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, 1998.

[ ] 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. [ ]

                Applicable Only to Issuers 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 Issuers

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

Common Stock,  Without Par Value - 12,222,379 shares as of  February 28, 1999.

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. and  Subsidiaries' Proxy  Statement dated April 2,
1999, are incorporated by reference into Part III.
<PAGE>

<TABLE>
<CAPTION>
          
                                                        TABLE OF CONTENTS
                                                FORM 10-K ANNUAL REPORT - 1998
                                                 AMTRAN INC. AND SUBSIDIARIES
                                                                                                                   Page #

PART I
<S>           <C>                                                                                                        <C>
         Item 1.     Business........................................................................................... 4
         Item 2.     Properties.........................................................................................11
         Item 3.     Legal Proceedings..................................................................................11
         Item 4.     Submission of Matters to a Vote of Security Holders................................................11

PART II
         Item 5.     Market for the Registrant's Common Stock and Related Security Holder Matters.......................12
         Item 6.     Selected Consolidated Financial Data...............................................................12
         Item 7.     Management's Discussion and Analysis of Financial Condition and Results of Operations..............13
         Item 7a.    Quantitative and Qualitative Disclosures About Market Risk.........................................35
         Item 8.     Financial Statements and Supplementary Data........................................................37
         Item 9.     Changes in and Disagreements with Accountants on Accounting and Financial Disclosure...............50

PART III
         Item 10.    Directors and Officers of the Registrant...........................................................51
         Item 11.    Executive Compensation.............................................................................51
         Item 12.    Security Ownership of Certain Beneficial Owners and Management.....................................51
         Item 13.    Certain Relationships and Related Transactions.....................................................51

PART IV
         Item 14.    Exhibits, Financial Statement Schedule and Reports on Form 8-K.....................................52
         Item 14d.   Valuation and Qualifying Accounts..................................................................55


</TABLE>


<PAGE>


PART I


Item 1.           Business

Amtran, Inc. (the "Company") owns American Trans Air, Inc. ("ATA"), the eleventh
largest  passenger  airline in the United States (based on 1998  revenues) and a
leading  provider of airline services in selected  markets.  The Company is also
the  largest  commercial  charter  airline in the United  States and the largest
charter  provider of passenger  airline services to the U.S.  military,  in each
case based on 1998 revenues.  For the year ended December 31, 1998, the revenues
of the Company consisted of 55.6% scheduled  service,  24.2% commercial  charter
service  and 13.3%  military  charter  service,  with the balance  derived  from
related services.

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.  In the
second and third quarters of 1998, the Company added  scheduled  service between
Chicago-Midway  and Dallas-Ft.  Worth,  Denver, New York-LaGuardia and San Juan.
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  53.4% of the Company's total scheduled  service
     capacity in 1998.  The Company is the number one carrier in terms of market
     share in 12 out of its 13 nonstop jet routes from Chicago-Midway.

     o Hawaii represented  approximately  21.3% of the Company's total scheduled
     service  capacity  in 1998.  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 fuel risk.

     o Indianapolis represented  approximately  16.1%  of  the  Company's  total
     scheduled  service  capacity in 1998. 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  in  6  of  its  7  nonstop  jet  routes  from
     Indianapolis.

Commercial Charter Service

The Company is the largest  commercial  charter airline in the United States and
provides  services  throughout the world,  primarily to U.S., South American and
European  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 favorable  markets.  The Company's  commercial  charter
services  are  marketed  and  distributed  through a  network  of  domestic  and
international sales offices.

Military/Government Charter Service

The Company has provided  passenger  airline services to the U.S. military since
1983 and is  currently  the  largest  charter  provider 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.

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 markets  where 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 superior nonstop schedules,  value-oriented service, focused
marketing  efforts and certain airport and aircraft  advantages.  The Company is
the 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 1996,  1997 and 1998,  the Company's  operating cost per available seat mile
("CASM") of 5.92(cent), 6.09(cent) and 6.09(cent),  respectively, was the lowest
among large U.S.  passenger  airlines.  The Company  believes  that its low-cost
structure provides 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,  low aircraft
ownership costs and low overhead costs.

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

     o Charter Expansion.  The Company is  acquiring  five  long-range  Lockheed
     L-1011-500  aircraft primarily for commercial and military charter service,
     whose low-cost and high-seating capacity will enable the Company to compete
     for  business  that it cannot now  accommodate  (e.g.,  nonstop  service to
     certain South American, European and Asian destinations).

     o Scheduled Service  Expansion  at  Chicago-Midway.  The  Company  plans to
     increase  frequencies and add up to three additional  destinations from its
     Chicago-Midway  gateway  over  the  next  18  months  and to  support  this
     expansion by adding two incremental Boeing 757-200 aircraft to its fleet in
     1999 and 2000.

     o Selected  Acquisitions.   The  Company  continually   evaluates  possible
     acquisitions  of related  businesses  or  interests  therein to enhance its
     competitive  position in its market segments.  Among other things, in early
     1999,  it  completed  the  purchase  of the 50%  interest  in its air cargo
     operation  that  it did not  previously  own and  acquired  Travel  Charter
     International,  a tour  operator.  It also has an agreement in principle to
     acquire Chicago Express, a commuter airline which presently operates as the
     ATA Connection, and Key Travel, another tour operator.

Industry Overview

Scheduled Airline Service
In the United  States,  the scheduled  airline  business is dominated by a small
number of large scheduled  airlines,  all of which have developed  hub-and-spoke
route systems.  As a result of this  structure,  many smaller cities or airports
are not served by direct or nonstop  flights  to leisure  destinations  and many
secondary  leisure  destinations  do not receive direct or nonstop  service from
more than a few major U.S. cities.  Unlike most of the scheduled  airlines,  the
Company  has  focused  on  low-frequency,  nonstop  or direct  service  from its
principal gateways to leisure or business  destinations where there is little or
no  competing  direct or nonstop  service.  The  Company  intends to continue to
pursue this strategy,  and in 1998 added nonstop service from  Chicago-Midway to
Denver, Dallas-Ft. Worth, New York-LaGuardia and San Juan.

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.
U.S.  charter  airlines have also provided service to the military both in times
of peak demand,  such as during the Persian Gulf War, and on a longer-term basis
to  supplement  the  U.S.  military's  own  passenger  fleet.  Based on the most
recently  available  Department  of  Transportation  ("DOT")  statistics,  total
charter  flights  by all U.S.  airlines  represented  approximately  2.9% of all
available  seat miles  ("ASMs") flown within the United States during the twelve
months ended September 30, 1998.

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,
<S>                                <C>           <C>           <C>           <C>           <C> 
                                   1994          1995          1996          1997          1998
                                 ---------     ---------     ---------     ---------     ----------
                                                       (Dollars in millions)

Scheduled service                  $240.7        $362.0        $386.5        $371.8         $511.3
                                 ---------     ---------     ---------     ---------     ----------

Commercial charter                  204.0         229.5         226.4         228.1          222.6
Military charter                     91.8          77.5          84.2         131.1          121.9
                                 ---------     ---------     ---------     ---------     ----------
       Total charter service        295.8         307.0         310.6         359.2          344.5
                                 ---------     ---------     ---------     ---------     ----------

Other                                44.0          46.0          53.8          52.2           63.6
                                 =========     =========     =========     =========     ==========
        Total                      $580.5        $715.0        $750.9        $783.2         $919.4
                                 =========     =========     =========     =========     ==========


</TABLE>

Scheduled Service
The Company  provides  scheduled  airline  services on selected  routes where it
believes that it can be one of the top two largest carriers,  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  destinations such as Hawaii, Las Vegas,  Florida,  California,
Mexico and the Caribbean, as well as to New York's John F. Kennedy and LaGuardia
Airports, Denver and Dallas-Ft. Worth.

In October 1997, the Company expanded its Chicago Express  commuter  services by
adding the cities of Lansing and Madison to the flights it had already  operated
out of Chicago-Midway to Indianapolis,  Milwaukee,  Des Moines, Dayton and Grand
Rapids since April 1997. Under the Chicago Express code share agreement, Chicago
Express provides  aircraft,  crews,  insurance and maintenance,  and the Company
provides all other services, including marketing, reservation services, fuel and
aircraft  handling.  The Company  receives all passenger and cargo  revenues and
pays  Chicago  Express a fixed fee per flight.  The seats sold under the Chicago
Express code share agreement are listed on major computer  reservations  systems
("CRS") as ATA  seats,  even  though  the  flights  are  operated  by a separate
airline.  Chicago  Express uses 19-seat  Jetstream  31  propeller  aircraft.  In
February  1999,  the Company  entered  into an agreement in principle to acquire
Chicago  Express.  Closing of this  transaction  is  subject  to  documentation,
approvals and other matters of substance.

Included in the Company's jet scheduled  service are bulk sales  agreements with
tour  operators.  Under these  arrangements,  which are very  similar to charter
sales,  the tour  operator  may  take up to 85% of an  aircraft  as a  bulk-seat
purchase. The seats which the Company retains are sold through its own scheduled
service  distribution  network.  Under bulk 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 minimize its credit
exposure under these  arrangements,  the Company  requires bonding or a security
deposit  for a  significant  portion  of the  contract  price.  Bulk seat  sales
amounted to $67.3  million,  $59.0 million and $68.6  million in 1996,  1997 and
1998, respectively,  which represented 9.0%, 7.5% and 7.5%, respectively, of the
Company's consolidated revenues for such periods.

Commercial Charter
Commercial  charter  represented  30.2%,  29.1% and 24.2%,  respectively  of the
Company's consolidated revenues for 1996, 1997 and 1998. 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. Because the Company has a contract with tour operators
for  each  flight  or  series  of  flights,   it  can,  subject  to  competitive
constraints,  structure  the  terms of each  contract  to  reflect  the costs of
providing the specific service,  together with an acceptable return.  Under most
of its contracts with tour  operators,  the Company passes through  increases in
fuel costs from a contracted price. Under these contracts,  if the fuel 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 is exposed to increases in
fuel costs that occur within 14 days of flight time.

Although the Company  serves tour  operators on a worldwide  basis,  its primary
customers  are  U.S.-based  and  European-based  tour  operators.  European tour
operators  accounted  for 4.6%,  3.2% and  2.2%,  respectively  of  consolidated
revenues for 1996,  1997 and 1998.  Contracts  with most European tour operators
establish  prices payable to the Company in U.S.  dollars,  thereby reducing the
Company's  foreign  currency  risk.  The  Company's  five largest tour  operator
customers represented  approximately 22.4%, 16.2%, and 14.4%,  respectively,  of
the Company's consolidated revenues for 1996, 1997 and 1998, and the ten largest
tour  operator  customers  represented  approximately  29.7%,  20.8% and  17.5%,
respectively, of the Company's consolidated revenues for the same periods.

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.

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,  from  flying  university  alumni to a
football game, to transporting political candidates on campaign trips, to moving
the NASA space shuttle ground crew to an alternate  landing site. These flights,
some of which are arranged on very short notice based on aircraft  availability,
allow the Company to increase aircraft utilization during off-peak periods.

Military/Government Charter
In 1996,  1997 and  1998,  sales to the U.S.  military  and  other  governmental
agencies  were  approximately  11.2%,  16.8%  and  13.3%,  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 price and 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
Company's contractor teaming arrangement  significantly increases the likelihood
that the team will receive both fixed-award and contract expansion business.

The Company is subject to biennial inspections by the Department of Defense as a
condition of retaining its eligibility to perform military charter flights.  The
last such inspection was completed in the fourth quarter of 1997. As a result of
the Company's military business,  it has been required from time to time to meet
operational  standards  beyond  those  normally  required  by the  DOT,  Federal
Aviation Administration ("FAA") and other government agencies.

Other Business
In addition to its core charter and scheduled  service  businesses,  the Company
operates  several other smaller  businesses that complement its core businesses.
For example,  the Company  sells ground  arrangements  (hotels,  car rentals and
attractions)  through its Ambassadair and ATA Vacations  subsidiaries;  provides
airframe and powerplant  mechanic  training  through American Trans Air Training
Corporation;  and  provides  helicopter  charter  services  through its ExecuJet
subsidiary. Additionally, the Company, through its subsidiary Amber Air Freight,
markets cargo  services in the Company's  scheduled and charter  operations.  In
aggregate,  these businesses,  together with incidental revenues associated with
core charter and scheduled  service  operations,  accounted  for 7.1%,  6.6% and
6.9%, respectively, of consolidated revenues in 1996, 1997 and 1998.

Aircraft Fleet

As of December  31,  1998,  the Company was  certified  to operate a fleet of 15
Lockheed L-1011s, 24 Boeing 727-200ADVs and 9 Boeing 757-200s.  The Company also
has an agreement in principle to acquire  Chicago  Express which is certified to
operate  Jetstream 31 propeller  aircraft.  As of December 31, 1998, the Company
had taken delivery of an incremental  Lockheed  L-1011-500  which was undergoing
modifications, and not yet flight certified. See " - Properties."

Lockheed L-1011 Aircraft
The Company's 15 Lockheed  L-1011 aircraft are wide-body  aircraft,  11 of which
have a range  of 2,971  nautical  miles,  three  of which  have a range of 3,425
nautical  miles,  and one of which has a range of 5,577  nautical  miles.  These
aircraft  conform  to the  FAA's  Stage  3  noise  requirements  and  have a low
ownership cost relative to other wide-body aircraft types. See  "--Environmental
Matters." As a result, the Company believes these aircraft provide a competitive
advantage when operated on long-range  routes,  such as on transatlantic,  South
American  and  transpacific  routes.  These  aircraft  have  an  average  age of
approximately 23 years. As of December 31, 1998, 14 of these aircraft were owned
by the Company and one was under an operating  lease that expires in March 2003.
The Company has agreed to purchase three additional L-1011-500 aircraft in 1999.
Certain 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
under its revolving  credit facility.  See "Management's Discussion and Analysis
of  Financial  Condition  and  Results of  Operations -- Liquidity  and  Capital
Resources."

Boeing 727-200ADV Aircraft
The Company's 24 Boeing  727-200ADV  aircraft are narrow-body  aircraft equipped
with  high-thrust,  JT8D-15/-15A/-17/-17A  engines  and  have a range  of  2,050
nautical miles. These aircraft, of which 16 conform to Stage 3 and eight conform
to Stage 2 noise  requirements  as of December 31, 1998,  have an average age of
approximately  19 years.  The Company leases 23 of these aircraft,  with initial
lease terms that expire between January 1999 and September 2003,  subject to the
Company's right to extend each lease for varying terms or purchase the aircraft.
Subsequent to December 31, 1998,  the Company  purchased  eight of the 23 leased
aircraft  Prior to  December  31,  1999,  the  Company  will be required to make
capital  expenditures for engine "hushkits" so that its entire fleet conforms to
Stage 3 noise  requirements  in  accordance  with FAA  regulations.  The Company
currently  plans to install  hushkits on eight  remaining Stage 2 Boeing 727-200
aircraft before the end of 1999. The capital cost to hushkit a Boeing 727-200ADV
aircraft is approximately $2.5 million. See "--Environmental Matters."

Boeing 757-200 Aircraft
The  Company's  9  Boeing  757-200  aircraft  are  relatively  new,  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 3 years and meet Stage
3 noise requirements.  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,  unlike most other  narrow-body  aircraft,  the
Boeing 757-200 has 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  December 1999 and July 2017,  subject to the Company's
right to extend each lease for varying terms.

Although Lockheed L-1011 and Boeing 727-200ADV 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. See "--Regulation."

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.

In order to  enhance  the  reliability  of its  service,  the  Company  seeks to
maintain  at least two spare  Lockheed  L-1011 and three  spare  Boeing  727-200
aircraft at all times.  Spare aircraft can be dispatched on short notice to most
locations where a substitute aircraft is needed for mechanical or other reasons.
These spare aircraft allow the Company to provide a dispatch  reliability to its
customers that is difficult for an airline of smaller size to match.

Maintenance and Support

The Company's  Maintenance  and  Engineering  Center is located at  Indianapolis
International  Airport.  This 120,000 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 performs  approximately
75% of its own maintenance work,  excluding engine overhauls and Lockheed L-1011
and Boeing 727-200 heavy airframe checks.

The Company currently maintains ten permanent maintenance facilities,  including
its Indianapolis facility. In addition, the Company utilizes "road teams," which
are  dispatched  primarily as charter flight  operations  require to arrange and
supervise  maintenance  services at temporary  locations.  The Company also uses
road teams to supervise all maintenance not performed in-house.

Fuel Price Risk Management

The  Company has fuel  reimbursement  clauses and  guarantees  which  applied to
approximately 50.4%, 53.4% and 45.0%, respectively,  of consolidated revenues in
1996, 1997 and 1998. The Company closely monitors jet fuel spot prices and crude
oil and heating oil futures  markets to provide early  indications  of potential
shifts in jet fuel prices for timely management  review and action.  The Company
did not engage in any material  fuel  hedging  activities  in 1996 or 1997,  but
began a fuel hedging program in 1998 and has hedged a significant portion of its
scheduled  service  fuel  exposure  for  the  first  six  months  of  1999.  See
"Management's  Discussion  and  Analysis of Financial  Condition  and Results of
Operations Operating Expenses - Fuel and Oil."

Competition

The  Company's  products and services  face varying  degrees of  competition  in
diverse markets.

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 Company
also  competes  against  several  European  and Mexican  charter  and  scheduled
airlines,  some of which are larger  and have  substantially  greater  financial
resources than the Company.  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.
During periods of dramatic fare cuts by other scheduled airlines, the Company is
forced to respond competitively to these deeply discounted prices.

The Company also competes directly against other 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.  As a result,  in  addition  to their  greater  access  to  financial
resources,   these   charter   airlines  may  also  have  greater   distribution
capabilities,  including exclusive or preferential relationships with affiliated
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.  The
formation of different competing teaming arrangements could adversely affect the
Company's U.S. military charter business.

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  does not consider the
inability to operate into or out of any of these  countries to be a  significant
limitation on its  business.  The Company will support  certain U.S.  government
operations  in areas where its  insurance  policy does not provide  coverage for
losses when the U.S. government provides replacement insurance coverage.

Employees

As of  December  31,  1998,  the  Company  had  approximately  6,000  employees,
approximately  2,300 of  which  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 became  amendable  in  December  1998,  and the  current
collective  bargaining  agreement  with the ALPA becomes  amendable in September
2000. The Company began  negotiations  with the AFA in the third quarter of 1998
to amend  the  collective  bargaining  agreement,  and  these  negotiations  are
continuing.  The existence of a significant  dispute with any sizeable number of
its employees could have a material  adverse effect on the Company's  operations
and financial condition.

Regulation

The  Company  is  subject  to  regulation  by the DOT and  the  FAA.  The DOT is
primarily  responsible  for  regulating  consumer  protection and other economic
issues  affecting air services and determining a carrier's  fitness to engage in
air transportation. In 1981, the DOT granted the Company a Certificate of Public
Convenience  and Necessity  pursuant to Section 401 of the Federal  Aviation Act
authorizing it to engage in air  transportation.  The Company is also subject to
the  jurisdiction  of the FAA  with  respect  to its  aircraft  maintenance  and
operations. The FAA requires each carrier to obtain an operating certificate and
operations  specifications  authorizing the carrier to fly to specific  airports
using  specified  equipment.  All of the  Company's  aircraft must also have and
maintain  certificates of airworthiness  issued by the FAA. The Company holds an
FAA air carrier  operating  certificate  under Part 121 of the Federal  Aviation
Regulations.

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.

The FAA has  issued  a series  of  Airworthiness  Directives  under  its  "Aging
Aircraft"  program which are  applicable to the  Company's  Lockheed  L-1011 and
Boeing 727-200  aircraft.  The Company does not currently expect the future cost
of these directives to be material.

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 its cargo affiliate. 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 Agri-
culture 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.  The Commerce Department also regulates the export and re-export of
the Company's U.S.-manufactured aircraft and equipment.

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 ("PFC") of up to $3.00 generally payable by each passenger departing from
the airport.  This charge must be collected from passengers by transporting  air
carriers,  such as the Company,  and must be remitted to the applicable  airport
authority.  Airport  operators  must obtain  approval of the FAA before they may
implement a PFC. The $3.00  maximum on PFCs may be raised if Congress  enacts an
amendment to the legislation authorizing these charges.

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.
Proposals for any  additional  charter  service must  generally be  specifically
approved  by  the  civil  aeronautics  authorities  in the  relevant  countries.
Approval of such  requests is typically  based on  considerations  of comity and
reciprocity and cannot be guaranteed.

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.  These regulations require that the Company achieve
a 75.0% Stage 3 fleet by December 31,  1998.  In general,  the Company  would be
prohibited  from  operating any Stage 2 aircraft  after December 31, 1999. As of
December 31, 1998,  83.3% of the Company's fleet met Stage 3  requirements.  The
Company expects to meet future Stage 3 fleet requirements through Boeing 727-200
hushkit modifications.

