an asset impairment charge of $35.2 million to reduce the carrying
     amount of the Boeing 727-200 aircraft and related assets to their estimated
     fair market  value,  including  those  aircraft  which had been  previously
     transferred  to the joint venture BATA.  During the fourth quarter of 2001,
     the Company recorded an additional asset impairment  charge of $9.3 million
     to reflect a further  decline in estimated fair market value of the assets.
     The carrying  amount of those assets not yet  transferred  to BATA has been
     classified  as assets held for sale in the  accompanying  balance  sheet in
     accordance with FAS 121.

     Also in the  fourth  quarter  of  2001,  the  Company  determined  that the
     estimated  future  undiscounted  cash flows expected to be generated by the
     Lockheed  L-1011-50  and 100 fleet was less than the current net book value
     of these aircraft and the related  rotable parts and inventory.  Therefore,
     these  assets were  impaired  under FAS 121.  During the fourth  quarter of
     2001, the Company recorded an asset  impairment  charge of $67.8 million to
     reduce the carrying  amount of the Lockheed  L-1011-50 and 100 aircraft and
     related assets to their estimated fair market value. The carrying amount of
     those assets has been  classified as assets held for use and appears in the
     property and equipment  section of the  accompanying  consolidated  balance
     sheet in  accordance  with FAS 121.  These  assets will be  depreciated  in
     conjunction with the planned fleet retirement schedule.

17.  Goodwill and Other Intangible Assets

     Goodwill  represents  the  excess of cost over the fair value of net assets
     acquired (See Note 13,  "Acquisition of Businesses.") The Company amortizes
     goodwill on a straight-line  basis over 20 years in accordance with APB 17.
     The Company recorded goodwill  amortization expense of $1.3 million in both
     2001 and 2000, and $0.9 million in 1999.

     The Company  periodically  reviews the carrying value of goodwill and other
     intangible assets to assess their  recoverability in accordance with APB 17
     and FAS 121.  The  Company  has no material  intangible  assets  other than
     goodwill on its  accompanying  balance sheets.  The Company's  policy is to
     record an impairment loss when it is determined that the carrying amount of
     the asset may not be recoverable.  No impairment losses related to goodwill
     or intangible assets were recognized in 2001, 2000 or 1999.

     In June 2001, the FASB issued Statements of Financial  Accounting Standards
     No. 141, Business Combinations,  and No. 142, Goodwill and Other Intangible
     Assets,  ("FAS 142"),  effective for fiscal years  beginning after December
     15, 2001.  Under the new rules,  goodwill and  intangible  assets deemed to
     have indefinite  lives will no longer be amortized,  but will be subject to
     annual impairment reviews.

                                       82
<PAGE>

     The Company  will adopt FAS 142 in the first  quarter of 2002.  The Company
     has not yet determined what the effect of these  impairment  tests will be,
     if any, on the results of operations and financial position of the Company.

<TABLE>
<CAPTION>
                                     Financial Statements and Supplementary Data
                                            Amtran, Inc. and Subsidiaries
                                           2001 Quarterly Financial Summary
                                                     (Unaudited)

--------------------------------------------------------------------------------------------------------------------
(In thousands,  except per share data)                     3/31              6/30            9/30 (1)       12/31(1)
--------------------------------------------------------------------------------------------------------------------

<S>                                                       <C>             <C>              <C>            <C>
Operating revenues                                        $ 347,485       $ 358,895        $ 321,469      $ 247,635
Operating expenses                                          349,719         342,336          317,017        358,282
Operating income (loss)                                      (2,234)         16,559            4,452       (110,647)
Other expenses                                               (5,459)         (5,828)          (4,048)        (8,862)
Income (loss) before income taxes                            (7,693)         10,731              404       (119,509)
Income taxes (credits)                                       (3,309)          4,200               16        (40,657)
Preferred stock dividends                                       375           2,333              375          2,485
Income (loss) available to common shareholders            $  (4,759)      $   4,198        $      13      $ (81,337)
Net income (loss) per common share - basic                $   (0.42)      $    0.37        $    0.00      $   (7.05)
Net income (loss) per common share - diluted              $   (0.42)      $    0.33        $    0.00      $   (7.05)
</TABLE>

(1) During 2001, several nonrecurring events resulted in significant charges and
credits to operating loss. See "Financial  Statements and  Supplementary  Data -
Notes  to  Consolidated  Financial  Statements  - Note 2 - Impact  of  Terrorist
Attacks on September 11, 2001" and "Financial Statements - Notes to Consolidated
Financial Statements and Supplementary Data- Note 16 - Asset Impairment."

<TABLE>
<CAPTION>
                                     Financial Statements and Supplementary Data
                                            Amtran, Inc. and Subsidiaries
                                           2000 Quarterly Financial Summary
                                                     (Unaudited)

--------------------------------------------------------------------------------------------------------------------
(In thousands,  except per share data)                     3/31              6/30            9/30           12/31
--------------------------------------------------------------------------------------------------------------------

<S>                                                       <C>             <C>              <C>            <C>
Operating revenues                                        $ 321,366       $ 333,534        $ 347,301      $ 289,352
Operating expenses                                          318,802         314,912          332,610        322,659
Operating income (loss)                                       2,564          18,622           14,691        (33,307)
Other expenses                                               (5,635)         (6,073)          (5,597)        (5,196)
Income (loss) before income taxes                            (3,071)         12,549            9,094        (38,503)
Income taxes (credits)                                       (1,117)          6,680            6,112        (16,282)
Preferred stock dividends                                         -                -               -            375
Income (loss) available to common shareholders            $  (1,954)      $   5,869        $   2,982      $ (22,596)
Net income (loss) per common share - basic                $   (0.16)      $    0.48        $    0.25      $   (1.96)
Net income (loss) per common share - diluted              $   (0.16)      $    0.46        $    0.23      $   (1.96)
</TABLE>

Item 9.  Changes in and Disagreements with Accountants on Accounting and
         Financial Disclosure

No change of auditors or disagreements on accounting methods have occurred which
would require disclosure hereunder.

                                       83
<PAGE>

PART III

Item 10.Directors and Officers of the Registrant

Incorporated  herein by reference  from the  Company's  proxy  statement for the
annual meeting of stockholders to be held on May 13, 2002.

Item 11. Executive Compensation

Incorporated herein by reference from the Company's proxy statement for the
annual meeting of stockholders to be held on May 13, 2002.

Item 12. Security Ownership of Certain Beneficial Owners and Management

Incorporated herein by reference from the Company's proxy statement for the
annual meeting of stockholders to be held on May 13, 2002.

Item 13. Certain Relationships and Related Transactions

Incorporated  herein by reference  from the  Company's  proxy  statement for the
annual meeting of stockholders to be held on May 13, 2002.

                                       84
<PAGE>

PART IV

Item 14.   Exhibits, Financial Statement Schedule and Reports on Form 8-K

(a)    (1) Financial Statements

          The following consolidated financial statements of the Company and its
          subsidiaries are included in Item 8:

          o  Consolidated  Balance  Sheets for the years ended December 31, 2001
             and 2000

          o  Consolidated  Statements of Operations for the years ended December
             31, 2001, 2000 and 1999

          o Consolidated  Statements of Changes in Redeemable  Preferred  Stock,
            Common  Stock  and Other  Shareholders'  Equity  for the  years
            ended December 31, 2001, 2000 and 1999

          o Consolidated  Statements of Cash Flows for the years ended December
            31, 2001, 2000 and 1999

          o Notes to Consolidated Financial Statements

       (2)  Financial Statement Schedule

          The following  consolidated  financial information for the years 2001,
          2000 and 1999 is included in Item 14d:
                                                                            Page
          o Schedule II - Valuation and Qualifying Accounts                  87

          All other  schedules  for which  provision  is made in the  applicable
          accounting  regulation of the Securities  and Exchange  Commission are
          not required under the related  instructions or are  inapplicable  and
          therefore have been omitted.

      (3) Exhibits

          Exhibits  are filed as a separate  section of this report as set forth
          in the Index to Exhibits attached to this report.

(b)       Reports on Form 8-K filed during the quarter ending December 31, 2001:

          Report filed on October 2, 2001,  furnishing items under Item 5. Other
          Events and Item 7. Financial Statements and Exhibits.

          Report filed on October 5, 2001,  furnishing items under Item 5. Other
          Events and Item 7. Financial Statements and Exhibits.

          Report  filed on  October  5,  2001,  furnishing  items  under Item 7.
          Financial   Statements   and  Exhibits  and  Item  9.   Regulation  FD
          Disclosure.

          Report  filed on December  20,  2001,  furnishing  items under Item 9.
          Regulation FD Disclosure.

                                       85
<PAGE>

(c)       Exhibits

          See the Index to Exhibits attached to this report.

(d)       Financial Statement Schedule

          See Schedule II - Valuation and Qualifying Accounts.