In addition to the  aircraft  noise  regulations  administered  by the FAA,  the
Environmental  Protection  Agency ("EPA")  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.

The Company  maintains on its property in Indiana two underground  storage tanks
which contain  quantities of de-icing fluid and emergency  generator fuel. These
tanks are subject to various EPA and State of Indiana  regulations.  The Company
believes  it is in  compliance  with  applicable  regulatory  requirements  with
respect to these storage facilities.

At its aircraft line  maintenance  facilities,  the Company uses materials which
are  regulated  as  hazardous  under  federal,  state and local law. The Company
maintains  programs  to  protect  the  safety  of its  employees  who use  these
materials and to manage and dispose of any resulting waste, and believes that it
is in substantial compliance with all applicable laws and regulations.

<PAGE>

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,  an  operations  center  and for the  Indianapolis
reservations center.

The Company's Maintenance and Engineering Center is also located at Indianapolis
International  Airport.  This 120,000 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,  as well as  non-routine,  maintenance  on the
Company's aircraft.

In 1998, the Company began construction of a 120,000 square-foot office building
immediately adjacent to the Company's  Indianapolis  Maintenance and Engineering
Center.  This  facility  will house the Company's  Maintenance  and  Engineering
office staff along with the airline's  operations center effective in the second
quarter of 1999.

In 1995,  the Company  completed  the lease of 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 and
Boeing 727-200 narrow-body fleets.

Also in 1995, the Company  relocated and expanded its Chicago area  reservations
unit to an 18,700  square-foot  facility  located near Chicago's O'Hare Airport.
This  reservation  facility  primarily  serves  customers in the greater Chicago
metropolitan area in support of the Company's  Chicago-Midway  scheduled service
operation.

The  Company also  routinely  leases various  properties at airports  around the
world for use by passenger  service,  flight operations and maintenance  staffs.
Other properties  are also leased for the use of sales office staff. These prop-
perties are used in support of both scheduled and charter flight  operations  in
such locations as Atlanta, Baltimore, Boston, Cancun, Chicago, Dallas-Ft. Worth,
Denver, Detroit, Ft. Lauderdale, Ft. Myers, Frankfurt,  Honolulu,  Indianapolis,
Las Vegas, London Gatwick, Los Angeles,  Maui, Milwaukee, Minneapolis, New York,
Oakland, Orlando, Phoenix, St. Louis, St.Petersburg, San Francisco, San Juan and
Sarasota.

At  December  31,  1998,  the  Company  was  certified  to operate a fleet of 48
aircraft.  The following table summarizes the ownership  characteristics of each
aircraft type operated by the Company as of the end of 1998.
<TABLE>
<CAPTION>


             Ownership                 Boeing               Boeing              Lockheed             Lockheed
<S>                                     <C>                 <C>                 <C>                      <C>
               Status                727-200ADV           757-200ER          L-1011-50/100          L-1011-500
----------------------------------------------------  -------------------  -------------------  -------------------
               Owned                     1                   N/A                   1                    1
           (Unencumbered)

               Owned                    N/A                  N/A                  12                   N/A
       (Encumbered-Pledged on
           Bank Facility)

               Leased                    22                    7                  N/A                  N/A
          (Fixed Buy-out)

          Operating Lease                 1                    2                   1                   N/A
            (No Buy-out)

               TOTAL                     24                    9                  14                    1
</TABLE>

Item 3.     Legal Proceedings

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.

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, 1998.
<PAGE>

Part II

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

The  Company's  common  stock trades on the Nasdaq  National  Market tier of The
Nasdaq  Stock  Market  under the symbol  "AMTR." The Company had 279  registered
shareholders at December 31, 1998.

                                       Year Ended December 31, 1998
Market Prices of Common Stock     High             Low          Close
                                 --------       ----------    ----------
First quarter                     16 3/8           7 1/2        16 1/4
Second quarter                    27              15 1/8        24 5/8
Third quarter                     30              20 7/8        23 1/2
Fourth quarter                    27 5/8          13 3/4        27 1/8


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


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 con-
         junction with the consolidated financial statements and related  notes.
<TABLE>
<CAPTION>

                                                               Amtran, Inc.
                                                             Five-Year Summary
                                                          Year Ended December 31,
               -------------------------------------------------------------------------------------------------------------------
<S>                                                                       <C>          <C>         <C>         <C>         <C> 
                                                                          1994         1995        1996        1997         1998
               (Dollars in thousands, except per share data and ratios)
               -------------------------------------------------------------------------------------------------------------------
               Statement of Operations Data:
                   Operating revenues                                 $  580,522  $  715,009  $  750,851   $ 783,193  $   919,369
                   Operating expenses                                    572,107     697,073     786,907     769,709      843,996
                   Operating income (loss) (1)                             8,415      17,936    (36,056)      13,484       75,373
                   Income (loss) before taxes                              5,879      14,653    (39,581)       6,027       67,210
                   Net income (loss)                                       3,486       8,524    (26,674)       1,572       40,081
                   Net income (loss) per share - basic (2)                  0.30        0.74      (2.31)        0.14         3.41
                   Net income (loss) per share - diluted (2)                0.30        0.74      (2.31)        0.13         3.07
                                                                                                               
               Balance Sheet Data (at end of period):
                   Property and equipment, net                        $  223,104  $  240,768  $  224,540   $ 267,681   $  329,332
                   Total assets                                          346,288     413,137     369,601     450,857      594,549
                   Total debt                                            118,106     138,247     149,371     191,804      246,671
                   Shareholders' equity (3)                               72,753      81,185      54,744      56,990      102,751
                   Ratio of total debt  to shareholders' equity             1.62        1.70        2.73        3.37         2.40
                     Ratio of total liabilities to shareholders'            3.76        4.09        5.75        6.91         4.79
                     equity                                                                                                       

               Selected Operating Statistics for
               Consolidated Passenger Services: (4)
                   Revenue passengers carried (thousands)                4,237.9     5,368.2     5,680.5     5,307.4      6,168.3
                   Revenue passenger miles (millions)                    7,158.8     8,907.7     9,172.4     8,986.0      9,758.1
                   Available seat miles (millions)                      10,443.1    12,521.4    13,295.5    12,647.7     13,851.7
                   Passenger load factor                                   68.6%       71.1%       69.0%       71.0%        70.5%

</TABLE>

              (1) The  Company  has  reclassified  gain  (loss)  on the  sale of
                  operating assets for 1994-1995 from  non-operating gain (loss)
                  to operating income (loss) to be consistent with the 1996-1998
                  presentation.  Also, in the third quarter of 1996, the Company
                  recorded a $4.7 million loss on the disposal of leased  assets
                  associated with the reconfiguration of its fleet.

                   (2)  In  1997,  the  Company  adopted  Financial   Accounting
                  Standards  Board  Statement  128,  "Earnings per Share," which
                  established  new standards for the  calculation and disclosure
                  of earnings  per share.  All prior  period  earnings per share
                  amounts disclosed in this five-year summary have been restated
                  to conform to the new standards under Statement 128.

              (3) No dividends were paid in any periods presented.

              (4) Operating statistics pertain only to ATA (including operations
                  under the Chicago  Express  code share  agreement)  and do not
                  include  information for other  operating  subsidiaries of the
                  Company.

<PAGE>

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

Overview

Amtran is a leading provider of targeted  scheduled airline services and charter
airline services to leisure and other value-oriented travelers.  Amtran, through
its  principal  subsidiary,  ATA,  has been  operating  for 26 years  and is the
eleventh largest U.S. airline in terms of 1998 revenues.  ATA provides scheduled
service   through   nonstop  and   connecting   flights  from  the  gateways  of
Chicago-Midway and Indianapolis to popular vacation destinations such as Hawaii,
Las Vegas, Florida, California,  Mexico and the Caribbean, as well as to Denver,
Dallas-Ft. Worth and New York City's LaGuardia and John F. Kennedy airports. ATA
also  provides  charter  service   throughout  the  world  to  independent  tour
operators, specialty charter customers and the U.S. military.

In 1998,  the Company  generated  record  operating  earnings  and net income as
compared to any previous  fiscal year in the Company's  25-year  history.  These
results  were  primarily  due to  the  effects  of  record  operating  revenues,
unchanged unit operating expenses and higher utilization of aircraft.

1997 was a year of recovery for the  Company,  after a  substantial  net loss in
1996.  Extensive business unit profitability  analysis in late 1996 prompted the
Company to undertake  significant  restructuring of scheduled service operations
and  standardization  of the Boeing 757-200 fleet. As a result of these efforts,
the Company finished 1997 with net income, a substantial improvement over 1996.

Results of Operations

In 1998, the Company earned $75.4 million in operating  income and $40.1 million
in net income, as compared to operating and net income of $13.5 million and $1.6
million,  respectively,  in 1997 and an operating  and net loss of $36.1 million
and $26.7 million, respectively in 1996.

Operating  expenses  increased  9.7% to $844.0  million in 1998,  as compared to
$769.7  million in 1997.  Operating  expense per ASM remained  unchanged at 6.09
cents in both  years.  Operating  expenses  were $786.9  million in 1996,  which
equated to 5.92 cents per ASM.

Results of Operations in Cents Per ASM

The following table sets forth, for the periods indicated, operating revenues
and expenses expressed as cents per ASM.
<TABLE>
<CAPTION>
                                                                              Cents per ASM
                                                                         Year Ended December 31,
                                                          ------------------------------------------------------
<S>                                                             <C>               <C>              <C> 
                                                                1998              1997             1996

Operating revenues:                                             6.64              6.19             5.65

Operating expenses:
    Salaries, wages and benefits                                1.52              1.36             1.23
    Fuel and oil                                                0.99              1.22             1.21
    Depreciation and amortization                               0.57              0.49             0.47
     Handling, landing and navigation fees                      0.54              0.55             0.53
    Aircraft maintenance, materials and repairs                 0.39              0.41             0.42
     Aircraft rentals                                           0.38              0.43             0.49
    Crew and other employee travel                              0.30              0.29             0.27
    Passenger service                                           0.24              0.26             0.25
    Commissions                                                 0.21              0.21             0.20
     Other selling expenses                                     0.16              0.12             0.13
    Ground package cost                                         0.14              0.15             0.14
    Advertising                                                 0.13              0.10             0.08
     Facilities and other rentals                               0.07              0.07             0.07
    Disposal of assets                                             -                 -             0.03
    Other                                                       0.45              0.43             0.40
        Total operating expenses                                6.09              6.09             5.92

    Operating income (loss)                                     0.55              0.10            (0.27)

    ASMs (in thousands)                                      13,851,731        12,647,683       13,295,505

</TABLE>

<PAGE>


Year Ended December 31, 1998, Versus Year Ended December 31, 1997

Consolidated Flight Operating 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"  operations  include  the  operations  of
Jetstream  31 propeller  aircraft  operated on the  Company's  behalf by Chicago
Express as the ATA Connection.

<TABLE>
<CAPTION>

                                                     Twelve Months Ended December 31,
<S>                                             <C>             <C>             <C>            <C>  
                                                1998            1997        Inc (Dec)     % Inc (Dec)
                                      --------------- --------------- ---------------- ---------------
Departures Jet                                45,881          39,517            6,364           16.10
Departures J31(a)                             16,388          10,091            6,297           62.40
                                      --------------- --------------- ---------------- ---------------
  Total Departures (b)                        62,269          49,608           12,661           25.52
                                      --------------- --------------- ---------------- ---------------

Block Hours Jet                              144,237         129,216           15,021           11.62
Block Hours J31                               16,166          10,210            5,956           58.33
                                      --------------- --------------- ---------------- ---------------
  Total Block Hours (c)                      160,403         139,426           20,977           15.05
                                      --------------- --------------- ---------------- ---------------

RPMs Jet (000s)                            9,727,097       8,967,900          759,197            8.47
RPMs J31 (000s)                               30,991          18,055           12,936           71.65
                                      --------------- --------------- ---------------- ---------------
  Total RPMs (000s) (d)                    9,758,088       8,985,955          772,133            8.59
                                      --------------- --------------- ---------------- ---------------

ASMs Jet (000s)                           13,799,507      12,615,230        1,184,277            9.39
ASMs J31 (000s)                               52,224          32,453           19,771           60.92
                                      --------------- --------------- ---------------- ---------------
  Total ASMs (000s) (e)                   13,851,731      12,647,683        1,204,048            9.52
                                      --------------- --------------- ---------------- ---------------

Load Factor Jet                                70.49           71.09           (0.60)          (0.84)
Load Factor J31                                59.34           55.63             3.71            6.67
                                      --------------- --------------- ---------------- ---------------
  Total Load Factor (f)                        70.45           71.05           (0.60)          (0.84)
                                      --------------- --------------- ---------------- ---------------

Passengers Enplaned Jet                    5,991,662       5,210,578          781,084           14.99
Passengers Enplaned J31                      176,604          96,812           79,792           82.42
                                      --------------- --------------- ---------------- ---------------
  Total Passengers Enplaned (g)            6,168,266       5,307,390          860,876           16.22
                                      --------------- --------------- ---------------- ---------------

Revenue (000s)                              $919,369        $783,193         $136,176           17.39
RASM in cents (h)                               6.64            6.19             0.45            7.27
CASM in cents (i)                               6.09            6.09                -               -
Yield in cents (j)                              9.42            8.72             0.70            8.03

</TABLE>

  See footnotes (a) through (j) on pages 14 and 15.

(a) Effective  April 1, 1997, the Company began ATA Connection  service  between
Chicago-Midway and the cities of Indianapolis, Milwaukee, Des Moines, Dayton and
Grand Rapids under a code sharing agreement with Chicago Express.  Services were
expanded to include  Lansing,  Michigan and Madison,  Wisconsin in October 1997.
Services were provided by Chicago Express using  Jetstream 31 ("J31")  propeller
aircraft.

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

(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.
<PAGE>

(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 an entire
aircraft is sold by the Company  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 1998 increased 17.4% to $919.4 million from $783.2
million in 1997. This increase was due to a $139.5 million increase in scheduled
service revenues,  a $10.5 million increase in other revenues and a $0.9 million
increase in ground package revenues, partially offset by a $5.5 million decrease
in   commercial   charter   revenues,   and   a   $9.2   million   decrease   in
military/government charter revenues.

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"  operations  include the operations of
Jetstream  31 propeller  aircraft  operated on the  Company's  behalf by Chicago
Express as the ATA Connection.
<PAGE>


<TABLE>
<CAPTION>
                                                     Twelve Months Ended December 31,
<S>                                             <C>             <C>            <C>              <C>       
                                                1998            1997        Inc (Dec)     % Inc (Dec)
                                      --------------- --------------- ---------------- ---------------
Departures Jet                                31,237          23,800            7,437           31.25
Departures J31(a)                             16,388          10,091            6,297           62.40
                                      --------------- --------------- ---------------- ---------------
  Total Departures (b)                        47,625          33,891           13,734           40.52
                                      --------------- --------------- ---------------- ---------------

Block Hours Jet                               92,263          72,883           19,380           26.59
Block Hours J31                               16,166          10,210            5,956           58.33
                                      --------------- --------------- ---------------- ---------------
  Total Block Hours (c)                      108,429          83,093           25,336           30.49
                                      --------------- --------------- ---------------- ---------------

RPMs Jet (000s)                            5,777,555       4,523,245        1,254,310           27.73
RPMs J31 (000s)                               30,991          18,055           12,936           71.65
                                      --------------- --------------- ---------------- ---------------
  Total RPMs (000s) (d)                    5,808,546       4,541,300        1,267,246           27.90
                                      --------------- --------------- ---------------- ---------------

ASMs Jet (000s)                            7,756,330       6,209,825        1,546,505           24.90
ASMs J31 (000s)                               52,224          32,453           19,771           60.92
                                      --------------- --------------- ---------------- ---------------
  Total ASMs (000s) (e)                    7,808,554       6,242,278        1,566,276           25.09
                                      --------------- --------------- ---------------- ---------------

Load Factor Jet                                74.49           72.84             1.65            2.27
Load Factor J31                                59.34           55.63             3.71            6.67
                                      --------------- --------------- ---------------- ---------------
  Total Load Factor (f)                        74.39           72.75             1.64            2.25
                                      --------------- --------------- ---------------- ---------------

Passengers Enplaned Jet                    4,094,454       3,087,706        1,006,748           32.61
Passengers Enplaned J31                      176,604          96,812           79,792           82.42
                                      --------------- --------------- ---------------- ---------------
  Total Passengers Enplaned (g)            4,271,058       3,184,518        1,086,540           34.12
                                      --------------- --------------- ---------------- ---------------

Revenues (000s)                             $511,254        $371,762         $139,492           37.52
RASM in cents (h)                               6.55            5.96             0.59            9.90
Yield in cents (j)                              8.80            8.19             0.61            7.45
Rev per segment $ (k)                         119.70          116.74             2.96            2.54
</TABLE>

See footnotes (a) through (j) on pages 14 and 15.

(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 1998 increased 37.5% to $511.3 million from $371.8
million in 1997.  Scheduled  service  revenues  comprised  55.6% of consolidated
revenues in 1998, as compared to 47.5% of consolidated revenues in 1997.

The Company  currently  has a code share  agreement  with Chicago  Express under
which Chicago Express  operates 19-seat  Jetstream 31 propeller  aircraft as the
ATA Connection between Chicago-Midway and the cities of Indianapolis, Milwaukee,
Des Moines,  Dayton,  Grand Rapids,  Lansing and Madison.  The  period-to-period
percentage  changes in  departures,  block  hours and  passengers  boarded  were
significantly  impacted by the operation of ATA Connection Jetstream 31 commuter
flights in the twelve months ended December 31, 1998, which operated only during
the nine months ended December 31, 1997. Such operations in all periods generate
comparatively  less impact to ASMs and RPMs due to the small seat  capacity  and
short  stage  length of ATA  Connection  propeller  aircraft  as compared to the
Company's jet aircraft.  In February 1999, the Company entered into an agreement
in principle  to acquire  Chicago  Express  Airlines,  Inc.,  ATA's code sharing
partner at Chicago-Midway.

The  Company's  1998   scheduled   service  at   Chicago-Midway   accounted  for
approximately  53.4% of scheduled  service  ASMs and 73.5% of scheduled  service
departures,  as compared to 42.9% and 63.2%,  respectively,  in 1997.  On May 1,
1998, the Company began three daily nonstop flights to Dallas-Ft.  Worth and two
daily nonstop  flights to Denver,  none of which  services were provided  during
1997. In addition to these new services,  the Company added  frequencies in 1998
to most existing jet markets,  including Ft.  Lauderdale,  Ft. Myers, Las Vegas,
Los  Angeles,  Orlando,  Phoenix,  St.  Petersburg  and  San  Francisco.  Flight
frequencies to Sarasota  declined between periods.  ATA Connection  Jetstream 31
flights  in  1998  and  the  nine  months   ended   December   31,  1997  served
Chicago-Midway from the cities of Dayton, Des Moines, Grand Rapids, Indianapolis
and Milwaukee.  In addition,  the Company  operated ATA Connection  Jetstream 31
service between  Chicago-Midway and the cities of Lansing and Madison throughout
1998, while such service was operated only during the fourth quarter of 1997.
<PAGE>
The Company anticipates that its Chicago-Midway operation will represent a focus
of growing  significance for its scheduled  service business in 1999 and beyond.
The Company  operated 57 daily jet and commuter  departures from  Chicago-Midway
and served 21 destinations on a nonstop basis in the summer of 1998, as compared
to 15 nonstop destinations served in the summer of 1997. By the end of 1998, the
Company completed a $1.5 million renovation of the existing terminal  facilities
at  Chicago-Midway  to enhance  their  attractiveness  and  convenience  for the
Company's  customers.  The Company also presently expects to occupy 13 jet gates
and six commuter  aircraft  gates at the new  Chicago-Midway  terminal  which is
presently  scheduled  for  completion  in 2002, as compared to the six jet gates
currently occupied in the existing terminal.

The Company's  growing  commitment  to  Chicago-Midway  is  consistent  with its
strategy for  enhancing  revenues  and  profitability  in  scheduled  service by
focusing  primarily on low-cost,  nonstop  flights  from  airports  where it has
market or aircraft  advantages in addition to its low-cost.  The Company expects
its growing  concentration of connecting  flights at  Chicago-Midway  to provide
both  revenue  premiums  and  operating  cost  efficiencies,  as compared to the
Company's other gateway cities.

The Company's Hawaii service  accounted for 21.3% of scheduled  service ASMs and
5.4% of scheduled  service  departures  in 1998,  as compared to 24.6% and 6.8%,
respectively,  in 1997. The Company provided nonstop services in both years from
Los  Angeles,  Phoenix  and  San  Francisco  to both  Honolulu  and  Maui,  with
connecting  service between  Honolulu and Maui. In addition,  in 1998,  seasonal
nonstop service was operated from San Diego to Honolulu,  which was not operated
in 1997. 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 relatively  low ownership  cost of the Lockheed  L-1011 fleet
and because of the high daily hours of  utilization  obtained for both  aircraft
and crews.