                                       86
<PAGE>

<TABLE>
<CAPTION>
Item 14d. Valuation and Qualifying Accounts.                                                                            Schedule II

                                                       (Dollars in thousands)
COLUMN A                                            COLUMN B               COLUMN C                COLUMN D            COLUMN E
------------------------------------------------  --------------   --------------------------    --------------     ---------------
                                                                          Additions
                                                                   --------------------------
                                                                                  Charged to
                                                    Balance at      Charged to       Other
                                                   Beginning of     Costs and      Accounts -     Deductions -         Balance at
Description                                           Period         Expenses       Describe        Describe         End of Period
------------------------------------------------  --------------   ------------  ------------    --------------     ---------------

<S>                                                   <C>             <C>                <C>          <C>               <C>
Year ended December 31, 1999:
     Deducted from asset accounts:
        Allowance for doubtful accounts . . . .          1,163          2,318              -            1,970 (1)          1,511
        Allowance for obsolescence - Inventory .         8,441          1,872              -               22 (2)         10,291
                                                  --------------   ------------  ------------    --------------     ---------------
     Totals . . . . . . . . . . . . . . . . . .        $ 9,604        $ 4,190            $ -          $ 1,992           $ 11,802
                                                  ==============   ============  ============    ==============     ===============

Year ended December 31, 2000:
     Deducted from asset accounts:
        Allowance for doubtful accounts . . . .          1,511          2,431              -            2,751 (1)          1,191
        Allowance for obsolescence - Inventory .        10,291          3,466              -              645 (2)         13,112
                                                  --------------   ------------  ------------    --------------     ---------------
     Totals . . . . . . . . . . . . . . . . . .       $ 11,802        $ 5,897            $ -          $ 3,396           $ 14,303
                                                  ==============   ============  ============    ==============     ===============

Year ended December 31, 2001:
     Deducted from asset accounts:
        Allowance for doubtful accounts . . . .          1,191          2,213              -            1,878 (1)          1,526
        Allowance for obsolescence - Inventory .        13,112          3,481              -            5,688 (2)         10,905
                                                  --------------   ------------  ------------    --------------     ---------------
     Totals . . . . . . . . . . . . . . . . . .       $ 14,303        $ 5,694            $ -          $ 7,566           $ 12,431
                                                  ==============   ============  ============    ==============     ===============

(1)   Uncollectible accounts written off, net of recoveries.

(2)   Reduction of obsolescence allowance in 2001 of $5.4 million resulted from the FAS 121 impairment write down of Lockheed
L-1011-50 and 100 inventory and Boeing 727-200 inventory.  The remainder of the 2001 reduction in obsolescence allowance, and the
reduction in 2000 and 1999, related to inventory items transferred to flight equipment or sold.
</TABLE>

                                       87
<PAGE>

Signatures

Pursuant to the requirement of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.


                          AMTRAN, INC.
                          ------------------------------------------------------
                          (Registrant)


Date   March 29, 2002     by /s/ J. George Mikelsons
     -----------------    ------------------------------------------------------
                          J. George Mikelsons
                          Chairman
                          On behalf of the Registrant and as Director

Date   March 29, 2002     /s/ John P. Tague
     -----------------    ------------------------------------------------------
                          John P. Tague
                          President and Chief Executive Officer
                          Director

Date   March 29, 2002     /s/ James W. Hlavacek
     -----------------    ------------------------------------------------------
                          James W. Hlavacek
                          Executive Vice President and
                          Chief Operating Officer
                          Director

Date   March 29, 2002     /s/ Kenneth K. Wolff
     -----------------    ------------------------------------------------------
                          Kenneth K. Wolff
                          Executive Vice President and
                          Chief Financial Officer
                          Director

Date   March 29, 2002     /s/ Robert A. Abel
     -----------------    ------------------------------------------------------
                          Robert A. Abel
                          Director

Date   March 29, 2002     /s/ Claude E. Willis
     -----------------    ------------------------------------------------------
                          Claude E.Willis
                          Director

Date   March 29, 2002     /s/ Andrejs P. Stipnieks
     -----------------    ------------------------------------------------------
                          Andrejs P. Stipnieks
                          Director

Date   March 29, 2002     /s/ David M. Wing
     -----------------    ------------------------------------------------------
                          David M. Wing
                          Vice President and Controller
                          Chief Accounting Officer
<PAGE>

                                Index to Exhibits

Exhibit No.

2.1       Agreement  and Plan of Merger  between INDUS  Acquisition  Company and
          Amtran, Inc.  (incorporated by reference to Annex A to the Preliminary
          Proxy  Statement  on  Schedule  14A filed by Amtran,  Inc. on June 29,
          2001).

3.(i)(a)  Restated  Articles of Incorporation of Amtran,  Inc.  (incorporated by
          reference to Exhibit 3(a) to Amtran, Inc.'s Registration  Statement on
          S-1 dated March 16, 1993, File No. 33-59630).

3.(i)(b)  Articles  of  Amendment  to the  Restated  Articles  of  Incorporation
          adopted as of September 19, 2000.(incorporated by reference to Exhibit
          3.(i)(b) to Amtran,  Inc.'s Annual Report on 10-K dated April 2, 2001,
          File No. 000-21642).

3.(i)(c)  Articles  of  Amendment  to the  Restated  Articles  of  Incorporation
          adopted as of December 28, 2000. (incorporated by reference to Exhibit
          3.(i)(c) to Amtran,  Inc.'s Annual Report on 10-K dated April 2, 2001,
          File No. 000-21642).

3(ii)     Bylaws of Amtran,  Inc.,  as amended,  (incorporated  by  reference to
          Exhibit  3(b) to Amtran,  Inc.'s  Registration  Statement on S-1 dated
          March 16, 1993, File No. 33-59630).

4.1       Indenture  dated as of July 24, 1997,  by and among  Amtran,  Inc., as
          issuer,  American Trans Air, Inc.,  Ambassadair Travel Club, Inc., ATA
          Vacations,  Inc.,  Amber  Travel,  Inc.,  American  Trans Air Training
          Corporation,  American Trans Air ExecuJet,  Inc. and Amber Air Freight
          Corporation,  as guarantors, and First Security Bank, N.A., as trustee
          (incorporated   by  reference   to  Exhibit  4.1  to  Amtran,   Inc.'s
          Registration  Statement  on  S-4  dated  October  6,  1997,  File  No.
          333-37283).

4.2       Indenture dated as of December 11, 1998, by and among Amtran, Inc., as
          issuer,  American Trans Air, Inc.,  Ambassadair Travel Club, Inc., ATA
          Vacations,  Inc.,  Amber  Travel,  Inc.,  American  Trans Air Training
          Corporation,  American Trans Air ExecuJet,  Inc. and Amber Air Freight
          Corporation,  as guarantors, and First Security Bank, N.A., as trustee
          (incorporated   by  reference   to  Exhibit  4.4  to  Amtran,   Inc.'s
          Registration  Statement  on  S-3  dated  August  26,  1998,  File  No.
          333-52655).

4.3       First  Supplemental  Indenture  dated as of December 11, 1998,  by and
          among Amtran, Inc., as issuer,  American Trans Air, Inc.,  Ambassadair
          Travel Club, Inc., ATA Vacations,  Inc., Amber Travel,  Inc., American
          Trans Air Training Corporation,  American Trans Air ExecuJet, Inc. and
          Amber Air Freight Corporation, as guarantors, and First Security Bank,
          N.A.,  as trustee,  to the  Indenture  dated as of  December  11, 1998
          (incorporated   by  reference   to  Exhibit  4.4  to  Amtran,   Inc.'s
          Registration  Statement  on  S-3  dated  August  26,  1998,  File  No.
          333-52655).
<PAGE>

4.4       First  Supplemental  Indenture  dated as of December 21, 1999,  by and
          among Amtran, Inc., as issuer,  American Trans Air, Inc.,  Ambassadair
          Travel Club, Inc., ATA Vacations,  Inc., Amber Travel,  Inc., American
          Trans Air Training Corporation,  American Trans Air ExecuJet, Inc. and
          Amber Air Freight  Corporation,  Chicago  Express  Airlines,  Inc., as
          guarantors,  and  First  Security  Bank,  N.A.,  as  trustee,  to  the
          Indenture  dated as of July 24, 1997  (incorporated  by  reference  to
          Exhibit  4.1 to Amtran,  Inc.'s  Registration  Statement  on S-4 dated
          January 25, 2000, File No. 333-95371).

4.5       Pass Through Trust Agreement,  dated as of February 15, 2000,  between
          American  Trans Air, Inc. and Wilmington  Trust  Company,  as Trustee,
          made with  respect to the  formation of American  Trans Air  2000-1G-O
          Pass Through Trust and the issuance of 8.039%  Initial  American Trans
          Air 2000-1G-O  Pass Through  Trust  Certificates  and 8.039%  Exchange
          American Trans Air 2000-1G-O Pass Through  Certificates  (incorporated
          by reference to Exhibit 4.5 to Amtran,  Inc.'s Registration  Statement
          on S-4 dated August 11, 2000, File No. 333-43606).