The Company's Indianapolis service accounted for 16.1% of scheduled service ASMs
and 12.7% of  scheduled  service  departures  in 1998,  as compared to 20.5% and
18.1%,  respectively,  in 1997. In 1998, the Company operated nonstop to Cancun,
Ft. Lauderdale,  Ft. Myers, Las Vegas, Los Angeles, Orlando, St. Petersburg, San
Francisco and Sarasota. The Company has served Indianapolis for 26 years through
the Ambassadair Travel Club and in scheduled service since 1986.

The Company  continues to evaluate the  profitability  of its scheduled  service
markets  and  expects  to adjust  its  service  from time to time.  The  Company
believes that  scheduled  service yields and load factors in 1998 have benefited
from strong customer demand for air transportation in the United States during a
period of constrained  industry growth in seat capacity relative to this demand.
The ability of the Company to increase its year-over-year scheduled service seat
capacity  by 25.1%,  and to operate  with a higher load  factor  between  years,
further  underscores the fundamental  strength of current demand in its domestic
scheduled service.

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 hundreds of  customer-designated  destinations  throughout the
world.  Commercial  charter  revenue  growth  in  1998  was  constrained  by the
reassignment of several narrow-body  aircraft to scheduled service expansion and
by subservice  contracts with other  airlines,  which the Company  believes have
been more profitable for these aircraft than the commercial charter applications
they replaced. The Company, however, continues to believe that tour operator and
specialty charter are businesses where the Company's experience and size provide
meaningful competitive advantage and are businesses to which the Company remains
committed.  Commercial  charter  revenues  accounted  for 24.2% of  consolidated
revenues in 1998, as compared to 29.1% in 1997.

The Company is addressing  its seat capacity  limitations  in the commercial and
military/government charter business units through the acquisition of long-range
Lockheed L-1011 series 500 aircraft.  In July 1998, the Company committed to the
purchase of five such  aircraft for delivery  between the third  quarter of 1998
and the second quarter of 1999.  Although Lockheed L-1011 series 500 maintenance
procedures  and cockpit  design are similar to the Company's  existing  fleet of
Lockheed L-1011 series 50 and series 100 aircraft,  they differ operationally in
that their  ten-to-eleven-hour range permits them to operate nonstop to parts of
Asia,  South America and Central and Eastern  Europe using an all-coach  seating
configuration  preferred  by  the  U.S.  military  and  most  of  the  Company's
commercial charter  customers.  The Company expects to place these aircraft into
service in commercial and  military/government  charter  operations during 1999,
which will  increase the  available  seat  capacity for these  charter  business
units, in addition to opening new long-range market opportunities to the Company
which it cannot serve with its existing fleet.

<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,
<S>                                          <C>              <C>              <C>           <C>                
                                             1998             1997          Inc (Dec)     % Inc (Dec)
Departures (b)                               9,602           10,589           (987)          (9.32)
Block Hours (c)                             33,516           36,836         (3,320)          (9.01)
RPMs (000s) (d)                          3,009,638        3,373,840       (364,202)         (10.79)
ASMs (000s) (e)                          3,882,202        4,169,102       (286,900)          (6.88)
Passengers Enplaned (g)                  1,617,901        1,840,056       (222,155)         (12.07)
Revenue (000s)                            $222,571         $228,062        $(5,491)          (2.41)
RASM in cents (h)                             5.73             5.47            0.26            4.75
</TABLE>

See footnotes (b) through (h) on pages 14 and 15.

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
$176.4 million in revenues in 1998, as compared to $184.3 million in 1997.

Specialty  charter  (including  incentive travel programs) is a product which is
designed  to meet the  unique  requirements  of the  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 operates an increasing number
of trips in  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  three fleet types also permits the Company to
meet a customer's  particular needs by choosing the aircraft type which provides
the most economical solution for those requirements. Specialty charter accounted
for  approximately  $35.1  million in  revenues  in 1998,  as  compared to $34.6
million in 1997.

MilitarylGovernment  Charter  Revenues.  The following table sets forth, for the
periods   indicated,   certain  key  operating   and  financial   data  for  the
military/government flight operations of the Company.
<TABLE>
<CAPTION>

                                                 Twelve Months Ended December 31,
<S>                                       <C>             <C>              <C>           <C>                  
                                          1998            1997          Inc (Dec)     % Inc (Dec)
Departures (b)                            4,447           4,860           (413)          (8.50)
Block Hours (c)                          16,389          18,704         (2,315)         (12.38)
RPMs (000s) (d)                         821,813       1,044,317       (222,504)         (21.31)
ASMs (000s) (e)                       1,963,069       2,165,169       (202,100)          (9.33)
Passengers Enplaned (g)                 205,641         265,862        (60,221)         (22.65)
Revenue (000s)                         $121,911        $131,115        $(9,204)          (7.02)
RASM in cents (h)                          6.21            6.06           0.15            2.48
</TABLE>

See footnotes (b) through (h) on pages 14 and 15.

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 entered into a contractor teaming arrangement
with four other cargo airlines.  Under this arrangement,  the team has 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  represents all of the passenger  transport
capacity of the 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 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 are generally 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.  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 (i) 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;  (ii) the  percentage  of
passenger capacity of the Company with respect to its own team; (iii) the amount
of  fixed-award  and  expansion  flying  required  by the U.S.  military in each
contract year; and (iv) 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 and cruise  accommodations  in  conjunction  with the
Company's air transportation  product. The Company markets these ground packages
to its Ambassadair club members and through its ATA Vacations  subsidiary to its
scheduled service passengers. In 1998, ground package revenues increased 4.0% to
$23.2 million, as compared to $22.3 million in 1997.

The Company's Ambassadair Travel Club offers hundreds of  tour-guide-accompanied
vacation  packages to its  approximately  38,000  individual  and family members
annually.  In 1998,  total packages sold decreased 5.0% as compared to 1997, but
the average  revenue earned for each ground package sold increased 20.4% between
periods.

ATA Vacations  offers numerous ground  accommodations  to the general public for
use with the  Company's  scheduled  service  flights in many areas of the United
States.  These packages are marketed through travel agents,  as well as directly
by the Company.  In 1998,  total  packages sold  decreased  10.2% as compared to
1997,  while the average  revenue  earned for each ground package sold decreased
3.2% between years.

The number of ground packages sold and the average revenue earned by the Company
for a ground  package  sale are a function of the mix of  vacation  destinations
served,  the  quality  and types of ground  accommodations  offered  and general
competitive  conditions with other air carriers offering similar products in the
Company's  markets,  all of which are  factors  that can change  from  period to
period.

In  early  1999,   the  Company   completed  the  purchase  of  Travel   Charter
International,  a tour  operator,  and has an  agreement in principle to acquire
another tour operator, Key Travel.

Other  Revenues.  Other revenues are comprised of the  consolidated  revenues of
affiliated  companies,   together  with  miscellaneous   categories  of  revenue
associated  with the  scheduled  and charter  operations  of the Company.  Other
revenues  increased 35.1% to $40.4 million in 1998, as compared to $29.9 million
in 1997.

In 1998, as compared to 1997, the Company earned $4.3 million more in substitute
service revenues, $3.2 million more in cancellation and administrative fees, and
$2.4  million  more in cargo and other  affiliate  company  revenues,  partially
offset by $0.6 million less revenue earned from the sale of surplus and obsolete
aircraft parts.

A substitute  service  agreement  typically  provides for the Company to operate
aircraft with its crews on routes  designated  by the customer  airline to carry
the  passengers  of that airline for a limited  period of time.  The Company has
seen  increased  demand  for this type of  service  in 1998 due to delays in new
aircraft  deliveries  being  experienced by various  airlines.  The Company also
increased its  administrative  fee for  change-of-reservation  on non-refundable
scheduled  service tickets from $50 to $60 per change effective August 1998, and
the volume of such fees earned also increased between years in proportion to the
increase in scheduled service passengers boarded.

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 1998 increased 22.5% to $211.3 million
from $172.5 million in 1997.

The Company increased its average equivalent employees by 18.4% between 1998 and
1997 in order to  appropriately  staff the  growth in  available  seats  offered
between periods.  Categories of employees where this growth was most significant
included cockpit and cabin crews,  reservations  agents,  airport  passenger and
ramp  service  agents,  and  aircraft  maintenance  personnel,  all of which are
influenced directly by flight activity.  Some employment growth in 1998 was also
needed to correct for certain  employee  shortages in 1997,  particularly in the
areas of  cockpit  crews,  reservations  agents  and  airframe  and power  plant
mechanics.

The  average  rate of pay  earned  by the  Company's  employees  (including  all
categories of salaries,  wages and benefits,  except for variable  compensation)
was unchanged  between 1998 and 1997.  While most  employees  received wage rate
increases  between  years,  new employees  are generally  hired at lower average
starting rates of pay than those rates in effect for more senior employees.  The
increase in new employees  between  periods  approximately  offset the wage rate
increases applicable to more senior employees.

In 1998, the Company recorded $8.9 million in variable  compensation and related
payroll taxes as a result of the significant improvement in earnings as compared
to 1997, when no such compensation was incurred.  In the second quarter of 1997,
a one-time charge of $2.0 million was recorded for variable compensation expense
associated  with the  resignation  of the Company's  former  President and Chief
Executive Officer.

Salaries, wages and benefits cost per ASM increased 11.8% in 1998 to 1.52 cents,
as compared to 1.36 cents in 1997. This unit-cost  increase was  attributable to
the faster rate of growth in average  equivalent  employees  between  years than
seat capacity,  and to the variable  compensation  earned in 1998, which was not
earned in 1997.

Fuel and Oil. Fuel and oil expense decreased 10.6% to $137.4 million in 1998, as
compared to $153.7 million in 1997. This decrease  occurred  despite the Company
consuming  9.8% more gallons of jet fuel for flying  operations  between  years,
which  resulted in an increase in fuel expense of  approximately  $15.0 million.
Jet fuel  consumption  increased  primarily due to the increased number of block
hours of jet flying  operations  between  periods.  The Company flew 144,237 jet
block hours in 1998, as compared to 129,216 jet block hours in 1997, an increase
of 11.6% between years.

Fuel  consumption  growth  between  1998 and 1997 was less than total block hour
growth,  however,  since  most of the  block  hour  growth  in  1998  was in the
narrow-body   Boeing   727-200  and  Boeing   757-200   fleets,   which  consume
approximately  50% of the  gallons  per block  hour  which are  consumed  by the
Lockheed L-1011 fleet.

During  1998,  the  Company's  average  cost per  gallon  of jet  fuel  consumed
decreased by 20.0% as compared to 1997,  resulting in a decrease in fuel and oil
expense of  approximately  $34.4 million  between years.  This reduction in fuel
price was  experienced  generally in the airline  industry  throughout 1998 as a
result of  significant  reductions  in average crude oil and  distillate  market
prices as compared to 1997.

During the first,  second and fourth  quarters of 1998, the Company entered into
several fuel price hedge  contracts under which the Company sought to reduce the
risk of fuel price increases  during the year. The Company hedged some 1998 fuel
consumption  under swap agreements  which  established  specific swap prices for
designated  periods,  and  hedged  other  1998 fuel  consumption  under fuel cap
agreements which  guaranteed a maximum price per gallon for designated  periods.
Since the price of fuel  declined  during  most of 1998,  the  Company  recorded
approximately  $2.5 million in  additional  fuel and oil expense under its hedge
contracts,  which added approximately one cent to its average cost per gallon in
1998.

Fuel and oil expense  decreased 18.9% to 0.99 cents per ASM in 1998, as compared
to 1.22 cents per ASM in 1997, primarily due to the period-to-period decrease in
the average price of fuel consumed.

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 increased 25.9% to
$78.7 million in 1998, as compared to $62.5 million in 1997.

Depreciation expense attributable to owned airframes and leasehold  improvements
increased $3.0 million in 1998, as compared to 1997.  The Company  purchased one
Boeing  757-200  and one  Boeing  727-200  aircraft  in late 1997 which had been
previously  financed through operating leases,  thereby increasing  depreciation
expense on  airframes  between  years.  (The  Company  recorded a  reduction  in
aircraft rental expense between periods for the termination of operating  leases
for these aircraft, which is further described below under "Aircraft Rentals.")

The Company also recorded additional inventory  obsolescence expense for certain
aircraft  parts held for sale which were sold during the first  quarter of 1998,
and  increased  its  investment  in  rotable  parts and  computer  hardware  and
software, among other items of property and equipment. These changes resulted in
an  increase in  depreciation  expense of $2.4  million in 1998,  as compared to
1997.

Amortization  of  capitalized  engine and  airframe  overhauls  increased  $11.1
million  in  1998,  as  compared  to  1997,   after   including  the  offsetting
amortization  associated  with  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 Boeing  727-200 and Lockheed
L-1011 fleets,  since such expense varies with that activity,  and partly due to
the completion of more engine and airframe  overhauls  between periods for these
fleet types.  Rolls-Royce-powered  Boeing 757-200 aircraft,  seven of which were
delivered  new from the  manufacturer  between late 1995 and late 1998,  are not
presently generating any engine or airframe overhaul expense,  since the initial
post-delivery  overhauls for these  aircraft are not yet due under the Company's
maintenance programs.

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 write-offs increased $1.3 million in
1998 as compared to 1997.  When these early engine  failures can be economically
repaired, the related repairs are charged to aircraft maintenance, materials and
repairs expense.

Effective July 1, 1998, the Company extended the estimated useful life of the 13
owned Lockheed  L-1011 series 50 and series 100 aircraft to a common  retirement
date of December  2004,  and also  reduced the  estimated  salvage  value of the
related airframes,  engines and rotables.  The effect of this change in estimate
was to reduce depreciation expense in 1998 by $2.1 million.

Depreciation and  amortization  expense per ASM increased 16.3% to 0.57 cents in
1998, as compared to 0.49 cents in 1997.  This increase was primarily due to the
increased  amount of overhaul  cost  incurred to maintain the  Company's  Boeing
727-200 and Lockheed L-1011  airframes and engines.  Airframes and engines which
originally enter the Company's fleet from time to time often do not require such
overhauls  until  several years later.  Therefore,  units added to the Company's
fleet over the last several years are currently  scheduled for or are undergoing
overhaul.  Such overhaul  expense  incurred and to be incurred is incremental in
comparison to prior periods.  Although the Company's fleet of new Boeing 757-200
aircraft has not yet begun this initial overhaul cycle, the Company  anticipates
that  it will  do so  beginning  in  1999,  at  which  time  increased  overhaul
amortization expense per ASM will be incurred for this fleet type as well.

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 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  increased by 7.5% to $74.6  million in
1998, as compared to $69.4 million in 1997. The total number of system-wide  jet
departures  between  1998 and 1997  increased  by 16.1% to 45,881  from  39,517,
resulting in approximately  $8.8 million in volume-related  handling and landing
expense increases between periods.

This  volume-related  increase was partially offset,  however,  by a decrease of
approximately  $3.3  million  in  price-and-mix-related   handling  and  landing
expenses for 1998,  as compared to 1997,  attributable  primarily to a change in
jet departure mix.

The cost per ASM for handling,  landing and  navigation  fees  decreased 1.8% to
0.54 cents in 1998, from 0.55 cents in 1997.

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  light  airframe  check  and line  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.  Aircraft  maintenance,  materials and repairs expense increased
4.3% to $53.7 million in 1998, as compared to $51.5 million in 1997.

The Company  performed a total of 51 light  airframe  checks on its fleet during
1998,  as  compared to 44 such checks  performed  in 1997,  an increase of 15.9%
between  years.  The cost of  materials  consumed  and  components  repaired  in
association with such light checks and other maintenance  activity  increased by
$1.6 million between 1998 and 1997.

The cost per ASM of aircraft  maintenance,  materials and repairs decreased 4.9%
to 0.39 cents in 1998, as compared to 0.41 cents in 1997.

Aircraft  Rentals.  Aircraft  rentals  expense for 1998  decreased 2.4% to $53.1
million from $54.4  million in 1997.  The Company  purchased  one leased  Boeing
757-200 in September  1997;  returned one leased Boeing 757-200 to the lessor in
November of 1997;  and added one new leased Boeing 757-200 each in December 1997
and August 1998.  These fleet changes  resulted in a reduction in Boeing 757-200
rentals expense of $0.9 million in 1998, as compared to 1997.  Aircraft  rentals
expense  for the  Boeing  727-200  and  Lockheed  L-1011  fleets  did not change
significantly between years.

Aircraft  rentals cost per ASM for 1998 was 0.38 cents, a decrease of 11.6% from
0.43  cents  per ASM in  1997.  Such  reduction  in cost  per ASM was  primarily
attributable  to the increased  utilization of all aircraft types between years,
producing more ASMs with approximately the same fleet size.

Crew and Other Employee Travel.  Crew and other employee travel is primarily the
cost of air  transportation,  hotels and per diem  reimbursements to cockpit and
cabin crew members  incurred to position  crews away from their bases to operate
Company  flights  throughout  the  world.  The  cost  of air  transportation  is
generally more  significant for the commercial and  military/government  charter
business units since these flights often operate between cities in which Company
crews are not normally based and may involve extensive international positioning
of crews. Hotel and per diem expenses are incurred for scheduled, commercial and
military/government  charter services,  although higher per diem and hotel rates
generally apply to international assignments.

The cost of crew and other employee  travel  increased 13.7% to $41.6 million in
1998, as compared to $36.6 million in 1997.  During 1998, the Company's  average
full-time-equivalent  cockpit and cabin crew employment was 13.5% higher than in
1997, while jet block hours flown increased by 11.6% between the same periods.

The average cost of hotel rooms per  full-time-equivalent  crew member increased
4.4% in 1998, as compared to 1997. Such hotel costs increased due to both higher
room rates paid in 1998,  and due to aircraft flow changes  associated  with the
Company's 1998 summer  schedule which resulted in more crews  terminating  their
daily flying away from their home bases than in the prior year.

The  average  cost of crew  positioning  per  full-time-equivalent  crew  member
decreased  5.4% in 1998, as compared to 1997.  Crew  positioning  costs declined
primarily due to the shift of revenue  production  from  commercial  charter and
military/government  charter to scheduled service. Crews positioning out of base
for scheduled service can often position at no cost on Company flights,  whereas
positioning  to remote  international  locations for charter  service is usually
done on other carriers at an incremental cost.

The cost per ASM for crew and other employee travel increased 3.4% to 0.30 cents
in 1998, as compared to 0.29 cents in 1997.

Passenger Service.  Passenger service expense includes the onboard costs of 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 1998  and  1997,
catering represented 84.1% and 83.0%,  respectively,  of total passenger service
expense.

The total cost of passenger  service increased 3.7% to $34.0 million in 1998, as
compared  to $32.8  million in 1997.  The  Company  experienced  a  decrease  of
approximately  10.2% in the average unit cost of catering each passenger between
years,  primarily  because in 1998 there were relatively more scheduled  service
passengers  in the  Company's  business  mix, who are provided a less  expensive
catering   product  than  the  Company's   longer-stage-length   commercial  and
military/government     charter     passengers.     This     resulted    in    a
price-and-business-mix reduction of $3.3 million in catering expense in 1998, as
compared to 1997. Total jet passengers boarded, however, increased 15.0% between
years, resulting in approximately $4.0 million in higher volume-related catering
expenses between the same sets of comparative periods.

The cost per ASM of passenger  service  declined 7.7% to 0.24 cents in 1998 from
0.26 cents in 1997.

Commissions. The Company incurs commissions expense in association with the sale
by travel agents of single seats on scheduled service. In addition,  the Company
incurs  commissions to secure some  commercial and  military/government  charter
business.  Commissions  expense  increased  9.2% to $28.5  million  in 1998,  as
compared to $26.1 million in 1997.

Scheduled service commissions expense increased by $2.3 million between 1998 and
1997.  This  increase was lower than the related  increase of 37.5% in scheduled
service revenues between the same periods, partially because of an industry-wide
reduction in the standard  travel  agency  commission  rate from 10% to 8% which
became  effective  in  October  1997,  and  partially  due  to  relatively  more
non-commissionable  bulk seat  scheduled  service  sales being made in 1998,  as
compared to 1997.  Neither commercial  charter nor  military/government  charter
commissions expense changed significantly between 1998 and 1997.

The cost per ASM of  commissions  expense was  unchanged  at 0.21 cents for both
1998 and 1997.

Other Selling Expenses. Other selling expenses are comprised of (i) booking fees
paid to computer  reservation  systems ("CRS") to reserve  single-seat sales for
scheduled  service;  (ii) credit card  discount  expenses  incurred when selling
single seats and ground  packages to  customers  using credit cards for payment;
(iii) costs of providing toll-free  telephone service,  primarily to single-seat
and  vacation  package  customers  who  contact  the  Company  directly  to book
reservations; and (iv) miscellaneous other selling expenses primarily associated
with single-seat  sales. Other selling expenses increased 42.6% to $22.1 million
in 1998,  as compared to $15.5  million in 1997.  Scheduled  service  passengers
boarded increased 34.1% between the same periods.

CRS fees  increased  $3.1 million in 1998,  as compared to 1997,  due to a 40.2%
increase in total CRS bookings made for the expanded  scheduled service business
unit between periods, and due to a 7.5% increase in the average cost of each CRS
booking. Toll-free telephone costs increased $0.5 million between 1998 and 1997,
primarily  due to higher  toll-free  usage related to higher  scheduled  service
reservations  activity.  Credit card discount expense  increased $3.0 million in
1998 as compared  to 1997,  due to higher  1998  earned  revenues  in  scheduled
service which were sold using credit cards as payment.

Other selling cost per ASM increased 33.3% to 0.16 cents in 1998, as compared to
0.12 cents in 1997.

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 ATA Vacations customers. Ground package
cost  increased  1.0% to $19.4  million in 1998, as compared to $19.2 million in
1997. The number of Ambassadair  ground packages sold in 1998 decreased 5.0%, as
compared to 1997,  while the average cost of  Ambassadair  ground  packages sold
increased by 29.8% between years.  The number of ATA Vacations  ground  packages
sold in 1998 decreased 10.2% as compared to 1997,  while the average cost of ATA
Vacations ground packages sold decreased by 7.6% between the same periods.

The cost per ASM of ground  packages  decreased  6.7% to 0.14 cents in 1998,  as
compared to 0.15 cents in 1997.

Advertising.  Advertising  expense  increased 40.2% to $17.8 million in 1998, as
compared  to $12.7  million  in  1997.  The  Company  incurs  advertising  costs
primarily  to  support  single-seat  scheduled  service  sales  and the  sale of
air-and-ground  packages.  Advertising support for these lines of businesses was
increased in 1998,  consistent  with the Company's  overall  strategy to enhance
scheduled service RASM through increases in load factor and yield.

The 40.2%  increase in total  advertising  expense  between  years was  slightly
greater than the 37.5% increase in scheduled  service  revenues between the same
periods.  The  majority  of the  Company's  growth  in 1998 was  from  increased
frequencies at existing  gateway cities such as  Chicago-Midway,  which provided
some  advertising  efficiencies  in 1998 as  compared  to the prior  year.  Such
market-related  efficiency  was partially  offset,  however,  due to temporarily
higher advertising support required in the second and third quarters of 1998 for
the introduction of the Company's new services to Dallas-Ft.  Worth, Denver, San
Juan, and New York's LaGuardia airport,  as well as to launch the Company's fall
promotions in the third and fourth quarters of 1998.

The cost  per ASM of  advertising  increased  30.0%  to 0.13  cents in 1998,  as
compared to 0.10 cents in 1997.

Facilities and Other Rentals.  Facilities and other rentals  include the cost of
all ground  facilities  that are leased by the  Company  such as airport  space,
regional  sales offices and general  offices.  The cost of facilities  and other
rentals  increased 10.5% to $9.5 million in 1998, as compared to $8.6 million in
1997. The rate of growth in facilities  costs between  periods was comparable to
the 9.5% rate of ASM growth  between  1998 and 1997,  due to the addition of new
facilities  for services to Denver,  Dallas-Ft.  Worth and New York's  LaGuardia
airport between periods.

The cost per ASM for facility and other  rentals was  unchanged at 0.07 cents in
both 1998 and 1997.

Other  Operating  Expenses.  Other operating  expenses  increased 14.5% to $62.2
million in 1998, as compared to $54.3 million in 1997. Other operating  expenses
which experienced significant changes between periods included: (i) $3.1 million
of additional  costs for the Chicago Express  Jetstream 31 code share agreement,
which  agreement was not in effect in the 1997 first  quarter,  and because such
code share was  expanded  to include  Lansing  and  Madison in 1998,  which were
served in only the fourth quarter of 1997;  (ii) $2.3 million in higher expenses
associated  with the operation of the Company's  affiliate  business;  and (iii)
$1.7  million  in  higher  costs  associated  with  the  short-term  leasing  of
substitute aircraft, and the reprotection of some of the Company's passengers on
other  airlines,   due  to  higher-than-normal   delayed  and  irregular  flight
operations, primarily in the second quarter of 1998.

Other  operating  cost per ASM increased 4.7% to 0.45 cents in 1998, as compared
to 0.43 cents in 1997.

Interest Income and Expense. Interest expense in 1998 increased to $12.8 million
as compared to $9.5 million in 1997.  The increase in interest  expense  between
periods  was  primarily  due to  changes  in  the  Company's  capital  structure
resulting from the two financings  completed on July 24, 1997, at which time the
Company (i) sold $100.0 million  principal amount of 10.5% unsecured  seven-year
notes,  and (ii)  entered  into a new $50.0  million  secured  revolving  credit
facility,  thereby  replacing the former secured  revolving  credit  facility of
$122.0 million as of June 30, 1997. Additionally,  in December 1998, the Company
sold $125.0 million principal amount of 9.625% unsecured senior notes.

Prior to completing  these new  financings,  the Company  utilized  secured bank
credit  facilities  to finance  cash flow  requirements  of the  Company as they
arose,  thereby  minimizing  the level of borrowings on which  interest would be
paid.  During  1998,  the  Company's   weighted  average  debt  outstanding  was
approximately $159.1 million, as compared to $117.2 million in 1997.

The  weighted  average  effective  interest  rate  applicable  to the  Company's
outstanding  debt in 1998 was 8.56%,  as compared to 8.06% in 1997. The increase
in the weighted average effective interest rates between years was primarily due
to the 10.5% interest rate  applicable to the $100.0 million in unsecured  notes
issued on July 24, 1997,  which was higher than the average  interest rate which
was applicable to borrowings under the former credit facility.

The Company  invested excess cash balances in short-term  government  securities
and commercial paper and thereby earned $4.4 million in interest income in 1998,
as compared to $1.6 million in 1997.

Income Tax  Expense.  In 1998 the Company  recorded  $27.1 million in income tax
expense applicable to $67.2 million of pre-tax income for that period,  while in
1997 income tax expense was $4.5 million on pre-tax income of $6.0 million.  The
effective tax rate applicable to 1998 was 40.4%, as compared to 73.9% in 1997.

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
amounts paid for crew per diem (45% in 1998 and 50% in 1997). The effect of this
and other permanent  differences on the effective  income tax rate for financial
accounting  purposes  becomes more pronounced in cases where  before-tax  income
approaches  zero,  which was a significant  reason for the higher  effective tax
rate in 1997.
<PAGE>

Income tax expense for 1997 was also significantly affected by the one-time $2.0
million  charge to salaries,  wages and benefits for the executive  compensation
package provided to the Company's former President and Chief Executive  Officer.
Of the total  compensation paid to this former executive of the Company in 1997,
approximately  $1.7 million was  non-deductible  against the  Company's  federal
taxable income.


Year Ended December 31, 1997, Versus Year Ended December 31, 1996

Consolidated Flight Operating 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"  operations  include  the  operations  of
Jetstream  31  propeller  aircraft  operated  by  Chicago  Express  as  the  ATA
Connection under a code sharing agreement.
<TABLE>
<CAPTION>

                                                     Twelve Months Ended December 31,
<S>                                           <C>             <C>              <C>            <C>                
                                              1997            1996          Inc (Dec)      % Inc (Dec)
                                      --------------- --------------- ---------------- ---------------
Departures Jet                                39,517          46,416          (6,899)         (14.86)
Departures J31(a)                             10,091               -           10,091             N/M
                                      --------------- --------------- ---------------- ---------------
  Total Departures (b)                        49,608          46,416            3,192            6.88
                                      --------------- --------------- ---------------- ---------------
Block Hours Jet                              129,216         138,114          (8,898)          (6.44)
Block Hours J31                               10,210               -           10,210             N/M
                                      --------------- --------------- ---------------- ---------------
  Total Block Hours (c)                      139,426         138,114            1,312            0.95
                                      --------------- --------------- ---------------- ---------------
RPMs Jet (000s)                            8,967,900       9,172,438        (204,538)          (2.23)
RPMs J31 (000s)                               18,055               -           18,055             N/M
                                      --------------- --------------- ---------------- ---------------
  Total RPMs (000s) (d)                    8,985,955       9,172,438        (186,483)          (2.03)
                                      --------------- --------------- ---------------- ---------------
ASMs Jet (000s)                           12,615,230      13,295,505        (680,275)          (5.12)
ASMs J31 (000s)                               32,453               -           32,453             N/M
                                      --------------- --------------- ---------------- ---------------
  Total ASMs (000s) (e)                   12,647,683      13,295,505        (647,822)          (4.87)
                                      --------------- --------------- ---------------- ---------------
Load Factor Jet                                71.09           68.99             2.10            3.04
Load Factor J31                                55.63               -              N/M             N/M
                                      --------------- --------------- ---------------- ---------------
  Total Load Factor (f)                        71.05           68.99             2.06            2.99
                                      --------------- --------------- ---------------- ---------------
Passengers Enplaned Jet                    5,210,578       5,680,496        (469,918)          (8.27)
Passengers Enplaned J31                       96,812               -           96,812             N/M
                                      --------------- --------------- ---------------- ---------------
  Total Passengers Enplaned (g)            5,307,390       5,680,496        (373,106)          (6.57)
                                      --------------- --------------- ---------------- ---------------
Revenue (000s)                              $783,193        $750,851          $32,342            4.31
RASM in cents (h)                               6.19            5.65             0.54            9.56
CASM in cents (i)                               6.09            5.92             0.17            2.87
Yield in cents (j)                              8.72            8.19             0.53            6.47
</TABLE>

N/M - Not meaningful
See footnotes (a) through (j) on pages 14 and 15.

<PAGE>

Operating Revenues

Total  operating  revenues for 1997 increased 4.3% to $783.2 million from $750.9
million in 1996. This increase was due to a $1.6 million  increase in commercial
charter  revenues and a $47.0  million  increase in military  charter  revenues,
partially offset by a $14.7 million decrease in scheduled service revenues and a
$1.6 million decrease in other revenues.

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"  operations  include the operations of
Jetstream  31 propeller  aircraft  operated on the  Company's  behalf by Chicago
Express as the ATA Connection.

<TABLE>
<CAPTION>
                                                     Twelve Months Ended December 31,
<S>                                           <C>             <C>             <C>            <C>              
                                              1997            1996          Inc (Dec)      % Inc (Dec)
                                      --------------- --------------- ---------------- ---------------
Departures Jet                                23,800          31,467          (7,667)         (24.37)
Departures J31(a)                             10,091               -           10,091             N/M
                                      --------------- --------------- ---------------- ---------------
  Total Departures (b)                        33,891          31,467            2,424            7.70
                                      --------------- --------------- ---------------- ---------------

Block Hours Jet                               72,883          85,836         (12,953)         (15.09)
Block Hours J31                               10,210               -           10,210             N/M
                                      --------------- --------------- ---------------- ---------------
  Total Block Hours (c)                       83,093          85,836          (2,743)          (3.20)
                                      --------------- --------------- ---------------- ---------------

RPMs Jet (000s)                            4,523,245       4,918,045        (394,800)          (8.03)
RPMs J31 (000s)                               18,055               -           18,055             N/M
                                      --------------- --------------- ---------------- ---------------
  Total RPMs (000s) (d)                    4,541,300       4,918,045        (376,745)          (7.66)
                                      --------------- --------------- ---------------- ---------------

ASMs Jet (000s)                            6,209,825       7,304,897      (1,095,072)         (14.99)
ASMs J31 (000s)                               32,453               -           32,453             N/M
                                      --------------- --------------- ---------------- ---------------
  Total ASMs (000s) (e)                    6,242,278       7,304,897      (1,062,619)         (14.55)
                                      --------------- --------------- ---------------- ---------------

Load Factor Jet                                72.84           67.33             5.51            8.18
Load Factor J31                                55.63               -              N/M             N/M
                                      --------------- --------------- ---------------- ---------------
  Total Load Factor (f)                        72.75           67.33             5.42            8.05
                                      --------------- --------------- ---------------- ---------------

Passengers Enplaned Jet                    3,087,706       3,551,141        (463,435)         (13.05)
Passengers Enplaned J31                       96,812               -           96,812             N/M
                                      --------------- --------------- ---------------- ---------------
  Total Passengers Enplaned (g)            3,184,518       3,551,141        (366,623)         (10.32)
                                      --------------- --------------- ---------------- ---------------

Revenues (000s)                             $371,762        $386,488        $(14,726)          (3.81)
RASM in cents (h)                               5.96            5.29             0.67           12.67
Yield in cents (j)                              8.19            7.86             0.33            4.20
Rev per segment $ (k)                         116.74          108.83             7.91            7.27
</TABLE>

N/M - Not Meaningful
See footnotes (a) through (k) on pages 14 - 16.

Scheduled  service revenues in 1997 decreased 3.8% to $371.8 million from $386.5
million in 1996.  Scheduled  service  revenues  comprised  47.5% of consolidated
revenues in 1997, as compared to 51.5% of consolidated revenues in 1996.

The  Company  added  scheduled  service  capacity  during  the  second and third
quarters  of 1996  which  primarily  included  expanded  direct  and  connecting
frequencies  through  the  Company's  four  major  gateways  of  Chicago-Midway,
Indianapolis,  Milwaukee  and Boston to west coast and Florida  markets  already
being served.  New seasonal  scheduled service was also introduced in the second
and third  quarters of 1996 from New York to Shannon and  Dublin,  Ireland,  and
Belfast,  Northern  Ireland,  and from the  midwest to Seattle.  New  year-round
service also commenced to San Diego, California, in the second quarter of 1996.

The introduction of this new capacity coincided closely,  however,  with the May
11, 1996,  ValuJet accident in Florida,  and the resulting  persistent  negative
media  attention  directed  toward airline  safety,  especially  toward low-fare
airlines.  On May 12, the Company experienced a cabin decompression  incident on
one of its own flights which,  although it resulted in no serious injury to crew
or  passengers,  nevertheless  attracted  additional  negative  media  attention
occurring as it did one day after the ValuJet tragedy. As a consequence,  during
the  second and third  quarters  of 1996,  the  Company  estimates  that it lost
significant  scheduled  service  revenues  from both canceled  reservations  and
reservations which were never received.  An analysis by the Company in the third
quarter of 1996 of the profitability of its scheduled service and commercial and
military  charter  service  business units  disclosed that a number of scheduled
service markets then being served by the Company had become unprofitable at that
point in time.

As a result of this analysis, in August 1996 the Company announced a significant
restructuring of scheduled service operations. The Company eliminated its Boston
and intra-Florida  scheduled  service  operations and also exited, or reduced in
frequency,   certain  markets  served  from  Chicago-Midway,   Indianapolis  and
Milwaukee.  In conjunction with this restructuring,  the Company completed a 15%
reduction in its employee and contract work forces by the end of 1996.

In addition,  the Company  re-evaluated the relative economic performance of its
three  aircraft  fleet  types in the context of the  restructured  markets to be
served by the Company and  optimized  the type and number of aircraft  through a
fleet  restructuring which was completed by the end of 1996. The Company reduced
the number of Boeing 757-200  aircraft from 11 units at the end of 1995 to seven
units at the end of 1996. The remaining  seven Boeing 757-200  aircraft were all
powered by Rolls-Royce  engines. The Company committed the seven Boeing 757-200s
to  mission-specific  uses in the U.S.  military and scheduled  service business
units.

After the 1996  restructuring,  the Company's  1997 core jet  scheduled  service
included  flights between  Chicago-Midway  and five Florida  cities,  Las Vegas,
Phoenix, Los Angeles and San Francisco; Indianapolis to four Florida cities, Las
Vegas and Cancun;  Milwaukee to three Florida  cities;  Hawaii  service from San
Francisco, Los Angeles and Phoenix; and service between Orlando and San Juan and
Nassau.

As a result  of the 1996  restructuring,  scheduled  service  profitability  was
substantially  improved in 1997 as compared to 1996.  Profitability was enhanced
through a combination  of  significantly  higher load factors and yields between
periods, even though total revenues in scheduled service declined between years.
The Company  believes  that  profitability  was enhanced in this  business  unit
through the  selective  elimination  of flights  which had  previously  produced
below-average  load factors and yield, and that the elimination of intra-Florida
flying in particular was a prominent factor in this  improvement.  Profitability
was  further  enhanced  in  certain   scheduled   service  markets  through  the
reassignment  of aircraft  fleet types to provide  better balance within markets
between revenues, costs and aircraft operational capabilities.

Scheduled service profitability improvement in 1997 was accomplished in spite of
what would normally have been a demand-dampening effect from the re-introduction
of the U.S.  departure and 10% federal excise taxes on tickets on March 7, 1997,
which had expired on January 1, 1997. In August 1997,  federal  legislation  was
enacted  which  extends  these  taxes  until 2007.  The U.S.  departure  tax for
international destinations was increased from $6 to $12 per passenger, and a new
U.S.  arrivals tax of $12 per passenger was added for  passengers  arriving into
the United States from international cities.  Effective October 1, 1997, the new
tax law also changed the method of  computation of the federal excise tax from a
standard 10% of ticket sale value to a declining percentage of ticket sale value
(ranging  from 9.0% to 7.5%),  plus an increasing  inflation-indexed  charge per
passenger  segment flown (ranging from $1 to $3). The Company does not currently
believe  that the change in  federal  excise  tax  computation  has placed it at
either a  significant  pricing  advantage  or  disadvantage  as  compared to the
previous  computation  method.  The Company  does  believe  that  certain of its
low-fare  competitors may be disadvantaged by the new computation  method due to
their lower  average  segment  fares and higher  average  intermediate  stops as
compared to the Company in similar markets.

The Company  began new service in June 1997,  between New York's John F. Kennedy
International Airport and Chicago-Midway,  Indianapolis and St. Petersburg,  and
also added  several  frequencies  between the midwest and the west coast for the
summer  season.  New York  service  to  Chicago-Midway  and St.  Petersburg  was
retained for the 1997-98 winter season.

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


                                   Twelve Months Ended December 31,
                                 1997        1996       Inc (Dec)    % Inc (Dec)
Departures (b)                  10,589       10,920        (331)        (3.03)
Block Hours (c)                 36,836       38,154      (1,318)        (3.45)
RPMs (000s) (d)              3,373,840    3,470,450     (96,610)        (2.78)
ASMs (000s) (e)              4,169,102    4,363,220    (194,118)        (4.45)
Passengers Enplaned (g)      1,840,056    1,854,262     (14,206)        (0.77)
Revenue (000s)                $228,062     $226,400       $1,662          0.73
RASM in cents (h)                 5.47         5.19         0.28          5.39

See footnotes (b) through (h) on pages 14 and 15 .

<PAGE>

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


                           Twelve Months Ended December 31,
                                 1997        1996       Inc (Dec)    % Inc (Dec)
Departures (b)                   4,860        3,414        1,446        42.36
Block Hours (c)                 18,704       12,294        6,410        52.14
RPMs (000s) (d)              1,044,317      665,494      378,823        56.92
ASMs (000s) (e)              2,165,169    1,442,113      723,056        50.14
Passengers Enplaned (g)        265,862      185,575       80,287        43.26
Revenue (000s)                $131,115      $84,200      $46,915        55.72
RASM in cents (h)                 6.06         5.84         0.22         3.77


See footnotes (b) through (h) on pages 14 and 15.

The U.S. military business grew at a faster  year-over-year  rate than any other
business unit of the Company  during 1997. As a result of the  restructuring  of
scheduled  service and the  reconfiguration  of the Company's fleet in 1996, the
Company  committed four of its seven  remaining  Boeing 757-200  aircraft to the
U.S. military for the contract year ending September 30, 1997. As a result of an
analysis  undertaken  during  1996,  the  Company  was also  successful  in more
accurately  documenting the actual costs associated with military flying and was
therefore able to obtain rate  increases for the contract year ending  September
30, 1997. The Company  obtained  additional rate increases for the contract year
ending September 30, 1998.

Ground  Package Revenues. In  1997 and  1996, ground  package revenues  were un-
changed at $22.3 million.

In 1997,  total  Ambassadair  packages sold  increased  9.4% over 1996,  and the
average  revenue  earned for each ground  package  sold  increased  8.2% between
periods.

During 1997, the number of ATA Vacations  ground packages sold increased 0.5% as
compared to 1996.  Lack of growth in the number of ground  packages sold between
periods  was mainly due to the  reduction  of the  Company's  scheduled  service
operations  between  years.  During 1997,  the average  revenue  earned for each
ground package sold decreased 15.8% as compared to 1996.

Other  Revenues.  Other  revenues  decreased  5.1% to $29.9  million in 1997, as
compared to $31.5  million in 1996,  primarily  due to a  reduction  in revenues
earned  between  periods by  providing  substitute  service  to other  airlines,
partially offset by increases in other miscellaneous revenue categories.

Operating Expenses

Salaries, Wages and Benefits. Salaries, wages and  benefits expense  in 1997 in-
creased 5.2% to $172.5 million from $164.0 million in 1996.