4.6       Pass Through Trust Agreement,  dated as of February 15, 2000,  between
          American  Trans Air, Inc. and Wilmington  Trust  Company,  as Trustee,
          made with  respect to the  formation of American  Trans Air  2000-1G-S
          Pass Through Trust and the issuance of 8.039%  Initial  American Trans
          Air 2000-1G-S Pass Through  Certificates and 8.039% Exchange  American
          Trans  Air  2000-1G-S  Pass  Through  Certificates   (incorporated  by
          reference to Exhibit 4.6 to Amtran,  Inc.'s Registration  Statement on
          S-4 dated August 11, 2000, File No. 333-43606).

4.7       Pass Through Trust Agreement,  dated as of February 15, 2000,  between
          American  Trans Air, Inc. and Wilmington  Trust  Company,  as Trustee,
          made with  respect to the  formation of American  Trans Air  2000-1C-O
          Pass Through Trust and the issuance of 9.644%  Initial  American Trans
          Air 2000-1C-O Pass Through  Certificates and 9.644% Exchange  American
          Trans  Air  2000-1C-O  Pass  Through  Certificates   (incorporated  by
          reference to Exhibit 4.7 to Amtran,  Inc.'s Registration  Statement on
          S-4 dated August 11, 2000, File No. 333-43606).

4.8       Pass Through Trust Agreement,  dated as of February 15, 2000,  between
          American  Trans Air, Inc. and Wilmington  Trust  Company,  as Trustee,
          made with  respect to the  formation of American  Trans Air  2000-1C-S
          Pass Through Trust and the issuance of 9.644%  Initial  American Trans
          Air 2000-1C-S Pass Through  Certificates and 9.644% Exchange  American
          Trans  Air  2000-1C-S  Pass  Through  Certificates   (incorporated  by
          reference to Exhibit 4.8 to Amtran,  Inc.'s Registration  Statement on
          S-4 dated August 11, 2000, File No. 333-43606).

4.9       Purchase and Investor Rights  Agreement dated as of December 13, 2000,
          between Amtran, Inc. and Boeing Capital Corporation.  (incorporated by
          reference to Exhibit 4.9 to Amtran, Inc.'s Annual Report on 10-K dated
          April 2, 2001, File No. 000-21642).
<PAGE>

4.10      Purchase and Investor Rights Agreement dated as of September 19, 2000,
          between  Amtran,  Inc. and  International  Lease Finance  Corporation.
          (incorporated  by reference to Exhibit 4.10 to Amtran,  Inc.'s  Annual
          Report on 10-K dated April 2, 2001, File No. 000-21642).

4.11      Pass Through  Trust  Agreement,  dated as of December 16, 1996,  among
          Amtran,  Inc.,  American Trans Air, Inc. and Wilmington Trust Company,
          as Trustee,  made with respect to the formation of American  Trans Air
          1996-1A Pass Through  Trust and the issuance of 7.37%  American  Trans
          Air  1996-1A  Pass  Through  Trust   Certificates.   (incorporated  by
          reference  to Exhibit  4.11 to Amtran,  Inc.'s  Annual  Report on 10-K
          dated April 2, 2001, File No. 000-21642).

4.12      Pass Through  Trust  Agreement,  dated as of December 16, 1996,  among
          Amtran,  Inc.,  American Trans Air, Inc. and Wilmington Trust Company,
          as Trustee,  made with respect to the formation of American  Trans Air
          1996-1B Pass Through  Trust and the issuance of 7.64%  American  Trans
          Air  1996-1B  Pass  Through  Trust   Certificates.   (incorporated  by
          reference  to Exhibit  4.12 to Amtran,  Inc.'s  Annual  Report on 10-K
          dated April 2, 2001, File No. 000-21642).

4.13      Pass Through  Trust  Agreement,  dated as of December 16, 1996,  among
          Amtran,  Inc.,  American Trans Air, Inc. and Wilmington Trust Company,
          as Trustee,  made with respect to the formation of American  Trans Air
          1996-1C Pass Through  Trust and the issuance of 7.82%  American  Trans
          Air  1996-1C  Pass  Through  Trust   Certificates.   (incorporated  by
          reference  to Exhibit  4.13 to Amtran,  Inc.'s  Annual  Report on 10-K
          dated April 2, 2001, File No. 000-21642).

4.14      Pass Through Trust Agreement,  dated as of December 23, 1997,  between
          Amtran,  Inc.,  American Trans Air, Inc. and Wilmington Trust Company,
          as Trustee,  made with respect to the formation of American  Trans Air
          1997-1A-O  Pass Through Trust and the issuance of 6.99% American Trans
          Air  1997-1A-O  Pass  Through  Trust  Certificates.  (incorporated  by
          reference  to Exhibit  4.14 to Amtran,  Inc.'s  Annual  Report on 10-K
          dated April 2, 2001, File No. 000-21642).