Approximately  $3.2 million of the increase  between periods was attributable to
changes  made in the third  quarter of 1996 in senior  executive  positions  and
associated senior executive  compensation plans. Special  compensation  totaling
$3.0 million was prepaid to the Company's  former  President and Chief Executive
Officer during the fourth  quarter of 1996 and the first quarter of 1997,  which
was  being  amortized  to  expense  over the  anticipated  two-year  term of his
employment  ending  August  1998.  Due to his  resignation  in late May 1997,  a
one-time charge to expense for the unamortized  $2.0 million prepaid balance was
made in the second quarter of 1997 to salaries,  wages and benefits,  whereas no
such charge to expense was incurred in the prior year.

The cost of salaries and wages earned by cockpit crew members and related flight
operations  support staff in 1997 was approximately  $5.8 million higher than in
1996.  These cost  increases  were incurred even though jet block hours flown by
cockpit crew members declined by 6.4% between periods. This increase in the unit
cost of cockpit crews was attributable to the following significant factors: (i)
the implementation of the cockpit crew collective bargaining agreement in August
1996, under which a 7.5% rate increase became  effective;  (ii) crew utilization
for U.S. military flying was significantly  lower than for scheduled service and
tour operator flying, and U.S. military block hours increased as a percentage of
total block hours to 14.5% in 1997,  as compared to 8.9% in 1996;  (iii) cockpit
crew  shortages  during the first three quarters of 1997 resulted in the need to
increase  premium pay to cockpit crew members in order to  adequately  staff the
spring and summer  flying  schedule;  and (iv)  cockpit  crew  productivity  was
reduced by the fleet  restructuring  completed  during 1996, which increased the
percentage  of jet block hours  flown by  three-crew-member  aircraft  (Lockheed
L-1011 and Boeing 727-200) to 78.9% in 1997, as compared to 70.6% in 1996.

The salaries, wages and benefits cost for other employee groups declined by $0.8
million in 1997 as compared to 1996. These costs declined  partially as a result
of the  decline  in  equivalent  full-time  employment  between  periods.  Total
equivalent  full-time  employment  declined  by  7.7%  between  years,  although
equivalent  full-time  employment in the fourth quarter of 1997 was 10.0% higher
than in the fourth  quarter of 1996. The increase in employment in late 1997 was
primarily due to the addition of cockpit and cabin crews and reservations agents
to adequately  staff expected  growth in flying capacity in 1998 compared to the
fourth  quarter of 1996 when the Company had just  completed  significant  staff
reductions.

In  addition  to those  planned  staff  reductions  completed  during the fourth
quarter of 1996,  the change in salaries,  wages and benefits  expense for other
employee groups was significantly  affected by reduced employment in Maintenance
and Engineering, which accounted for a $1.4 million reduction in expense between
1997 and 1996. Employment of Maintenance and Engineering staff, such as airframe
and  powerplant  mechanics  and  engineers,  was  constrained  in 1997 by  broad
shortages in related labor markets  attributable  to very strong  current demand
for these skills within the airline industry.  The Company  compensated for some
of  these  shortages  in 1997 by  acquiring  these  skills  through  third-party
contract  labor  vendors.  The cost of  maintenance  contract  labor (which is a
component of Aircraft  Maintenance,  Materials  and  Repairs)  increased by $2.3
million in 1997 as compared to 1996.

Salaries, wages and benefits cost per ASM increased 10.6% in 1997 to 1.36 cents,
as compared to 1.23 cents in 1996.

Fuel and Oil.  Fuel and oil expense for 1997  decreased  4.7% to $153.7  million
from $161.2  million in 1996.  During  1997,  as  compared to 1996,  the Company
consumed 3.1% fewer gallons of jet fuel for flying operations, which resulted in
a reduction in fuel expense of approximately  $5.4 million between periods.  The
reduction in jet fuel  consumed was due to the reduced  number of block hours of
jet flying operations between years. The Company flew 129,216 jet block hours in
1997, as compared to 138,114 jet block hours in 1996, a decrease of 6.4% between
periods.

During 1997, the Company's average cost per gallon of fuel consumed decreased by
1.8% as compared to 1996,  which  resulted in a decrease in fuel and oil expense
of  approximately  $2.9  million  between  years.  Also,  during  the last three
quarters of 1997, the Company  incurred  approximately  $1.0 million in fuel and
oil  expense to operate  the  Jetstream  31 aircraft  under its  agreement  with
Chicago Express, which was not in effect in the last three quarters of 1996.

Fuel and oil expense  increased  0.8% to 1.22 cents per ASM in 1997, as compared
to 1.21 cents per ASM in 1996.

Depreciation and Amortization.  Depreciation and amortization  expense increased
1.3% to $62.5 million in 1997, as compared to $61.7 million in 1996.

Depreciation  expense attributable to owned airframes and engines decreased $0.4
million in 1997 as compared  to 1996.  The  Company  reduced its  year-over-year
investment in engines and airframe  improvements due to the  reconfiguration  of
the Boeing  757-200 fleet in the fourth  quarter of 1996. As a result of the net
reduction of four Boeing 757-200 aircraft at the end of 1996, as compared to the
end of 1995,  and the complete  elimination  of Pratt &  Whitney-powered  Boeing
757-200s from the fleet, some airframe and leasehold  improvements were disposed
of, and all spare Pratt & Whitney engines and rotable parts were reclassified as
Assets Held for Sale in the  accompanying  balance sheet.  None of these assets,
therefore,  gave rise to depreciation  expense in 1997. The Company did increase
its investment in computer  equipment and furniture and fixtures  between years;
placed  the west bay of the  renovated  Midway  Hangar  No.  2 into  service  in
mid-1996; and incurred increased debt issue costs between years relating to debt
facility  and  senior  unsecured  notes  issued,   as  well  as  aircraft  lease
negotiations  completed  primarily in the fourth quarter of 1996. These changes,
together with increased costs pertaining to remaining rotable components and the
provision  for  obsolescence  of  aircraft  parts  inventories,  resulted  in an
increase in depreciation expense of $0.8 million in 1997 as compared to 1996.

Amortization of capitalized engine and airframe overhauls increased $0.4 million
in  1997 as  compared  to  1996  after  including  the  offsetting  amortization
associated  with  manufacturers'  credits.  Changes  to  the  cost  of  overhaul
amortization  were partly due to the  reduction  of total block hours and cycles
flown between  comparable  periods.  This expense was also favorably impacted by
the late-1996  reconfiguration  of the Boeing  757-200 fleet and, in particular,
the  disposal  of all  Pratt &  Whitney-powered  Boeing  757-200  aircraft.  All
unamortized net book values of engine and airframe  overhauls  pertaining to the
Pratt &  Whitney-powered  aircraft  were  charged to the cost of the disposal of
these  assets  in the third  quarter  of 1996.  The  Company's  seven  remaining
Rolls-Royce-powered  Boeing 757-200  aircraft,  four of which were delivered new
from the  manufacturer in late 1995 and late 1996, are not presently  generating
any  engine  and  airframe  overhaul  expense  since the  initial  post-delivery
overhauls for the Rolls-Royce-powered  Boeing 757-200s are not yet due under the
Company's  maintenance  programs.  The net  reduction  in  engine  and  airframe
amortization  expense in 1997  pertaining  to changes  in the  Company's  Boeing
757-200  fleet was  approximately  $3.5 million as compared to 1996.  Engine and
airframe  amortization  for the  Company's  fleet  of  Boeing  727-200  aircraft
increased by  approximately  $2.6 million in 1997 as compared to 1996 due to the
on-going expansion of this fleet type and due to the completion of new overhauls
for Pratt & Whitney  JT8D  engines  that power the  Boeing  727-200  fleet.  The
increase  between  years in engine and  airframe  amortization  expense  for the
Company's  Lockheed  L-1011  fleet was  approximately  $0.8  million,  which was
primarily due to the addition of airframe overhauls to the fleet.

Depreciation  and  amortization  expense  per ASM  increased  6.5% to 0.49 cents
in 1997,  as compared to 0.46 cents in the prior year.

Handling,  Landing and Navigation  Fees.  Handling,  landing and navigation fees
decreased  by 1.0% to $69.4  million in 1997,  as compared  to $70.1  million in
1996.  Due to the  restructuring  of scheduled  service in the fourth quarter of
1996, the absolute  number of system-wide  jet departures  between 1997 and 1996
declined by 14.9% to 39,517 from 46,416,  which resulted in  approximately  $7.4
million in  volume-related  handling  and  landing  expense  reductions  between
periods.  This  volume-related  decline was  partially  offset,  however,  by an
approximately $4.8 million  price-related  handling and landing expense increase
between  periods  attributable  primarily to a change in jet departure mix. As a
result of the reduction in the Company's  narrow-body  Boeing  757-200 fleet and
the shift of revenue  production towards charter  operations,  the Company's jet
departures in 1997 included  proportionately  more  international  and wide-body
operations  than in 1996. In 1997,  21.1% of the Company's jet  departures  were
operated with wide-body aircraft, as compared to 19.4% in 1996, and 22.4% of the
Company's 1997 jet departures were from international  locations, as compared to
18.9% in the prior year.

The cost per ASM for handling,  landing and  navigation  fees  increased 3.8% to
0.55 cents in 1997, from 0.53 cents in 1996.

Aircraft Maintenance, Materials and Repairs. Aircraft maintenance, materials and
repairs  expense  decreased  6.7% to $51.5 million in 1997, as compared to $55.2
million in 1996.  The cost per ASM  decreased by 2.4% to 0.41 cents in 1997,  as
compared to 0.42 cents in the prior year.

Repair costs were $4.2 million lower in 1997 as compared to the prior year. This
was due to a reduction  in both the total  number of repairs  performed  and the
average unit cost of repairs  between  periods.  Negotiations  were completed in
early 1997 with several  repair  vendors which  resulted in reduced unit charges
for some repair activity.  Additionally,  the Company  established a maintenance
disposition  board in late  1996  which  carefully  reviews  significant  repair
decisions in light of anticipated fleet  requirements and the available quantity
of serviceable components in stock.

The cost of  expendable  parts  consumed  increased  $1.9  million  in 1997,  as
compared to 1996.  The  increase in the cost of  expendable  parts  consumed was
closely related to the Company's light airframe  maintenance  check programs for
its fleet,  which resulted in several more light airframe checks being completed
in 1997 than in the previous year.

The cost of  maintenance  contract  labor  increased by $2.3 million in 1997, as
compared to 1996. As explained above under  "Salaries,  Wages and Benefits," the
Company  increased its  utilization  of  maintenance  contract  labor in 1997 to
compensate for some  employment  shortages of airframe and powerplant  mechanics
and engineers.

The  cost of parts  loans  and  exchanges  was $1.3  million  lower in 1997,  as
compared to 1996, due to improved internal procedures to limit the need for such
loans and exchanges.

Return condition  expenses accrued in 1997 were $1.8 million lower than in 1996,
primarily  due to the  negotiation  of new  terms  and  conditions  for  several
aircraft leases during 1997, which eliminated return condition obligations which
had existed prior to those negotiations.

Aircraft  Rentals.  Aircraft  rentals  expense for 1997 decreased 16.8% to $54.4
million  in 1997  from  $65.4  million  in 1996.  This  decrease  was  primarily
attributable to the reconfiguration of the Company's Boeing 757-200 fleet in the
fourth  quarter  of 1996,  as a result  of which the  number  of Boeing  757-200
aircraft operated by the Company was reduced by four units. The reduction in the
size of the Boeing 757-200 fleet was an integral component of the Company's 1996
restructuring  of scheduled  service  based upon  profitability  analysis  which
disclosed that, for some uses of the Boeing 757-200 in the Company's markets, it
was more  profitable to substitute  other aircraft with lower  ownership  costs.
Aircraft  rentals  expense  declined by $14.4 million between 1997 and 1996 as a
result of the Boeing 757-200 fleet restructuring.

Four  additional   Boeing  727-200   aircraft  were  acquired  and  financed  by
sale/leasebacks  at various times during the first three quarters of 1996, while
one Boeing  727-200  aircraft  previously  on an operating  lease was  purchased
during the second quarter of 1996 and was  subsequently  sold and leased back in
September  1997.  The net increase in leased  Boeing  727-200  aircraft  between
years,  together with the incorporation of hushkits into new  sale/leasebacks of
several  Boeing 727-200  aircraft  between  periods,  added  approximately  $3.2
million in aircraft rentals expense between 1997 and 1996.

Aircraft  rentals  expense  for 1997 was 0.43 cents per ASM, a decrease of 12.2%
from 0.49 cents per ASM in 1996.  The  period-to-period  decrease in the size of
the Boeing  757-200  fleet was a  significant  factor in this  change  since the
rental cost of ASMs  produced by this fleet type was  significantly  higher than
for the Company's other aircraft.

Crew and  Other  Employee  Travel.  The cost of crew and other  employee  travel
increased  1.9% to $36.6  million in 1997, as compared to $35.9 million in 1996.
During 1997, the Company's average  full-time-equivalent  cockpit and cabin crew
employment  was 8.6% lower as compared to the prior year,  even though jet block
hours  decreased  by  only  6.4%  between  periods.  Although  the  Company  did
experience  some crew  shortages in the first  quarter of 1996  associated  with
severe  winter  weather,  shortages  of both  cockpit  and cabin crews were more
chronic in the first nine months of 1997, and per-crew-member  travel costs were
consequently  higher since crews spent  greater  amounts of time away from their
bases to operate the Company's schedule. In addition,  average crew travel costs
for the U.S. military and specialty charter  businesses are much higher than for
track charter and scheduled  service since these flights more often operate away
from crew bases.

The cost per ASM for crew and other employee travel increased 7.4% to 0.29 cents
in 1997,  as compared to 0.27 cents in 1996.

Passenger  Service.  For 1997 and 1996,  catering  represented  83.0% and 80.4%,
respectively,  of total passenger service expense.

The  cost of  passenger  service  increased  0.3% in 1997 to $32.8  million,  as
compared to $32.7 million in 1996. This change between periods was primarily due
to an  increase  of  approximately  8.4%  in the  average  cost  to  cater  each
passenger,  offset by a decrease of 8.3% in jet passengers  boarded to 5,210,578
in 1997, as compared to 5,680,496 in 1996. Catering unit cost increased due to a
change in the mix of passengers boarded from fewer scheduled service toward more
charter and military passengers;  the latter passengers,  particularly military,
are the  most  expensive  passengers  to cater in the  Company's  business  mix.
Military and charter  passengers  accounted for 40.4% of  passengers  boarded in
1997, as compared to 35.9% of passengers boarded in 1996.

The cost per ASM of passenger  service  increased 4.0% to 0.26 cents in 1997, as
compared to 0.25 cents in 1996.

Commissions.  Commissions  expense  decreased  2.2% to $26.1 million in 1997, as
compared  to  $26.7  million  in 1996.  Scheduled  service  commissions  expense
declined by $2.2 million between  periods,  primarily as a result of the decline
in total scheduled  service revenues  earned,  and also partly as a result of an
industry-wide  reduction in the standard travel agency  commission rate from 10%
to 8% during October 1997.  Military and commercial charter  commissions expense
increased by $1.9 million and $0.1 million,  respectively,  due to the increased
level of  commissionable  revenues  earned in those  business  units in 1997, as
compared to 1996.

The cost per ASM of commissions expense increased by 5.0% to 0.21 cents in 1997,
as compared to 0.20 cents in 1996.

Other Selling Expenses. Other selling expenses  decreased 11.9% to $15.5 million
in 1997, as compared to $17.6 million in 1996.

CRS fees  decreased $1.3 million in 1997, as compared to 1996 due to both a 7.7%
decrease in total CRS bookings made for the smaller  scheduled  service business
unit between  periods,  and due to a 14.4% reduction in the average cost of each
CRS booking made between years. Toll-free telephone costs decreased $0.7 million
between periods due to less usage and lower rates.

Other selling cost per ASM decreased  7.7% to 0.12 cents in 1997, as compared to
0.13 cents in the previous year.

Ground  Package Cost.  Ground  package cost  increased  5.5% to $19.2 million in
1997, as compared to $18.2 million in 1996. The increase in cost between periods
was  primarily  due to a 9.4%  increase  in the  number  of  Ambassadair  ground
packages  sold.  There  was no  material  change in the  average  cost of ground
packages sold between years.

Ground package cost per ASM increased by 7.1% to 0.15 cents in 1997, as compared
to 0.14 cents in 1996.

Advertising.  Advertising  expense  increased 23.3% to $12.7 million in 1997, as
compared  to $10.3  million  in  1996.  The  Company  incurs  advertising  costs
primarily  to  support  single-seat  scheduled  service  sales  and the  sale of
air-and-ground  packages.  Advertising  support for these lines of business  was
increased in 1997 consistent with the Company's overall strategy to enhance RASM
in these businesses  through  increases in load factor and yield.  Additionally,
advertising  was  comparatively  low in the  third  quarter  of 1996  due to the
restructuring of numerous  scheduled  service markets which was initiated in the
latter part of that quarter.

The cost  per ASM of  advertising  increased  25.0%  to 0.10  cents in 1997,  as
compared  to 0.08 cents in 1996.  This  increase in cost per ASM  resulted  from
higher absolute  advertising  dollars being spent in a period of declining ASMs,
but was  nevertheless  an  integral  part of the  Company's  strategy in 1997 to
enhance profitability in the scheduled service business.

Facilities and Other Rentals.  The cost of facility and other rentals  decreased
10.4% to $8.6 million in 1997,  as compared to $9.6 million in 1996.  There were
some changes in specific  facilities  utilized by the Company  between  periods,
such as the addition of hangar space at  Chicago-Midway  and the  elimination of
airport  facilities at Boston.  The Company also reduced total facility  expense
between years through the sublease of excess facilities to third parties.

The cost per ASM for facility and other rentals was unchanged between periods at
0.07 cents.

Other  Operating  Expenses.  Other  operating  expenses  increased 0.9% to $54.3
million in 1997, as compared to $53.8 million in 1996. Other operating  expenses
which experienced  significant  increases between years included (i) the cost of
the Chicago  Express  Agreement;  and (ii) the cost of property and sales taxes.
Other operating expenses which experienced significant decreases between periods
included  (i)  the  cost  of  insurance;   (ii)  the  cost  of  data  and  voice
communications;  and (iii) the cost of  professional  consulting  fees.  Several
other  categories of other  operating  expenses were lower in 1997 than in 1996,
primarily due to the smaller size of the airline between periods.

Other  operating  cost per ASM increased 4.9% to 0.43 cents in 1997, as compared
to 0.41 cents in 1996.

Interest Income and Expense.  Interest  expense in 1997 increased 111.1% to $9.5
million,  as compared to $4.5 million in 1996. The increase in interest  expense
between  periods  was  primarily  due to the  change  in the  Company's  capital
structure  from  (i)  the  offering  of  the  10  1/2  %  notes,  and  (ii)  the
implementation  of the  credit  facility.  During  1997,  the  weighted  average
borrowings were  approximately  $117.2 million,  as compared to $86.1 million in
1996. The weighted average  effective  interest rate applicable to the Company's
borrowings in 1997 was 8.06%,  as compared to 5.18% in 1996. The increase in the
weighted average effective interest rates between years was primarily due to the
10.5% interest rate applicable to the unsecured notes, which was higher than the
average  interest  rates  applicable  to  borrowings  under  the  former  credit
facility.

The Company  invested excess cash balances in short-term  government  securities
and commercial paper and thereby earned $1.6 million in interest income in 1997,
an increase of 166.7% over interest income of $0.6 million earned in 1996.

Income Tax Expense.  In 1997,  the Company  recorded  $4.5 million in income tax
expense  applicable to the income  before  income taxes for that year,  while in
1996 income tax credits of $12.9 million were recognized  pertaining to the loss
before  income  taxes for that year of $39.6  million.  The  effective  tax rate
applicable to 1997 was 73.9%,  while the  effective tax rate  applicable to 1996
was 32.6%.

Income  tax  expense  and  credits  in  both  periods   were   affected  by  the
non-deductibility  for federal  income tax  purposes of 50% of amounts  paid for
crew per  diem.  The  effect  of this and  other  permanent  differences  on the
effective  income  tax rate  for  financial  accounting  purposes  becomes  more
pronounced in cases where before-tax income or loss approaches zero, which was a
significant cause for the unusually high effective tax rate in 1997.

Income tax expense and the effective  tax rate for 1997 were also  significantly
affected by the one-time $2.0 million charge to salaries,  wages and benefits in
the second quarter of 1997 for the executive  compensation  package  provided to
the  Company's  former  President  and  Chief  Executive  Officer.  Of the total
compensation paid to this former executive of the Company in 1997, approximately
$1.7 million was non-deductible against the Company's federal taxable income.