4.15      Pass Through Trust Agreement,  dated as of December 23, 1997,  between
          Amtran,  Inc.,  American Trans Air, Inc. and Wilmington Trust Company,
          as Trustee,  made with respect to the formation of American  Trans Air
          1997-1A-S  Pass Through Trust and the issuance of 6.99% American Trans
          Air  1997-1A-S  Pass  Through  Trust  Certificates.  (incorporated  by
          reference  to Exhibit  4.15 to Amtran,  Inc.'s  Annual  Report on 10-K
          dated April 2, 2001, File No. 000-21642).

4.16      Pass Through Trust Agreement,  dated as of December 23, 1997,  between
          Amtran,  Inc.,  American Trans Air, Inc. and Wilmington Trust Company,
          as Trustee,  made with respect to the formation of American  Trans Air
          1997-1B-O  Pass Through Trust and the issuance of 7.19% American Trans
          Air  1997-1B-O  Pass  Through  Trust  Certificates.  (incorporated  by
          reference  to Exhibit  4.16 to Amtran,  Inc.'s  Annual  Report on 10-K
          dated April 2, 2001, File No. 000-21642).
<PAGE>

4.17      Pass Through Trust Agreement,  dated as of December 23, 1997,  between
          Amtran,  Inc.,  American Trans Air, Inc. and Wilmington Trust Company,
          as Trustee,  made with respect to the formation of American  Trans Air
          1997-1B-S  Pass Through Trust and the issuance of 7.19% American Trans
          Air  1997-1B-S  Pass  Through  Trust  Certificates.  (incorporated  by
          reference  to Exhibit  4.17 to Amtran,  Inc.'s  Annual  Report on 10-K
          dated April 2, 2001, File No. 000-21642).

4.18      Pass Through Trust Agreement,  dated as of December 23, 1997,  between
          Amtran,  Inc.,  American Trans Air, Inc. and Wilmington Trust Company,
          as Trustee,  made with respect to the formation of American  Trans Air
          1997-1C-O  Pass Through Trust and the issuance of 7.46% American Trans
          Air  1997-1C-O  Pass  Through  Trust  Certificates.  (incorporated  by
          reference  to Exhibit  4.18 to Amtran,  Inc.'s  Annual  Report on 10-K
          dated April 2, 2001, File No. 000-21642).

4.19      Pass Through Trust Agreement,  dated as of December 23, 1997,  between
          Amtran,  Inc.,  American Trans Air, Inc. and Wilmington Trust Company,
          as Trustee,  made with respect to the formation of American  Trans Air
          1997-1C-S  Pass Through Trust and the issuance of 7.46% American Trans
          Air  1997-1C-S  Pass  Through  Trust  Certificates.  (incorporated  by
          reference  to Exhibit  4.19 to Amtran,  Inc.'s  Annual  Report on 10-K
          dated April 2, 2001, File No. 000-21642).

4.20      Form of Common Stock  Certificate  of Amtran,  Inc.  (incorporated  by
          reference to Exhibit 4 to Amtran, Inc.'s Registration Statement on S-1
          dated March 16, 1993, File No. 33-59630).

4.21      Form  of  Series  A1  Preferred  Stock  Certificate  of  Amtran,  Inc.
          (incorporated  by reference to Exhibit 4.21 to Amtran,  Inc.'s  Annual
          Report on 10-K dated April 2, 2001, File No. 000-21642).

4.22      Form  of  Series  B  Preferred  Stock  Certificate  of  Amtran,   Inc.
          (incorporated  by reference to Exhibit 4.22 to Amtran,  Inc.'s  Annual
          Report on 10-K dated April 2, 2001, File No. 000-21642).

4.23      Form  of  1996  Class  A  American   Trans  Air,   Inc.  Pass  Through
          Certificates (included in Exhibit 4.11).

4.24      Form  of  1996  Class  B  American   Trans  Air,   Inc.  Pass  Through
          Certificates (included in Exhibit 4.12).

4.25      Form  of  1996  Class  C  American   Trans  Air,   Inc.  Pass  Through
          Certificates (included in Exhibit 4.13).

4.26      Form  of  1997  Class  A  American   Trans  Air,   Inc.  Pass  Through
          Certificates (included in Exhibit 4.14).

4.27      Form  of  1997  Class  B  American   Trans  Air,   Inc.  Pass  Through
          Certificates (included in Exhibit 4.16).
<PAGE>

4.28      Form  of  1997  Class  C  American   Trans  Air,   Inc.  Pass  Through
          Certificates (included in Exhibit 4.18).