Liquidity and Capital Resources

Cash Flows.  The  Company  has  historically  financed  its working  capital and
capital  expenditure  requirements  from cash flow from operations and long-term
borrowings  from banks and other lenders.  As described  further  below,  in the
third  quarter of 1997 and the fourth  quarter of 1998,  the  Company  completed
several separate  financings  designed to lengthen the maturity of its long-term
debt and diversify its credit sources,  including the issuance of $225.0 million
total in two series of unsecured  notes,  and the  renegotiation  of a revolving
credit  facility  that had an extended  maturity,  lower  interest rate and less
restrictive covenants than the former credit facility.

In 1998,  1997 and 1996,  net cash provided by operating  activities  was $151.8
million,  $99.9 million and $32.2  million,  respectively.  The increase in cash
provided  by  operating  activities  between  periods was  attributable  to such
factors  as  increased  earnings  and  related  deferred  income  taxes,  higher
depreciation and amortization, growth in air traffic liabilities, higher accrued
expenses and other factors.

Net cash used in investing  activities  was $142.4  million,  $76.1  million and
$63.2 million,  respectively,  in 1998,  1997 and 1996.  Such amounts  primarily
included capital expenditures  totaling $175.4 million,  $84.2 million and $69.9
million, respectively, for engine and airframe overhauls, airframe improvements,
hushkit installations,  the purchase of rotable parts, and for purchase deposits
made on Boeing  757-200 and Lockheed  L-1011-500  aircraft  scheduled for future
delivery.

Net cash used in financing activities was $59.3 million,  $6.9 million and $11.6
million, respectively, for 1998, 1997 and 1996. Financing activities in the 1998
period  included  proceeds of $125.0  million from the sale of unsecured  notes,
offset by $71.5 million in credit facility and other debt  repayments.  In 1997,
proceeds of $100.0 million were recorded from the sale of unsecured notes, which
was applied primarily to the repayment of other long-term debt.

Aircraft and Fleet Transactions. In November 1994, the Company signed a purchase
agreement  for six new Boeing  757-200s  which,  as  subsequently  amended,  now
provides  for 10 total  aircraft  to be  delivered  between  1995 and  2000.  In
conjunction  with the Boeing  purchase  agreement,  the Company  entered  into a
separate  agreement  with  Rolls-Royce  Commercial  Aero Engines  Limited for 21
RB211-535E4  engines to power the ten Boeing 757-200 aircraft and to provide one
spare engine. Under the Rolls-Royce agreement, which became effective January 1,
1995,  Rolls-Royce  has provided  the Company  various  spare parts  credits and
engine  overhaul cost  guarantees.  The Company  accepted  delivery of the first
seven aircraft under these  agreements in September and December 1995,  November
and December 1996, November 1997, July 1998 and December 1998, all of which were
financed under leases accounted for as operating leases.  The aggregate purchase
price  under  these  two  agreements   for  the  remaining   three  aircraft  is
approximately $50.0 million per aircraft, subject to escalation. The final three
deliveries  are  scheduled  for  September  1999,  October  1999 and June  2000.
Advanced  payments  totaling  approximately  $19.5  million  ($6.5  million  per
aircraft) are required prior to delivery of the three remaining  aircraft,  with
the remaining purchase price payable at delivery.  As of December 31, 1998, 1997
and 1996, the Company had recorded fixed asset additions for $13.0 million, $6.0
million and $2.7  million,  respectively,  in advanced  payments  applicable  to
aircraft  scheduled  for future  delivery.  The  Company  intends to finance the
remaining  three   deliveries  under  this  agreement   through   sale/leaseback
transactions accounted for as operating leases.

In July 1998 the  Company  committed  to the  purchase of five  Lockheed  L-1011
series 500  aircraft,  three spare engines and certain  associated  spare parts.
These aircraft are powered by Rolls-Royce  RB211-524B4-02  engines.  The Company
accepted  delivery of the first two aircraft  under this  purchase  agreement in
1998 and  expects  to  accept  delivery  of the  remaining  three in 1999.  Upon
delivery of each aircraft, the Company intends to complete certain modifications
and  improvements  to the  airframes  and  interiors in order to qualify them to
operate  in  a  standard  coach  seating   configuration  of  307  seats.   Such
modifications  are  expected  to  require  approximately  90 days  from  date of
delivery of the unmodified  aircraft from the seller.  The modified aircraft are
expected to be placed into revenue service during 1999,  operating  primarily in
the commercial and military/government  charter businesses.  The Company expects
that the total cost of the five modified  aircraft,  together with spare engines
and spare parts, will be approximately  $100.0 million. The Company has financed
this  purchase  primarily  through the issuance of  unsecured  notes in December
1998.

The Company purchased an additional  Rolls-Royce-powered Boeing 757-200 aircraft
from an aircraft  lessor in September  1997,  financing this purchase  through a
payment of cash and the  issuance of a $30.7  million  note.  The note  required
monthly  payments of $400,000 in principal  and interest  from October 15, 1997,
through  September  1999,  with  the  balance  due  at  maturity.   The  Company
re-financed this aircraft through a sale/leaseback transaction in December 1998,
at which time the note was  repaid in full.  The new lease  expires in  December
1999,  at which time the  aircraft  will be returned  to the lessor,  unless the
lessor  exercises its right to leave the aircraft with the Company for up to two
additional years at a reduced rental amount.

In the fourth quarter of 1997, the Company  purchased a Boeing 727-200  aircraft
which had been previously  financed by the Company through a lease accounted for
as an  operating  lease,  financing  this  purchase  through  the  issuance of a
short-term note and a payment of cash. This note was repaid in the first quarter
of 1998.  The Company then issued a long-term note (secured by this aircraft) in
September  1998 for $6.0 million,  which  required  repayment of $1.0 million in
October 1998 and $100,000 per month in principal and interest from November 1998
through  October  2002,  with the balance due in  November  2002.  This note was
repaid in December 1998.

In the second and third quarters of 1998, the Company purchased and improved one
Lockheed L-1011-100 aircraft, which was placed into service in late July 1998.

Financings in 1997. On July 24, 1997, the Company sold $100.0 million  principal
amount of unsecured  seven-year notes in a private offering under Rule 144A. The
Company  subsequently  completed an exchange  offer to holders of the  unsecured
seven-year  notes in January  1998,  under which offer those notes issued in the
original  private  offering  could be tendered in exchange for fully  registered
notes of equal value.

The net proceeds of the unsecured notes were approximately $96.9 million,  after
deduction of 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 will use the
balance of the proceeds for general  corporate  purposes,  which may include the
purchase of  additional  aircraft  and/or the  refinancing  of  existing  leased
aircraft, among other things.

Concurrently  with the issuance of the unsecured  notes,  on July 24, 1997,  the
Company entered into a new $50.0 million revolving credit facility that included
up to $25.0 million for stand-by  letters of credit.  ATA was the borrower under
the new credit  facility,  which was  guaranteed  by the Company and each of the
Company's other active  subsidiaries.  The principal  amount of the new facility
was scheduled to mature on April 1, 2001, and borrowings were secured by certain
Lockheed L-1011 aircraft and engines.

As of  December  31,  1997,  the Company had  borrowed  the maximum  amount then
available  against its  existing  credit  facility,  of which $34.0  million was
repaid on January 2, 1998. There were no borrowings  against the credit facility
at December 31, 1998.

The Company also  maintained a $5.0 million  revolving  credit  facility for its
short-term  borrowing  needs and for securing the issuance of letters of credit.
Borrowings against this credit facility bore interest at the lender's prime rate
plus 0.25% per annum.  There were no  borrowings  against  this  facility  as of
December 31, 1998 and 1997; however, the Company did have outstanding letters of
credit  secured by this  facility  aggregating  $3.8  million and $3.5  million,
respectively.  No amounts had been drawn  against  letters of credit at December
31, 1998 or 1997.  This separate  revolving  credit  facility was  eliminated in
association with the implementation of the 1999 credit facility described below.

Financings in 1998 and 1999. In December  1998,  the Company sold $125.0 million
principal  amount of unsecured  senior notes in a public  offering.  Interest is
payable on June 15 and December 15 of each year beginning June 15, 1999.

The net proceeds of the $125.0 million unsecured notes were approximately $121.0
million,  after deducting  costs and fees of issuance.  The Company plans to use
the net proceeds for the purchase of Lockheed L-1011-500  aircraft,  engines and
spare parts, and, together with available cash and bank facility borrowings, for
the purchase of Boeing 727-200 ADV aircraft,  engines, engine hushkits and spare
parts.

In January 1999, the Company revised the revolving  credit facility to provide a
maximum of $75.0 million,  including up to $25.0 million for stand-by letters of
credit.  The terms and  conditions  remained the same as the July 1997 facility,
except that the 1999 facility  matures January 2, 2003, and borrowings under the
facility  bear  interest,  at the option of ATA,  at either  LIBOR plus 1.25% to
2.50% or the agent bank's prime rate.  The 1999  facility is subject to the same
restrictive  covenants  as the prior  facility,  except  that the 1999  facility
limits  certain  non-aircraft-related  capital  expenditures  to $15.0  million,
rather than the $10.0 million limitation in the prior revolving credit facility.

Aircraft  Purchase  Commitments  and  Options.  The Company has signed  purchase
agreements to acquire 16 Boeing 727-200ADV  aircraft at agreed prices.  Fourteen
of these aircraft are currently  leased by the Company.  The other two aircraft,
currently on lease to another airline,  may be purchased in 1999, depending upon
the exercise of lease extension  options  available to the current  lessee.  The
Company  currently intends to install engine hushkits on 8 of the Boeing 727-200
aircraft  currently  operated  by the Company in order to meet  federal  Stage 3
noise regulations for its fleet by December 31, 1999.

Year 2000

Until  recently many computer  programs were written to store only two digits of
year-related  date  information in order to make the storage and manipulation of
such data more efficient. Programs which use two-digit date fields, however, may
not be able  to  distinguish  between  such  years  as 1900  and  2000.  In some
circumstances,   this  date  limitation  could  result  in  system  failures  or
miscalculations, potentially causing disruptions of business processes or system
operations.  The date field  limitation is  frequently  referred to as the "Year
2000 Problem."

State of Readiness.  In the fourth quarter of 1997, the Company initiated a Year
2000  Project to address  this  issue.  During  the first  quarter of 1998,  the
Company  inventoried its internal computer systems,  facilities  infrastructure,
aircraft  components  and  other  hardware,  and  completed  a  Year  2000  risk
assessment for these items.

During the course of its inventory,  the Company  identified  approximately  693
separate  computer  infrastructure  components which are used to support various
aspects of its world-wide operations.  Such components include software packages
(both  purchased and  internally  developed),  operating  systems for computers,
computer  hardware and peripheral  devices,  local and wide-area  communications
networks,  aircraft  computers and  components,  and a variety of other items of
technology  infrastructure  including  those  associated  with the  operation of
properties and facilities.  The Company then classified each of these components
using an internal scale to designate the  seriousness and immediacy of impact to
the Company,  should the component fail due to lack of compliance with Year 2000
standards.

The Company's Year 2000 Project  involves the completion of five specific phases
of work.  The first,  or  awareness  phase  (now 100%  complete),  includes  the
creation of a Year 2000  Project  team,  development  of written  standards  and
processes for the Year 2000 Project,  communications  to Company employees about
the Year 2000 Problem and the Company's  approach to addressing it,  creation of
Year 2000 compliance  standards for newly acquired  technology  components,  and
written standards and procedures for Year 2000 Project status reporting.

The second phase is inventory and assessment (now 100% complete), which includes
such  activities  as  creating an  inventory  of all  technology  infrastructure
components used by the Company,  developing  standards for assessing and ranking
Year  2000  risk  for  such  components,  completing  risk  assessments  for all
components,  providing Year 2000  certification  standards for such  components,
development of a critical vendor database,  development of renovation  standards
and guidelines,  development of testing  standards and  guidelines,  creation of
testing  environments,  developing  an  inventory  of tools  needed to  complete
assessment,  conversion  and  testing of  components,  development  of Year 2000
resource budgets, and completion of high-level contingency plans.

The third phase is renovation (now 58% complete), which includes the conversion,
replacement or elimination of selected hardware platforms and devices, operating
systems,  databases,  purchased software,  utilities,  and internal and external
interfaces. Renovation requires the completion and documentation of software and
hardware  changes,  development  of  replacement  systems,  and  decommissioning
systems  to  be  eliminated.   Renovation   also  includes  the  completion  and
documentation of unit testing, and the creation of a final test plan for system,
integration  and stress testing of all changes.  Contingency  plans will also be
updated and completed, based upon completion of renovation efforts and unit test
results.

The  fourth  phase  is  validation  (now  39%  complete),  which  includes  user
acceptance testing of all new or renovated components.  Such testing is expected
to validate Year 2000 operational readiness of the individual components,  up to
but not including  testing of the  integration  of those  components  with other
components sharing common interfaces or other interdependencies.

The fifth phase is implementation (now 31% complete), which includes integration
testing of individual  components as to interfaces  and  interdependencies  with
other components or elements of the Company's technology infrastructure.

With  respect to the 693  computer  infrastructure  components,  the Company has
prepared  approximately  120 individual  project plans with tasks and milestones
which  define  the work to be done to  complete  the five  phases  of Year  2000
readiness.  A total  of 37 plans  are now  complete.  A total  of 66  plans  are
currently in progress and are  substantially on schedule for future  completion.
The  remaining  17 plans  have not yet  commenced,  but the  Company  expects to
complete  them prior to the end of 1999.  Of the total hours of work included in
the Company's 120 project plans, approximately 45% of such work is now complete.

The  Company  is  dependent  upon a large  number  of  third-party  vendors  and
suppliers who provide essential goods and services to the Company throughout the
world.  In order to insure that essential goods and services are supplied to the
Company without  interruptions  caused by the Year 2000 Problem, the Company has
undertaken a "vendor Year 2000 readiness" project.

Some third-party vendor  relationships are very significant to the Company.  The
loss of access to some goods and services provided by some vendors, such as tour
operator and airline reservation systems,  could have severe consequences on the
Company's business operations.

Under the Company's vendor readiness plan, significant Company vendors have been
grouped according to the expected safety, operations or financial impacts from a
loss of access to  essential  goods or  services  due to the  vendor  failing to
become Year 2000  compliant,  and the  expected  time and effort  which would be
required to replace the non-compliant vendor with a compliant vendor. Under this
classification  system,  the Company has  identified  641 "tier 3" vendors whose
lack of Year 2000  compliance  and the  resulting  loss of  essential  goods and
services  could create  immediate  and severe  safety,  operations  or financial
impact to the Company, with replacement of such vendors taking considerable time
and effort.  The Company has further classified 395 vendors as "tier 2" vendors,
which could pose  significant  safety,  operations  or financial  impacts to the
Company should they be non-Year-2000  compliant,  but which impacts would not be
immediate  and for which only  moderate  time and effort  would be  required  to
locate compliant  replacement  vendors.  All remaining  significant vendors have
been classified as "tier 1" vendors  (totaling over 2,000),  none of which would
pose a  significant  safety,  operations  or  financial  impact  in the event of
non-compliance  with  Year  2000  standards,  and all of which  could  easily be
replaced with alternative vendors.

In addition to the third-party  dependencies  enumerated  above,  the Company is
also highly  dependent  upon the  operation of airports and air traffic  control
systems in the United  States and in foreign  countries.  Each year the  Company
flies to over 400 individual airports world-wide which are typically operated by
governmental or  quasi-governmental  agencies.  Other governmental  agencies use
computers  to provide  essential  services  at  airports,  such as  customs  and
immigration screening and weather reporting.

As a member of the Air Transport Association Year 2000 Committee, the Company is
participating  with other  member  airlines to test and  validate  the Year 2000
readiness  of the air  transportation  infrastructure  such as airports  and air
traffic control systems. As yet, no comprehensive  inventory and risk assessment
of domestic and  international  airports has been  completed,  and therefore the
Company  cannot  determine to what degree,  if any,  domestic and  international
airports are at risk of failing to meet Year 2000 readiness standards.

Under the  direction of the Air Transport  Association  Year 2000  Committee,  a
separate  evaluation of  aviation-related  federal agencies is also in progress.
This  evaluation  includes  the Year  2000  readiness  of the  Federal  Aviation
Administration,  particularly  with respect to the operation of the domestic air
traffic control system;  the Department of  Transportation;  the Immigration and
Naturalization   Service;   and  the  National  Weather   Service.   Based  upon
representations made by such federal agencies, they expect to be able to provide
uninterrupted  services  to  the  air  transportation  industry,  including  the
Company,  during the year 2000.  Efforts of the Air Transport  Association  Year
2000 Committee are directed  toward  completing an independent  verification  of
readiness of these agencies, which is still incomplete at this time.

Estimated Costs of Achieving Year 2000 Readiness.  Based upon all data currently
available to the Company,  it presently estimates that the total cost of meeting
Year 2000 standards,  including computer and facilities  infrastructure,  vendor
readiness,  aircraft and airports,  will be  approximately  $7.0  million.  Such
estimated cost includes  approximately  $2.5 million in capital  expenditures to
acquire new software and hardware to replace non-compliant  computer devices, as
well as approximately  $4.5 million in labor and related expenses to perform all
Year 2000 Project work to insure the readiness of remaining computer devices for
operation after 1999. Approximately $3.6 million of this estimated cost has been
incurred as of January 31, 1999,  with the remaining $3.4 million to be incurred
by the end of  1999.  It is  possible  that  the  Company  will  determine  that
additional  costs beyond those  estimated above will be required to complete all
Year 2000 activities as testing and  implementation  proceeds through the end of
1999.

Year 2000 Risks and Contingency  Plans.  The Company  believes that its computer
infrastructure  project  plans and  vendor  readiness  plan,  together  with its
participation  on  the  Air  Transport  Association  Year  2000  Committee,   if
successfully  completed,  will  mitigate all  significant  risks of business and
operational   disruption   arising  from  non-compliant   computer   components.
Successful completion of this plan is dependent,  however, upon the availability
to the  Company of a wide  range of  technical  skills  from both  internal  and
external  sources,  and is also  dependent  upon the  availability  of purchased
software  and  hardware  components.  The  Company  cannot be assured  that such
resources and  components can be acquired in the  quantities  needed,  or by the
times needed, to successfully complete the Year 2000 project plan, in which case
it is possible that the Company  could suffer  serious  disruptions  to business
processes and operations as a consequence of system failures attributable to the
Year 2000 Problem. In addition,  the Company cannot be assured that domestic and
foreign air  transportation  infrastructure,  such as  airports  and air traffic
control systems,  will be fully compliant with Year 2000 requirements by the end
of 1999.

The Company has developed a number of high-level  contingency  plans  addressing
how it would  respond to specific  Year 2000 issues  arising from  non-compliant
computer  infrastructure  components,  vendors  and  government  agencies.  Such
contingency  plans will be broadened and  formalized as more advanced  phases of
the Company's Year 2000 Project are completed and risks in individual  areas are
more  thoroughly  assessed and  alternative  approaches to existing  systems and
components are identified. Contingency plans include such strategies as securing
alternative  vendors and adding staff to  implement  manual  workarounds,  where
feasible.

Future Accounting Changes

In March 1998, the American Institute of Certified Public Accountants  ("AICPA")
issued Statement of Position ("SOP") 98-1, "Accounting for the Costs of Computer
Software  Developed  or Obtained for Internal  Use." This  accounting  standard,
which  is  effective  for  fiscal  years  beginning  after  December  15,  1998,
specifically  defines the criteria under which costs incurred in connection with
internal-use  computer  software  projects are to be treated as a current period
expense or to be capitalized. The adoption of SOP 98-1 is not expected to have a
material effect on the Company's financial position or results of operations.

In April 1998,  the AICPA issued SOP 98-5,  "Reporting  on the Costs of Start-Up
Activities."  This  accounting  standard,  which is  effective  for fiscal years
beginning  after  December 15,  1998,  requires  that certain  costs of start-up
activities and organization  costs be expenses as incurred.  The adoption of SOP
98-5 is not  expected  to have a  material  effect  on the  Company's  financial
position or results of operations.

In June 1998,  the  Financial  Accounting  Standards  Board issued  Statement of
Financial  Accounting  Standards  ("SFAS") No. 133,  "Accounting  for Derivative
Instruments  and  Hedging  Activities."  This  accounting  standard,   which  is
effective for all fiscal quarters of fiscal years beginning after June 15, 1999,
requires that all  derivatives  be recognized as either assets or liabilities at
fair value. The Company is evaluating the new statement's provisions and has not
yet determined either the date on which it will adopt SFAS No. 133 or the impact
of adoption on the results of operations or financial position.

Forward-Looking Information

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  can be  material,  depending  upon the
circumstances.  Therefore,  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  as there  are  many  risks
associated with business, the airline industry and the Company specifically that
could cause  actual  results to differ  materially  from those  expressed in any
forward-looking statement made by the Company.

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 may take to mitigate the Company's exposure to such changes.
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. The Company's results of operations are significantly impacted by
changes in the price of aircraft fuel. During 1998,  aircraft fuel accounted for
approximately 16.3% of the Company's operating expenses.  Based on the Company's
1999 projected fuel  consumption,  a one cent change in the average annual price
per gallon of aircraft  fuel would impact the  Company's  annual  aircraft  fuel
expense by approximately $2.0 million,  after the effect of hedging  instruments
and contractual fuel reimbursement guarantees in place as of December 31, 1998.

In order to reduce the short-term risk associated with fuel price increases, the
Company has entered into certain fuel swap  contracts  and fuel cap  agreements.
The  Company's  short-term  risk is also  mitigated  by  contractual  fuel price
guarantees contained in the military charter contracts, which enable the Company
to pass through increases in fuel cost. Both the Company's fuel hedging strategy
and military fuel  guarantees  could result in the Company not fully  benefiting
from certain  fuel price  declines.  As of December  31,  1998,  the Company had
hedged or guaranteed as part of projected military activity, approximately 22.6%
of its projected 1999 fuel  requirements,  including  52.5% of the first quarter
and 17.8% of the second quarter.

Interest Rates. The Company's results of operations are affected by fluctuations
in market  interest  rates.  The  Company  has  approximately  $75.0  million of
variable-rate  debt available through a revolving credit facility.  In 1999, the
Company does not project to incur significant  borrowings under the facility, so
the risk of exposure to market interest rate fluctuations is not significant.

As of December 31, 1998, the Company had  fixed-rate  debt with a carrying value
of $225.0  million.  Based  upon  discounted  future  cash flows  using  current
incremental borrowing rates for similar types of instruments,  the fair value of
the fixed-rate debt is estimated at approximately  $229.0 million.  Market risk,
estimated as the potential  increase in fair value resulting from a hypothetical
1.0% decrease in interest rates was  approximately  $14.5 million as of December
31, 1998.

If 1999 average  short-term  interest rates  decreased by 1.0% over 1998 average
rates, the Company's projected interest income from short-term investments would
decrease by approximately $0.9 million during 1999.

<PAGE>


PART II - Continued

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, 1998 and 1997,  and the related  consolidated
statements of  operations,  changes in  shareholders'  equity and cash flows for
each of the three years in the period ended  December 31, 1998.  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  generally   accepted  auditing
standards.  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, 1998 and 1997,  and the  consolidated  results of
their  operations and their cash flows for each of the three years in the period
ended  December 31, 1998,  in  conformity  with  generally  accepted  accounting
principles. 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 26, 1999


<PAGE>


<TABLE>
<CAPTION>

                                     AMTRAN, INC. AND SUBSIDIARIES
                                      CONSOLIDATED BALANCE SHEETS
                                        (Dollars in thousands)

                                                                         December 31,         December 31,
<S>                                                                        <C>                  <C> 
                                                                             1998                1997
                                                                      ----------------------------------
                              ASSETS
Current assets:
     Cash and cash equivalents                                      $       172,936    $        104,196
     Receivables, net of allowance for doubtful accounts
     (1998 - $1,163; 1997 - $1,682)                                          24,921              23,266
     Inventories,  net                                                       19,567              14,488
     Prepaid expenses and other current assets                               25,604              20,892
                                                                   -----------------   -----------------
Total current assets                                                        243,028             162,842

Property and equipment:
     Flight equipment                                                       557,302             463,576
     Facilities and ground equipment                                         68,848              54,933
                                                                   -----------------   -----------------
                                                                            626,150             518,509
     Accumulated depreciation                                             (296,818)           (250,828)
                                                                   -----------------   -----------------
                                                                            329,332             267,681

Assets held for sale                                                          7,176               8,691
Deposits and other assets                                                    15,013              11,643
                                                                   -----------------   -----------------

Total assets                                                        $       594,549    $        450,857
                                                                   =================   =================

               LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
     Current maturities of long-term debt                           $         1,476    $          8,975
     Accounts payable                                                         7,158              10,511
     Air traffic liabilities                                                 76,662              68,554
     Accrued expenses                                                        98,548              80,312
                                                                   -----------------   -----------------
Total current liabilities                                                   183,844             168,352

Long-term debt, less current maturities                                     245,195             182,829
Deferred income taxes                                                        52,620              31,460
Other deferred items                                                         10,139              11,226

Commitments and contingencies

Shareholders' equity:
     Preferred stock; authorized 10,000,000 shares; none issued                   -                   -
     Common stock, without par value;  authorized 30,000,000
shares;
         issued 12,374,577 - 1998; 11,829,230 - 1997                         47,632              38,760
     Treasury stock;  193,506 shares - 1998; 185,000 shares -               (1,881)             (1,760)
1997
     Additional paid-in-capital                                              11,735              15,340
     Retained earnings                                                       46,331               6,250
     Deferred compensation - ESOP                                           (1,066)             (1,600)
                                                                   -----------------   -----------------

                                                                            102,751              56,990
                                                                   -----------------   -----------------

Total liabilities and shareholders' equity                          $       594,549    $        450,857
                                                                   =================   =================
</TABLE>

See accompanying notes.



<PAGE>

<TABLE>
<CAPTION>


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

                                                              Year Ended December 31,
<S>                                                    <C>              <C>              <C> 
                                                       1998             1997             1996
                                                  ------------------------------------------------

Operating revenues:
   Scheduled service                              $     511,254    $     371,762    $     386,488
   Charter                                              344,482          359,177          310,569
   Ground package                                        23,186           22,317           22,302
   Other                                                 40,447           29,937           31,492
                                                  --------------   --------------   --------------
Total operating revenues                                919,369          783,193          750,851
                                                  --------------   --------------   --------------

Operating expenses:
   Salaries, wages and benefits                         211,304          172,499          163,990
   Fuel and oil                                         137,401          153,701          161,226
   Depreciation and amortization                         78,665           62,468           61,661
   Handling, landing and navigation fees                 74,640           69,383           70,122
   Aircraft maintenance, materials and repairs           53,655           51,465           55,175
   Aircraft rentals                                      53,128           54,441           65,427
   Crew and other employee travel                        41,565           36,596           35,855
   Passenger service                                     34,031           32,812           32,745
   Commissions                                           28,483           26,102           26,677
   Other selling expenses                                22,147           15,462           17,563
   Ground package cost                                   19,466           19,230           18,246
   Advertising                                           17,772           12,658           10,320
   Facilities and other rentals                           9,536            8,557            9,625
   Disposal of assets                                         -                -            4,475
   Other                                                 62,203           54,335           53,800
                                                  --------------   --------------   --------------
Total operating expenses                                843,996          769,709          786,907
                                                  --------------   --------------   --------------
Operating income (loss)                                  75,373           13,484         (36,056)
Other income (expense):
  Interest income                                         4,433            1,584              617
  Interest (expense)                                   (12,808)          (9,454)          (4,465)
  Other                                                     212              413              323
                                                  --------------   --------------   --------------
Other expenses                                          (8,163)          (7,457)          (3,525)
                                                  --------------   --------------   --------------

Income (loss) before income taxes                        67,210            6,027         (39,581)
Income taxes (credits)                                   27,129            4,455         (12,907)
                                                  --------------   --------------   --------------
Net income (loss)                                 $      40,081    $       1,572    $    (26,674)
                                                  ==============   ==============   ==============

Basic earnings per common share:
Average shares outstanding                           11,739,106       11,577,727       11,535,425
Net income (loss) per share                       $        3.41    $        0.14    $      (2.31)
                                                  ==============   ==============   ==============

Diluted earnings per common share:
Average shares outstanding                           13,066,222       11,673,330       11,535,425
Net income (loss) per share                       $        3.07    $        0.13    $      (2.31)
                                                  ==============   ==============   ==============

See accompanying notes.

</TABLE>


<PAGE>


<TABLE>
<CAPTION>

                                                AMTRAN, INC. AND SUBSIDIARIES
                               CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
                                                  (Dollars in thousands)

                                                                               Additional                          Deferred
                                                  Common        Treasury         Paid-in         Retained        Compensation
                                                  Stock           Stock          Capital         Earnings            ESOP
                                               --------------  ------------   --------------   --------------    --------------

<S>                                                 <C>             <C>            <C>              <C>               <C>          
Balance, December 31, 1995                   $       38,259  $     (1,581)  $        15,821  $        31,352   $       (2,666)

     Net loss                                             -              -                -         (26,674)                 -

     Issuance of common stock for ESOP                    -              -            (173)                -               533

     Restricted stock grants                             32              -              (7)                -                 -

     Stock options exercised                             50              -             (23)                -                 -

     Purchase of 16,000 shares of  treasury               -          (179)                -                -                 -
     stock
                                               -------------   ------------   --------------   --------------    --------------

Balance, December 31, 1996                           38,341        (1,760)           15,618            4,678           (2,133)

     Net income                                           -              -                -            1,572                 -

     Issuance of common stock for ESOP                    -              -            (214)                -               533

     Restricted stock grants                            419              -            (185)                -                 -

     Executive stock options expired                      -              -              121                -                 -
                                               -------------   ------------   --------------   --------------    --------------

Balance, December 31, 1997                           38,760        (1,760)           15,340            6,250           (1,600)

     Net income                                           -              -                -           40,081                 -

     Issuance of common stock for ESOP                    -              -            (257)                -               534

     Restricted stock grants                            147              -             (66)                -                 -

     Stock options exercised                          8,725              -          (4,089)                -                 -

     Purchase of 8,506 shares of  treasury                -          (121)                -                -                 -
     stock

     Disqualifying disposition of stock                   -              -              807                -                 -
                                               -------------   ------------   --------------   --------------    --------------

Balance, December 31, 1998                   $       47,632  $     (1,881)  $        11,735  $        46,331   $       (1,066)
                                               =============   ============   ==============   ==============    ==============
</TABLE>


See accompanying notes.


<PAGE>

<TABLE>
<CAPTION>


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

                                                                        Year Ended December 31,
<S>                                                              <C>               <C>               <C> 
                                                                 1998              1997              1996
                                                            -------------------------------------------------
Operating activities:

Net  income (loss)                                          $     40,081       $     1,572      $   (26,674)
Adjustments to reconcile net income (loss)
  to net cash provided by operating activities:
     Depreciation and amortization                                78,665            62,468            61,661
     Deferred income taxes (credits)                              21,160            11,244          (13,246)
     Other non-cash items                                          1,708             (666)            28,185
   Changes in operating assets and liabilities:
      Receivables                                                (1,655)           (3,027)             3,919
      Inventories                                                (4,356)           (1,637)             (948)
      Assets held for sale                                             -             5,356          (14,112)
      Prepaid expenses                                           (4,712)           (6,321)             6,081
      Accounts payable                                           (3,353)           (3,160)             2,519
      Air traffic liabilities                                      8,108            18,655           (6,632)
      Accrued expenses                                            16,166            15,452           (8,582)
                                                            -------------    --------------    --------------
    Net cash provided by operating activities                    151,812            99,936            32,171
                                                            -------------    --------------    --------------

Investing activities:

Proceeds from sales of property and equipment                     37,061             8,005               529
Capital expenditures                                           (175,417)          (84,233)          (69,884)
Reductions of (additions to) other assets                        (3,996)               173             6,194
                                                            -------------    --------------    --------------
   Net cash used in investing activities                       (142,352)          (76,055)          (63,161)
                                                            -------------    --------------    --------------

Financing activities:

Payments on short-term debt                                      (4,750)                 -                 -
Proceeds from long-term debt                                     131,000           134,000            21,390
Payments on long-term debt                                      (71,485)         (127,067)           (9,580)
Proceeds from stock option exercises                               4,636                 -                 -
Purchase of  treasury  stock                                       (121)                 -             (179)
                                                            -------------    --------------    --------------
   Net cash provided by financing activities                      59,280             6,933            11,631
                                                            -------------    --------------    --------------

Increase (decrease) in cash and cash equivalents                  68,740            30,814          (19,359)
Cash and cash equivalents, beginning of period                   104,196            73,382            92,741
                                                            -------------    --------------    --------------
Cash and cash equivalents, end of period                    $    172,936       $   104,196      $     73,382
                                                            =============    ==============    ==============

Supplemental disclosures:

Cash payments for:
   Interest                                                 $     14,685       $     6,197      $      3,823
   Income taxes (refunds)                                          7,897             (311)               515

Financing and investing activities not affecting cash:
   Issuance of long-term debt directly for capital          $          -       $    30,650      $          -
expenditures
   Issuance of short-term debt directly for capital                    -             4,750                 -
expenditures

</TABLE>

See accompanying notes.



<PAGE>

Part II - Continued

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  95.0%  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  generally
      accepted  accounting  principles 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 and are  primarily  comprised  of
      investments in U.S.  Treasury  bills,  commercial  paper and time deposits
      which are purchased with original  maturities of three months or less (see
      Note 2).

      Assets Held For Sale

      Assets  held for  sale  are  carried  at the  lower  of net book  value or
      estimated net realizable value.

      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 its estimated  useful  service life. The
      obsolescence allowance at December 31, 1998 and 1997, was $8.4 million and
      $7.6  million,  respectively.  Inventories  are  charged to  expense  when
      consumed.

      Revenue Recognition

      Revenues are  recognized  when the  transportation  is 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
      adjustments resulting therefrom, which can be significant, are included in
      the results of  operations  for the periods in which the  evaluations  are
      completed.

      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.

      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.  Advanced  payments for future aircraft  purchases are recorded at
      cost.  As of  December  31, 1998 and 1997,  the Company had made  advanced
      payments for future  aircraft  deliveries  totaling $13.0 million and $6.0
      million,   respectively.  The  estimated  useful  service  lives  for  the
      principal depreciable asset classifications are as follows:


<PAGE>
<TABLE>
<CAPTION>

<S>     <C>                                                <C>
        Asset                                               Estimated Useful Service Life
        --------------------------------------------------- ------------------------------------------
        Aircraft and related equipment:
                Lockheed L-1011 (Series 50 and 100)         Depreciating to common retirement date of
                                                            December 2004 (see Note 13)
                Boeing 757-200                              20 years
                Boeing 727-200                              11 years
        Major rotable parts, avionics and assemblies        Life of equipment to which applicable
                                                            (Generally ranging from 6 -16 years)
        Improvements to leased flight equipment             Period of benefit or term of lease
        Other property and equipment                        3 - 7 years
</TABLE>

      The costs of major  airframe  and engine  overhauls  are  capitalized  and
      amortized  over  their  estimated  useful  lives  based  upon usage (or to
      earlier fleet common retirement dates) for both owned and leased aircraft.

      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.

      Financial Instruments

      The  carrying   amounts  of  cash   equivalents,   receivables   and  both
      variable-rate and fixed-rate debt (see Note 5) approximate fair value. 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.

      During  1998,  the Company  began  entering  into fuel hedge  contracts to
      reduce  the  risk  of  fuel  price  increases.  The  Company  hedges  fuel
      consumption  under both swap  agreements  which  establish  specific  swap
      prices for designated  periods and fuel cap agreements  which  guarantee a
      maximum  price per gallon for  designated  periods.  When the market  fuel
      price  remains  below that  established  in hedge  contracts,  the Company
      records the cost of the fuel hedge contract as a component of fuel expense
      in the period the fuel is consumed.

2.    Cash and Cash Equivalents

      Cash and cash equivalents consist of the following:
<TABLE>
<CAPTION>
                                                                           December 31,
<S>                                                                 <C>                <C> 
                                                                    1998               1997
                                                                --------------------------------
                                                                         (In thousands)
        Cash                                                        $  7,389          $  25,406
        Commercial paper                                             161,285             34,817
        U.S. Treasury repurchase agreements                            4,262             43,973
                                                                -------------      -------------
                                                                  $  172,936          $ 104,196
                                                                =============      =============
</TABLE>

3.    Property and Equipment

      The Company's property and equipment consist of the following:
<TABLE>
<CAPTION>

                                                                               December 31,
<S>                                                                   <C>                    <C> 
                                                                      1998                   1997
                                                                ------------------ ----------------
                                                                              (In thousands)
        Flight equipment, including airframes, engines and
        other                                                          $  557,302         $  463,576

        Less accumulated depreciation                                     258,025            219,590
                                                                ------------------      -------------
                                                                          299,277            243,986
                                                                ------------------      -------------
        Facilities and ground equipment                                    68,848             54,933
        Less accumulated depreciation                                      38,793             31,238
                                                                ------------------      -------------
                                                                           30,055             23,695
                                                                ------------------      -------------
                                                                        $ 329,332          $ 267,681
                                                                ==================      =============
</TABLE>
<PAGE>

4.    Short-Term Borrowings

      The Company maintains a $5.0 million  revolving credit facility  available
      for its short-term  borrowing needs and for issuance of letters of credit.
      The credit facility is available until January 1999 and is  collateralized
      by certain aircraft engines. Borrowings against the facility bear interest
      at the bank's prime rate plus .25%. There were no borrowings  against this
      credit  facility at December  31, 1998 or 1997.  At December  31, 1998 and
      1997,  the  Company had  outstanding  letters of credit  aggregating  $3.8
      million and $3.5 million, respectively, under such facility. This facility
      was terminated in January 1999.


5.    Long-Term Debt

      Long-term debt consists of the following:
<TABLE>
<CAPTION>
                                                                            December 31,
<S>                                                                        <C>             <C> 
                                                                           1998            1997
                                                                        ------------  ------------
                                                                              (In thousands)

       Unsecured Senior Notes, fixed rate of 9.625% payable on             $125,000      $   -
       December 15, 2005                                                                                    

       Unsecured Senior Notes, fixed rate of 10.5% payable on               100,000       100,000
       August 1, 2004                                                                                       

       Other                                                                 21,671        91,804
                                                                      -------------   ------------
                                                                            246,671       191,804
       Less current maturities                                                1,476         8,975
                                                                      -------------   ------------
                                                                           $245,195      $182,829
                                                                      ==============  ============
</TABLE>

      In December  1998,  the Company sold $125.0  million  principal  amount of
      unsecured senior notes.  Interest is payable on June 15 and December 15 of
      each year beginning  June 15, 1999.  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. At any time prior to June 15, 2001, the Company may redeem up to
      35.0% of the  principal  amount of the notes with the  proceeds  of one or
      more sales of its common stock, at a redemption price of 109.625% of their
      principal  amount plus  accrued  interest,  provided  that at least $81.25
      million aggregate  principal amount of the notes remains outstanding after
      such redemption.

      The net proceeds of the $125.0 million unsecured notes were  approximately
      $121.0 million,  after  deducting costs and fees of issuance.  The Company
      plans to use the net  proceeds  for the  purchase of  Lockheed  L-1011-500
      aircraft,  engines and spare parts,  and, together with available cash and
      bank facility borrowings, for the purchase of Boeing 727-200 ADV aircraft,
      engines, engine hushkits and spare parts.

      In July  1997,  the  Company  sold  $100.0  million  principal  amount  of
      unsecured senior notes.  Interest is payable on February 1 and August 1 of
      each year beginning February 1, 1998. 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.  At
      any time prior to August 1, 2000,  the  Company  may redeem up to 35.0% of
      the original aggregate  principal amount of the notes with the proceeds of
      sales of common stock, at a redemption  price of 110.5% of their principal
      amount plus  accrued  interest,  provided  that at least $65.0  million in
      aggregate  principal  amount of the notes remains  outstanding  after such
      redemption.

      The net proceeds of the $100.0 million unsecured notes 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 Company's 1998 revolving  credit facility  provides a maximum of $50.0
      million, including up to $25.0 million for stand-by letters of credit. ATA
      is the borrower  under the credit  facility,  which is  guaranteed  by the
      Company and each of the Company's other active subsidiaries. The principal
      amount of the  facility  matures  on April 1,  2001,  and  borrowings  are
      secured by certain Lockheed L-1011-50 and L-1011-100 aircraft and engines.
      The  loan-to-value  ratio for  collateral  securing  the  facility may not
      exceed 75.0% at any time.  Borrowings under the facility bear interest, at
      the option of ATA, at either  LIBOR plus 1.5% to 2.5% or the agent  bank's
      prime rate.

      In January  1999,  the Company  revised the revolving  credit  facility to
      provide a maximum of $75.0  million,  including  up to $25.0  million  for
      stand-by   letters  of   credit.   The  terms  and   conditions   remained
      substantially  the same except that the 1999 facility  expires  January 2,
      2003,  and borrowings  under the facility bear interest,  at the option of
      ATA, at either  LIBOR plus 1.25% to 2.50% or the agent  bank's prime rate.
      The 1999 facility is subject to similar restrictive  covenants as the 1998
      facility,  except  that  the 1999  facility  limits  certain  non-aircraft
      related  capital  expenditures  to $15.0  million,  rather  than the $10.0
      million limitation in the 1998 revolving credit facility.

      The notes and credit  facilities  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;  or the creation of liens on or other
      transactions  involving  certain assets.  In addition,  certain  covenants
      require certain financial ratios to be maintained.


      Future maturities of long-term debt are as follows:

                                    December 31, 1998
                                  -----------------------
                                      (In thousands)
          1999                             $       1,476
          2000                                    11,374
          2001                                     1,374
          2002                                     1,193
          2003                                       254
          Thereafter                             231,000
                                  -----------------------
                                           $     246,671
                                  =======================

      Interest   capitalized  in  connection   with  long-term   asset  purchase
      agreements and construction  projects was $2.0 million and $0.7 million in
      1998 and 1997, respectively.