4.29      Form  of  2000  Class  G  American   Trans  Air,   Inc.  Pass  Through
          Certificates (included in Exhibit 4.5).

4.30      Form  of  2000  Class  C  American   Trans  Air,   Inc.  Pass  Through
          Certificates (included in Exhibit 4.7)

4.31      Amtran, Inc. hereby agrees to furnish to the Commission, upon request,
          copies of certain additional instruments relating to long-term debt of
          the kind described in Item 601(b)(4)(iii)(A) of Regulation S-K.

10.1      1993  Incentive  Stock Plan for Key Employees of Amtran,  Inc. and its
          Subsidiaries (incorporated by reference to Exhibit 10(r)(r) to Amtran,
          Inc.'s  Registration  Statement on S-1 dated March 16, 1993,  File No.
          33-59630).

10.2      1996  Incentive  Stock Plan for Key Employees of Amtran,  Inc. and its
          Subsidiaries (incorporated by reference to Amtran, Inc.'s Registration
          Statement on S-8 dated June 20, 1997, File No. 333-29715).

10.3      2000  Incentive  Stock Plan for Key Employees of Amtran,  Inc. and its
          Subsidiaries (incorporated by reference to Exhibit A to Amtran, Inc.'s
          Proxy Statement dated April 5, 2000).

10.4      Stock  Option  Plan  for  Non-Employee   Directors   (incorporated  by
          reference to Appendix A to Amtran,  Inc.'s Proxy Statement dated April
          15, 1994).

10.5      Aircraft  General Terms Agreement  dated as of June 30, 2000,  between
          The Boeing Company  ("Boeing") and American Trans Air, Inc.;  Purchase
          Agreement  Number 2285 dated as of June 30, 2000,  between  Boeing and
          American Trans Air, Inc.;  Purchase  Agreement Number 2262 dated as of
          June  30,  2000,   between   Boeing  and  American   Trans  Air,  Inc.
          (incorporated  by reference to Exhibit 10.5 to Amtran,  Inc.'s  Annual
          Report on 10-K dated April 2, 2001, File No. 000-21642). *

10.6(a)   Aircraft  Lease  Agreement  dated as of September  20,  2000,  between
          Amtran,   Inc.   and   International   Lease   Finance    Corporation.
          (incorporated by reference to Exhibit 10.6(a) to Amtran, Inc.'s Annual
          Report on 10-K dated April 2, 2001, File No. 000-21642). *

10.6(b)   Aircraft  Lease  Agreement  dated as of September  20,  2000,  between
          Amtran,   Inc.   and   International   Lease   Finance    Corporation.
          (incorporated by reference to Exhibit 10.6(b) to Amtran, Inc.'s Annual
          Report on 10-K dated April 2, 2001, File No. 000-21642). *

10.6(c)   Aircraft  Lease  Agreement  dated as of September  20,  2000,  between
          Amtran,   Inc.   and   International   Lease   Finance    Corporation.
          (incorporated by reference to Exhibit 10.6(c) to Amtran, Inc.'s Annual
          Report on 10-K dated April 2, 2001, File No. 000-21642). *
<PAGE>

10.6(d)   Aircraft  Lease  Agreement  dated as of September  20,  2000,  between
          Amtran,   Inc.   and   International   Lease   Finance    Corporation.
          (incorporated by reference to Exhibit 10.6(d) to Amtran, Inc.'s Annual
          Report on 10-K dated April 2, 2001, File No. 000-21642). *

10.6(e)   Aircraft  Lease  Agreement  dated as of September  20,  2000,  between
          Amtran,   Inc.   and   International   Lease   Finance    Corporation.
          (incorporated by reference to Exhibit 10.6(e) to Amtran, Inc.'s Annual
          Report on 10-K dated April 2, 2001, File No. 000-21642). *

10.6(f)   Aircraft  Lease  Agreement  dated as of September  20,  2000,  between
          Amtran,   Inc.   and   International   Lease   Finance    Corporation.
          (incorporated by reference to Exhibit 10.6(f) to Amtran, Inc.'s Annual
          Report on 10-K dated April 2, 2001, File No. 000-21642). *

10.6(g)   Aircraft  Lease  Agreement  dated as of September  20,  2000,  between
          Amtran,   Inc.   and   International   Lease   Finance    Corporation.
          (incorporated by reference to Exhibit 10.6(g) to Amtran, Inc.'s Annual
          Report on 10-K dated April 2, 2001, File No. 000-21642). *

10.6(h)   Aircraft  Lease  Agreement  dated as of September  20,  2000,  between
          Amtran,   Inc.   and   International   Lease   Finance    Corporation.
          (incorporated by reference to Exhibit 10.6(h) to Amtran, Inc.'s Annual
          Report on 10-K dated April 2, 2001, File No. 000-21642). *