  6.   Lease Commitments

      At December  31,  1998,  the Company had  aircraft  leases on one Lockheed
      L-1011-100,  23 Boeing  727-200s  and nine Boeing  757-200s.  The Lockheed
      L-1011-100  has an initial  term of 60 months which  expires in 2003.  The
      Boeing  757-200s  have initial  lease terms which expire from 1999 through
      2017. The Boeing 727-200s have initial lease terms of three to seven years
      and expire between 1999 and 2003. The Company also leases nine engines for
      use on the Lockheed  L-1011-50s  and  L-1011-100s,  two engines for use on
      Boeing  727-200s  and two  engines  for use on the  Boeing  757-200s.  The
      L-1011-50 and L-1011-100  engine leases expire in 2001, the 727-200 leases
      expire in June 1999 and the 757-200  leases  expire in 2008 and 2011.  All
      aircraft leases are accounted for as operating leases.

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

      As of December 31, 1998, the Company had other long-term leases related to
      certain  ground  facilities,  including  terminal  space  and  maintenance
      facilities,  with original  lease terms that vary from 1.5 to 33 years and
      expire at various dates through 2028. 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 leases its headquarters facility from the City of Indianapolis
      under a capital lease  agreement  which expires in 1999. The agreement has
      two  options  to  extend  of three and five  years,  respectively,  and is
      cancelable   with  advance   notice.   The  Company  is  responsible   for
      maintenance,  taxes,  insurance  and  other  expenses  incidental  to  the
      operation of the facilities.

      Future  minimum  lease  payments at December 31, 1998,  for  noncancelable
      operating leases with initial terms of more than one year are as follows:

                                               Facilities
                          Flight               and Ground
                        Equipment              Equipment             Total
                     -----------------   ------------------    ----------------
                                             (In thousands)
        1999             $  63,696             $  7,272            $  70,968
        2000                56,198                5,879               62,077
        2001                46,149                4,046               50,195
        2002                40,009                3,805               43,814
        2003                32,646                2,904               35,550
        Thereafter         307,030               19,827              326,857
                     -----------------    -----------------     ----------------
                         $ 545,728              $43,733              $589,461
                     =================    =================     ================


      Rental expense for all operating  leases in 1998,  1997 and 1996 was $62.7
      million,  $63.0 million and $75.0 million, respectively.

7.    Income Taxes

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

                                                    December 31,
                                        1998             1997            1996
                                    -------------   --------------   -----------
                                                    (In thousands)
        Federal:
         Current                      $  6,403         $    173       $       -
         Deferred                       18,102            3,706         (11,798)
                                    -------------    -------------   -----------
                                        24,505            3,879         (11,798)
        State:
         Current                           686              163             161
         Deferred                        1,938              413          (1,270)
                                    -------------    -------------   -----------
                                         2,624              576          (1,109)
                                    -------------    -------------   -----------
        Income tax expense (credit)    $27,129          $ 4,455        $(12,907)
                                    =============    =============   ===========

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

<TABLE>
<CAPTION>

                                                                                     December 31,
<S>                                                                       <C>           <C>              <C> 
                                                                          1998          1997             1996
                                                                       ---------   -------------     -----------
                                                                                   (In thousands)

        Federal income taxes (credit) at statutory rate                 $23,523       $ 2,049         $(13,457)               

        State income taxes (credit), net of federal benefit               1,711           367             (732)
                                                                              
        Non-deductible expenses                                           1,234         1,947            1,282

        Other, net                                                          661            92                -
                                                                      ----------   ------------      -----------
        Income tax expense (credit)                                     $27,129       $ 4,455          $(12,907)
                                                                      ==========   ============      =========== 
</TABLE>
      
      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,
<S>                                                                              <C>          <C> 
                                                                                 1998         1997
                                                                            -------------------------
                                                                                    (In thousands)
        Deferred tax liabilities:
         Tax depreciation in excess of book depreciation                       $ 76,560      $ 61,117
         Other taxable temporary differences                                        502           597
                                                                            ------------   -----------
               Deferred tax liabilities                                          77,062        61,714
                                                                            ------------   -----------
        Deferred tax assets:
         Tax benefit of net operating loss carryforwards                         18,102        28,744
         Alternative minimum tax and other tax credit carryforwards               8,726         3,032
         Vacation pay accrual                                                     3,225         2,595
         Amortization of lease credits                                            1,964         1,979
         Other deductible temporary differences                                   3,302         3,660
                                                                            ------------   -----------
               Deferred tax assets                                               35,319        40,010
                                                                            ------------   -----------
        Deferred taxes classified as:
        Current asset
        Current asset                                                          $ 10,877      $  9,756
                                                                            ============   ===========
        Non-current liability                                                  $ 52,620      $ 31,460
                                                                            ============   ===========
</TABLE>

      At December 31, 1998, for federal tax reporting purposes,  the Company had
      approximately $47.3 million of net operating loss carryforwards  available
      to offset future  federal  taxable  income and $8.7 million of alternative
      minimum tax and other tax credit carryforwards  available to offset future
      federal tax liabilities.  The net operating loss  carryforwards  expire as
      follows: 2009, $14.2 million; 2011, $33.1 million. The alternative minimum
      tax and other tax credit  carryforwards of $8.7 million 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 40.0% in 1998,  35.0% in 1997,  and 30.0% in 1996,  of the
      amount  contributed  by each  participant  up to the first six  percent of
      eligible  compensation.  Company matching  contributions expensed in 1998,
      1997  and  1996  were  $2.3  million,   $1.8  million  and  $1.3  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.  The Company recognized $0.7 million, $0.3 million
      and $0.3 million in 1998,  1997 and 1996,  respectively,  as  compensation
      expense related to the ESOP.  Shares of common stock held by the ESOP will
      be allocated to participating  employees annually as part of the Company's
      401(k) savings plan  contribution.  The fair value of the shares allocated
      during the year is recognized as compensation expense.

9.    Shareholders' Equity

      In the  first  quarter  of 1994,  the  Board  of  Directors  approved  the
      repurchase of up to 250,000  shares of the Company's  common stock.  As of
      December 31, 1998, the Company had  repurchased  193,506 shares at a total
      cost of $1.9 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.  Options  granted have 5 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 of         Weighted-Average
                                                              Shares           Exercise Price
                                                          ---------------    ----------------- 
<S>                                                            <C>                 <C>   
        Outstanding at December 31, 1995                       395,300             $11.92
                                                          ---------------
            Granted                                          1,302,400               7.87
            Exercised                                          (3,100)               8.94
            Canceled                                          (64,700)              10.87
                                                          ---------------
        Outstanding at December 31, 1996                     1,629,900               8.74
                                                          ---------------
            Granted                                          1,588,500               8.49
            Canceled                                         (706,000)               7.14
                                                          ---------------
        Outstanding at December 31, 1997                     2,512,400               9.39
                                                          ---------------
            Granted                                            560,900               9.67
            Exercised                                        (545,347)               8.50
            Canceled                                         (157,700)               9.08
                                                          ---------------
        Outstanding at December 31, 1998                     2,370,253             $ 9.38
                                                          ===============
        Options exercisable at December 31, 1997               390,232             $12.02
                                                          ===============
        Options exercisable at December 31, 1998               755,075             $10.13
                                                          ===============
</TABLE>

      During  1996,  the  Company  adopted  the  disclosure  provisions  of FASB
      Statement 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  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 1998 and 1997 is
      estimated at $5.12 and $5.28 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  1998  and  1997:
      risk-free interest rate of 5.0% and 6.0%; expected market price volatility
      of .44  and  .40;  weighted-average  expected  option  life  equal  to the
      contractual term; estimated forfeitures of 5.0%; 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>

<S>                                                                 <C>         <C>       <C> 
                                                                    1998        1997      1996
                                                               (In thousands, except per share data)

            Net income (loss) as reported                         $ 40,081     $1,572   $(26,674)
            Net income (loss) pro forma                             37,209         89    (28,864)

            Diluted income (loss) per share as reported               3.07        .13      (2.31)

            Diluted income (loss) per share pro forma                 2.85        .01      (2.50)

</TABLE>

      Options  outstanding  at  December  31,  1998,  expire from August 2003 to
      November 2008. A total of 970,883 shares are reserved for future grants as
      of December 31, 1998,  under the 1993 and 1996 Plans.  The following table
      summarizes  information  concerning outstanding and exercisable options at
      December 31, 1998:

        Range of Exercise Prices                       $7 - 14       $15 - 27
        Options outstanding:
         Weighted-Average Remaining
            Contractual Life                          8.1 years      5.2 years
         Weighted-Average Exercise Price                  $8.88         $16.57
         Number                                       2,216,953        153,300

        Options exercisable:
          Weighted-Average Exercise Price                 $8.89         $16.00
          Number                                        623,075        132,000


10.   Earnings per Share

      The  following  table  sets  forth the  computation  of basic and  diluted
earnings per share:
<TABLE>
<CAPTION>
<S>                                                                  <C>                  <C>              <C> 
                                                                     1998                 1997             1996
                                                                ----------------  ----------------  ----------------

        Numerator:
            Net income (loss)                                       $40,081,000        $1,572,000     $(26,674,000)
        Denominator:
            Denominator for basic earnings per
               share - weighted average shares                       11,739,106        11,577,727        11,535,425
            Effect of dilutive securities:
                Employee stock options                                1,327,116            64,725                 -
                Restricted shares                                             -            30,878                 -
                                                                ----------------  ----------------  ----------------
            Dilutive potential common shares                          1,327,116            95,603                 -
                                                                ----------------  ----------------  ----------------
            Denominator for diluted earnings per
              share - adjusted weighted average shares               13,066,222        11,673,330        11,535,425
                                                                ================  ================  ================
            Basic earnings per share                                   $   3.41         $    0.14          $  (2.31)
                                                                ================  ================  ================
            Diluted earnings per share                                 $   3.07         $    0.13          $  (2.31)
                                                                ================  ================  ================
</TABLE>

      Potentially  dilutive  securities  were not included in the computation of
      1996 diluted  earnings per share  because the year  resulted in a net loss
      and, therefore, their effect would be antidilutive.


11.   Major Customer

      The United States government is the only customer that accounted for  more
      than 10.0% of consolidated revenues.  U.S.  government  revenues accounted
      for 13.3%, 16.8% and  11.2% of  consolidated  revenues for 1998, 1997  and
      1996, respectively.

12.   Commitments and Contingencies

      In July 1998,  the Company  committed  to the  purchase  of five  Lockheed
      L-1011 series 500 aircraft.  The Company accepted delivery of two aircraft
      under this  purchase  agreement in 1998,  with planned  deliveries  of the
      additional  three  aircraft  in 1999.  The Company  plans to finance  this
      purchase  with the net  proceeds of the $125.0  million  unsecured  senior
      notes sold in December 1998.

      In November  1994,  the Company  signed a purchase  agreement  for six new
      Boeing  757-200s,  which,  as subsequently  amended,  now provides for the
      delivery  of ten  total  aircraft.  The  amended  agreement  provides  for
      deliveries of aircraft between 1995 and 2000. As of December 31, 1998, the
      Company had taken  delivery of seven Boeing  757-200s  under this purchase
      agreement  and  financed  those  aircraft  using leases  accounted  for as
      operating  leases.  The final three  deliveries  under this  agreement are
      scheduled for September  1999,  October 1999 and June 2000.  The remaining
      aircraft have an aggregate  purchase price of approximately  $50.0 million
      per  aircraft,   subject  to   escalation.   Advance   payments   totaling
      approximately $19.5 million ($6.5 million per aircraft) are required to be
      made for the  remaining  undelivered  aircraft,  with the  balance  of the
      purchase  price due upon  delivery.  As of December 31, 1998 and 1997, the
      Company  had made $13.0  million and $6.0  million in  advanced  payments,
      respectively, pertaining to future aircraft deliveries.

      The Company has signed purchase agreements to acquire 16 Boeing 727-200ADV
      aircraft at agreed upon  prices.  Fourteen of the aircraft to be purchased
      are currently leased by the Company. The remaining two aircraft, currently
      on lease to another airline,  may be purchased in 1999, depending upon the
      exercise of lease extension options available to the current lessee.

      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.   Change in Accounting Estimate

      In July 1998,  the Company  committed  to the  purchase  of five  Lockheed
      L-1011 series 500 aircraft for delivery between August 1998 and June 1999.
      The Company  already  operates 14 Lockheed L-1011 series 50 and series 100
      aircraft,  13 of which are owned and one of which is leased.  The purchase
      agreement will expand the size of the Lockheed  L-1011 fleet from 14 to 19
      aircraft.

      As a result of this fleet  expansion,  the  Company now expects to operate
      its existing  fleet of Lockheed  L-1011  series 50 and series 100 aircraft
      through  December 2004, as opposed to previous  retirement dates which had
      ranged  from  2000  to  2002.  The  Company  implemented  this  change  in
      accounting  estimate  effective  July  1,  1998,  which,  in  addition  to
      extending the estimated  useful lives of the 13 owned aircraft and related
      engines,  overhauls and spare parts,  also reduced the  estimated  salvage
      value for these  aircraft  as of the common  retirement  date of  December
      2004.

      This change in accounting estimate resulted in a reduction of $2.1 million
      in depreciation and  amortization  expense for the year ended December 31,
      1998,  and  resulted in an  increase in net income of $1.2  million in the
      same period. Basic and fully diluted earnings per share for the year ended
      December 31, 1998, were increased by $0.10 and $0.09, respectively.

<PAGE>


<TABLE>
<CAPTION>

                                Financial Statements and Supplementary Data
                                          Amtran, Inc. and Subsidiaries
                                        1998 Quarterly Financial Summary
                                                     (Unaudited)
--------------------------------------------- ------------------- ------------------ ------------------ -------------------------
<S>                                                      <C>                <C>             <C>                <C>
(In thousands, except per share data)              March 31            June 30         September 30        December 31
--------------------------------------------- ------------------- ------------------ ------------------ -------------------------

Operating revenues                                      $229,305        $238,464        $242,414            $209,186
Operating expenses                                       205,896         213,820         219,517             204,763              
Operating income                                          23,409          24,644          22,897               4,423             
Other expenses                                           (2,138)         (1,995)         (2,049)             (1,981)
Income before income taxes                                21,271          22,649          20,848               2,442
Income taxes                                               8,872           8,854           8,415                 988
Net income                                              $ 12,399        $ 13,795        $ 12,433            $  1,454
Net income per share - basic                            $   1.07        $   1.19        $   1.06            $    .12 
Net income per share - diluted                          $   1.02        $   1.05        $    .92            $    .11

                                         Amtran, Inc. and Subsidiaries
                                           1997 Quarterly Financial Summary
                                                    (Unaudited)
--------------------------------------------- ------------------- ------------------ ------------------ -------------------------
(In thousands, except per share data)              March 31            June 30         September 30        December 31
--------------------------------------------- ------------------- ------------------ ------------------ -------------------------

Operating revenues                                      $194,284        $192,187        $210,790            $185,932
Operating expenses                                       186,556         191,166         205,464             186,523
Operating income (loss)                                    7,728           1,021           5,326               (591)
Other expenses                                           (1,411)         (1,501)         (1,752)             (2,793)
Income (loss) before income taxes                          6,317           (480)           3,574             (3,384)
Income taxes (credits)                                     3,095             269           1,828               (737)
Net income (loss)                                       $  3,222        $  (749)        $  1,746            $(2,647)
Net income (loss) per share - basic                     $    .28        $  (.06)        $    .15            $  (.23)
Net income (loss) per share - diluted                   $    .27        $  (.06)        $    .15            $  (.23)
</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.

<PAGE>


Part III

Item 10.   Directors and Officers of the Registrant

The  information  contained on pages 4 and 5 of Amtran,  Inc. and  Subsidiaries'
Proxy  Statement  dated April 2, 1999,  with respect to directors  and executive
officers of the Company, is incorporated herein by reference in response to this
item.


Item 11.   Executive Compensation

The  information   contained  on  pages  12  through  15  of  Amtran,  Inc.  and
Subsidiaries'  Proxy  Statement  dated April 2, 1999,  with respect to executive
compensation and transactions,  is incorporated  herein by reference in response
to this item.


Item 12.   Security Ownership of Certain Beneficial Owners and Management

The information  contained on pages 10 and 11 of Amtran,  Inc. and Subsidiaries'
Proxy  Statement  dated April 2, 1999,  with  respect to security  ownership  of
certain beneficial owners and management, is incorporated herein by reference in
response to this item.


Item 13.   Certain Relationships and Related Transactions

The  information  contained on page 6 of Amtran,  Inc. and  Subsidiaries'  Proxy
Statement dated April 2, 1999, with respect to certain relationships and related
transactions, is incorporated herein by reference in response to this item.


<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 years ended December 31, 1998
                   and 1997

                 o Consolidated Statements of Operations for years ended
                   December 31, 1998, 1997 and 1996

                 o Consolidated Statements of Changes in Shareholders'Equity for
                   years ended December 31, 1998, 1997 and 1996

                 o Consolidated Statements of Cash Flows for years ended
                   December 31, 1998, 1997 and 1996

                 o Notes to Consolidated Financial Statements

           (2)   Financial Statement Schedule

                 The following consolidated financial  information for the years
                 1998, 1997 and 1996 is included in Item 14(d):
                                                                            Page
                 o  Schedule II - Valuation and Qualifying Accounts           55

                  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

                 The following exhibits are submitted as a separate
                 section of this report:
                                                                            Page
                 23.   Consent of Independent Auditor                         54

    (b)     Reports on Form 8-K

            There were no Form 8-Ks filed during the quarter ended
            December 31, 1998

    (c)     Exhibits

            This section is not applicable.

    (d)     Financial Statement Schedule

            This section is not applicable.


<PAGE>



Signatures

Pursuant  to the  requirements  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 31, 1999     John P. Tague
                            John P. Tague
                            President and Chief Executive Officer
                            Director




Date     March 31, 1999     James W. Hlavacek
                            James W. Hlavacek
                            Executive Vice President, Chief Operating Officer
                              and President of ATA Training Corporation
                            Director




Date     March 31, 1999     Kenneth K. Wolff
                            Kenneth K. Wolff
                            Executive Vice President and Chief Financial Officer
                            Director



<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 and 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
              of  our  report  dated  January  26,  1999,  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, 1998.













              /S/ERNST & YOUNG LLP
              Indianapolis, Indiana
              March 29, 1999






<PAGE>

<TABLE>
<CAPTION>

PART IV                                                                                                        SCHEDULE  II
Item 14(d)


                                            VALUATION AND QUALIFYING ACCOUNTS
                                                 (Dollars in thousands)


COLUMN A                                          COLUMN B                 COLUMN C               COLUMN       COLUMN E
                                                                                                     D
-------------------------------------------     -------------   ----------------------------   ------------    -------------
                                                                          Additions
                                                                ----------------------------

<S>                                                <C>             <C>            <C>            <C>                <C>
                                                                               Charged to
                                                 Balance at     Charged to     Other                             Balance at
                                                 Beginning       Costs and     Accounts -      Deductions -         End of
Description                                      of Period       Expenses      Describe        Describe            Period
-------------------------------------------     -------------   ------------   -------------   ------------    ----------------

Year ended December 31, 1996:
  Deducted from asset accounts:
    Allowance for doubtful accounts             $      1,303    $       791    $          -    $       820 (1) $      1,274
    Allowance for obsolescence -Inventory              5,574          1,432               -            412 (2)        6,594
                                                -------------   ------------   -------------   ------------    -------------
               Totals                           $      6,877    $     2,223    $          -    $     1,232     $      7,868
                                                =============   ============   =============   ============    =============

Year ended December 31, 1997:
  Deducted from asset accounts:
    Allowance for doubtful accounts             $      1,274    $     1,261    $          -    $       853 (1) $      1,682
    Allowance for obsolescence - Inventory             6,594          1,474               -            437 (2)        7,631
    Valuation allowance - Assets held for sale             -            200               -              -              200 
                                                -------------   ------------   -------------   ------------    -------------
               Totals                           $      7,868    $     2,935    $          -    $     1,290     $      9,513
                                                =============   ============   =============   ============    =============

Year ended December 31, 1998:
  Deducted from asset accounts:
    Allowance for doubtful accounts             $      1,682    $     1,492    $          -    $     2,011 (1) $      1,163
    Allowance for obsolescence - Inventory             7,631          1,905               -          1,095 (2)        8,441
    Valuation allowance - Assets held for sale           200              -               -            200 (3)            -
                                                -------------   ------------   -------------   ------------    -------------
               Totals                           $      9,513    $     3,397    $          -    $     3,306     $      9,604
                                                =============   ============   =============   ============    =============
</TABLE>



(1)  Uncollectible accounts written off, net of recoveries
(2)  Obsolescence  allowance  related to inventory  items  transferred to flight
     equipment or sold
(3)  Valuation allowance related to parts sold