10.6(i)   Aircraft  Lease  Agreement  dated as of September  20,  2000,  between
          Amtran, Inc. and International LeaseFinance Corporation. (incorporated
          by reference to Exhibit  10.6(i) to Amtran,  Inc.'s  Annual  Report on
          10-K dated April 2, 2001, File No. 000-21642). *

10.6(j)   Aircraft  Lease  Agreement  dated as of September  20,  2000,  between
          Amtran,   Inc.   and   International   Lease   Finance    Corporation.
          (incorporated by reference to Exhibit 10.6(j) to Amtran, Inc.'s Annual
          Report on 10-K dated April 2, 2001, File No. 000-21642). *

10.6(k)   Aircraft  Lease  Agreement  dated as of September  20,  2000,  between
          Amtran,   Inc.   and   International   Lease   Finance    Corporation.
          (incorporated by reference to Exhibit 10.6(k) to Amtran, Inc.'s Annual
          Report on 10-K dated April 2, 2001, File No. 000-21642). *

10.6(l)   Aircraft  Lease  Agreement  dated as of September  20,  2000,  between
          Amtran,   Inc.   and   International   Lease   Finance    Corporation.
          (incorporated by reference to Exhibit 10.6(l) to Amtran, Inc.'s Annual
          Report on 10-K dated April 2, 2001, File No. 000-21642). *

10.6(m)   Aircraft  Lease  Agreement  dated as of September  20,  2000,  between
          Amtran,   Inc.   and   International   Lease   Finance    Corporation.
          (incorporated by reference to Exhibit 10.6(m) to Amtran, Inc.'s Annual
          Report on 10-K dated April 2, 2001, File No. 000-21642). *
<PAGE>

10.6(n)   Aircraft  Lease  Agreement  dated as of September  20,  2000,  between
          Amtran,   Inc.   and   International   Lease   Finance    Corporation.
          (incorporated by reference to Exhibit 10.6(n) to Amtran, Inc.'s Annual
          Report on 10-K dated April 2, 2001, File No. 000-21642). *

10.7      Aircraft  Financing  Agreement  dated as of December 6, 2000,  between
          Amtran, Inc. and General Electric Capital  Corporation.  (incorporated
          by reference to Exhibit 10.7 to Amtran,  Inc.'s  Annual Report on 10-K
          dated April 2, 2001, File No. 000-21642). *

10.8      Limited  Liability  Company  Agreement  dated  as of March  13,  2001,
          between  Amtran,  Inc.  and Boeing  Capital  Corporation  to form BATA
          Leasing LLC.  (incorporated  by reference to Exhibit 10.1.1 to Amtran,
          Inc.'s  Quarterly  Annual Report on 10-Q dated May 15, 2001,  File No.
          000-21642). *

10.9      Purchase and Voting Agreement dated as of May 16, 2001 between Amtran,
          Inc., and ILFC  (incorporated  by reference to Exhibit 99.2 to the 8-K
          dated May 16, 2001).

10.10     Commitment Letter dated June 18, 2001, from Salomon Smith Barney Inc.,
          and Citicorp USA, Inc. to Amtran,  Inc.  (incorporated by reference to
          Exhibit  2 to the  Schedule  13D  filed by  Amtran,  Inc.,  J.  George
          Mikelsons and INDUS Acquisition Company on June 21, 2001).

21        Subsidiaries of Amtran, Inc.

23        Consent of Independent Auditors.

*Portions  of these  exhibits  have  been  omitted  pursuant  to a  request  for
confidential  treatment and filed  separately  with the  Securities and Exchange
Commission.
<PAGE>

Exhibit 23


                         CONSENT OF INDEPENDENT AUDITORS


We consent to the incorporation by reference in the Registration Statement (Form
S-3 No.  333-52655)  of Amtran,  Inc.  and its  subsidiaries  and in the related
Prospectus,  in the Registration Statement (Form S-8 No. 33-65708) pertaining to
the 1993  Incentive  Stock  Plan  for Key  Employees  of  Amtran,  Inc.  and its
subsidiaries  and in the  Registration  Statement  (Form S-3 No.  333-86791)  of
Amtran,  Inc. and its subsidiaries  and in the related  Prospectus of our report
dated January 22, 2002, with respect to the  consolidated  financial  statements
and schedule of Amtran,  Inc., included in the Annual Report (Form 10-K) for the
year ended December 31, 2001.



/S/ ERNST & YOUNG LLP
Indianapolis, Indiana
March 27, 2002